<PAGE>
As filed with the Securities and Exchange Commission on February 11, 1999
Registration No. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Hearst-Argyle Television, Inc.
(Exact name of Registrant as Specified in its Charter)
Delaware 4833 74-2717523
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification Code
Organization) Number)
888 Seventh Avenue
New York, New York 10106
(212) 887-6800
(Address, including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive Offices)
---------------
Dean H. Blythe
Senior Vice President-Corporate Development,
Secretary and General Counsel
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10106
(212) 887-6800
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agents for Service)
---------------
With copies to:
RICHARD A. PALMER STEVEN A. HOBBS
Fulbright & Jaworski L.L.P. BONNIE A. BARSAMIAN
666 Fifth Avenue Rogers & Wells LLP
New York, New York 10103 200 Park Avenue
(212) 318-3000 New York, New York 10166
(212) 878-8000
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger (the "Merger") of Pulitzer Publishing Company, with
and into the Registrant as provided in the Amended and Restated Agreement and
Plan of Merger, dated as of May 25, 1998, described in the enclosed Joint
Proxy Statement/Prospectus, have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act Registration Statement Number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement Number of the earlier effective registration statement
for the same offering. [_]
---------------
<PAGE>
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
Title of each Class of to be Offering Price Offering Registration
Securities to be Registered Registered Per Share(1) Price(1) Fee(2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series A Common Stock, $.01
par value per share........ 37,096,774 N/A N/A $54,299.48
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(1) The registration fee for the acquisition of the television broadcast
business of Pulitzer Publishing Company ("Pulitzer") has been computed
pursuant to Rule 457(f)(1) and (2) under the Securities Act of 1933, as
amended (the "Securities Act") on the basis on a rate of $278 per
$1,000,000 of the maximum aggregate price of the securities to be received
by Hearst-Argyle in the Merger as prescribed by Section 6(b) of the
Securities Act. The maximum aggregate price of the securities to be
received by Hearst-Argyle is $1,022,661,812.03, determined as follows: the
product of (i) the sum of (a) the product of (A) 7,326,561 (the number of
shares of Common Stock ("Pulitzer Common Stock"), par value $.01 per
share, of Pulitzer issued and outstanding on February 9, 1999), and (B)
$82.09375 (the average of the high and low per share trading prices of the
Pulitzer Common Stock on the New York Stock Exchange on February 10,
1999), and (b) the product of (A) 15,297,449 (the number of shares of
Class B Common Stock ("Pulitzer Class B Common Stock"), par value $.01 per
share, of Pulitzer issued and outstanding on February 10, 1999) and (B)
$82.09375 (based on (1) an assumed conversion of each share of Pulitzer
Class B Common Stock into one shares of Pulitzer Common Stock (as
permitted by Pulitzer's Restated Certificate of Incorporation) and (2) the
per share market value of the Pulitzer Common Stock on February 9, 1999 as
determined above), multiplied by (ii) 55% (the percentage of the aggregate
market value of Pulitzer Common Stock and Pulitzer Class B Common Stock
(as determined above) which is attributable to Pulitzer television
broadcast business).
(2) Pursuant to Rule 457(b), the registration fee of $284,299.48 is reduced by
the fee of $230,000 paid previously to the Commission pursuant to the
Securities Exchange Act of 1934, as amended, in connection with the filing
of the preliminary proxy materials on Schedule 14A.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
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- -------------------------------------------------------------------------------
<PAGE>
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10106
February 11, 1999
Dear Stockholder,
You are cordially invited to attend the Special Meeting of Stockholders (the
"Hearst-Argyle Meeting") of Hearst-Argyle Television, Inc., a Delaware
corporation ("Hearst-Argyle"), to be held on Wednesday, March 17, 1999, at 959
Eighth Avenue, New York, New York 10019, starting at 10:00 a.m. (New York
time). The Hearst-Argyle Meeting is being held to vote on the proposals
described below.
At the Hearst-Argyle Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Amended and Restated Agreement and Plan of
Merger, dated as of May 25, 1998 (the "Merger Agreement"), among Pulitzer
Publishing Company, a Delaware corporation ("Pulitzer"), Pulitzer Inc., a
Delaware corporation and wholly-owned subsidiary of Pulitzer ("New Pulitzer"),
and Hearst-Argyle, and all related transactions and agreements, pursuant to
which: (i) Pulitzer will contribute to New Pulitzer all of its assets (other
than broadcasting assets) and the net proceeds of $700 million of new debt
after the satisfaction of certain liabilities (the "New Debt"), subject to all
liabilities of Pulitzer (other than broadcasting liabilities, the New Debt and
certain other obligations) and distribute shares of capital stock of New
Pulitzer to Pulitzer's stockholders and (ii) Pulitzer with its remaining
television and radio broadcast assets and liabilities, the New Debt and
certain other obligations will be merged with and into Hearst-Argyle with
Hearst-Argyle being the surviving corporation in the merger, in exchange for
the issuance to Pulitzer stockholders of 37,096,774 shares of Series A Common
Stock, par value $.01 per share, of Hearst-Argyle ("Hearst-Argyle Series A
Common Stock") on the terms and subject to the conditions contained in the
Merger Agreement, all as more fully described in the enclosed Joint Proxy
Statement/Prospectus (the "Hearst-Argyle Merger Proposal").
In addition, at the Hearst-Argyle Meeting, you will also be asked to
consider and vote upon a proposal to approve and adopt an amendment to the
Amended and Restated Certificate of Incorporation of Hearst-Argyle to increase
the number of authorized shares of Hearst-Argyle Common Stock from 200 million
to 300 million shares, 200 million of such shares to be designated Hearst-
Argyle Series A Common Stock, and 100 million of such shares to be designated
Series B Common Stock, par value $.01 per share ("Hearst-Argyle Series B
Common Stock") (the "Hearst-Argyle Charter Amendment Proposal").
The Hearst-Argyle Board of Directors believes that the Hearst-Argyle Merger
Proposal offers significant benefits for Hearst-Argyle and its stockholders
and is an important step toward Hearst-Argyle's strategic goal of becoming a
larger, more significant player in the television broadcasting business and
thereby a more profitable and valuable company. The combination of Pulitzer's
television and radio stations with the television and radio stations already
owned or managed by Hearst-Argyle will create a group of 26 television
stations and seven radio stations, and will increase Hearst-Argyle's coverage
of U.S. television households from about 12.0% to approximately 17.5%, ranking
it as one of the country's two largest independent, or non-network-owned, TV
station groups. This combination will also position Hearst-Argyle as the
largest ABC affiliate group and the second largest NBC affiliate group.
The Hearst-Argyle Board believes that the Hearst-Argyle Charter Amendment
Proposal is necessary in order to have additional shares of Common Stock
available for general corporate purposes, including future acquisitions,
equity financings and grants of stock options. The proposed increase in the
number of authorized shares of Common Stock will afford Hearst-Argyle the
flexibility to take advantage of business and financial opportunities without
the delay and expense of seeking stockholder approval for the authorization of
additional stock at a later time.
<PAGE>
The Hearst-Argyle Board has unanimously (with one member being absent)
approved and adopted the Merger Agreement and the transactions contemplated
thereby (including the merger and the issuance of the Hearst-Argyle Series A
Common Stock in the merger) and has determined that such transactions are fair
to, and in the best interests of, Hearst-Argyle and its stockholders. The
Hearst-Argyle Board also has unanimously (with one member being absent)
approved the Hearst-Argyle Charter Amendment. The Hearst-Argyle Board
recommends that holders of Hearst-Argyle capital stock vote "FOR" the Hearst-
Argyle Merger Proposal and "FOR" the Hearst-Argyle Charter Amendment Proposal.
Hearst Broadcasting, Inc., which owned approximately 87.1% of the
outstanding voting power of the Hearst-Argyle common stock and 86.0% of the
outstanding voting power of the Hearst-Argyle capital stock as of January 21,
1999, has agreed to vote in favor of the Hearst-Argyle Merger Proposal and has
indicated it will vote in favor of the Hearst-Argyle Charter Amendment
Proposal.
A detailed description of the proposed Hearst-Argyle Merger Proposal and
Hearst-Argyle Charter Amendment Proposal is set forth in the enclosed Joint
Proxy Statement/Prospectus, which you should read carefully. Also, a copy of
the Merger Agreement is included as Annex I to the Joint Proxy
Statement/Prospectus. A Notice of Special Meeting of Stockholders of Hearst-
Argyle is also enclosed. Holders of record of shares of Hearst-Argyle Series A
Common Stock, Series B Common Stock, Series A Preferred Stock and Series B
Preferred Stock at the close of business on January 21, 1999, the record date
for the Hearst-Argyle Meeting, are entitled to notice of, and to vote at, the
Hearst-Argyle Meeting and at any adjournments or postponements of the Hearst-
Argyle Meeting.
It is important that your shares be represented at the Hearst-Argyle
Meeting, whether or not you plan to attend. Accordingly, you are requested to
complete, date and sign the enclosed proxy card and return it in the enclosed
envelope, which requires no postage if mailed in the United States. If you
attend the Hearst-Argyle Meeting, you may revoke your proxy at any time before
it is voted and vote in person if you wish, even if you have previously
returned your proxy card.
We strongly support the Hearst-Argyle Merger Proposal and Hearst-Argyle
Charter Amendment Proposal and join with the other members of the Hearst-
Argyle Board in enthusiastically recommending these proposals to you.
Very truly yours,
Bob Marbut
Chairman of the Board
and Co-Chief Executive Officer
John G. Conomikes
President and Co-Chief Executive
Officer
2
<PAGE>
Pulitzer Publishing Company
900 North Tucker Boulevard
St. Louis, Missouri 63101
February 11, 1999
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Pulitzer Publishing Company, to be held at 10:00 a.m., New York time, on
Wednesday, March 17, 1999, at the Hotel Plaza Athenee, Le Trianon Room, 37
East 64th Street, New York, New York 10021. At the Special Meeting,
stockholders will be asked to approve two proposals necessary to effectuate
the proposed spin-off of the Company's newspaper operations to its
stockholders and the proposed merger between the Company and Hearst-Argyle
Television, Inc. which were announced in May 1998. The proposals to be
considered for approval by the Company's stockholders are the merger agreement
with Hearst-Argyle and an amendment to the Company's charter.
We encourage you to read carefully the enclosed Joint Proxy
Statement/Prospectus which discusses in detail the merger agreement proposal
and charter amendment proposal.
Your Board of Directors has carefully considered the merger agreement and
its terms and has unanimously determined that the merger and the charter
amendment are in the best interests of the Company and its stockholders. The
Board strongly recommends that stockholders approve each proposal.
THE MERGER AGREEMENT
Under the terms of the merger agreement, following the proposed spin-off of
the Company's newspaper operations to its stockholders, Hearst-Argyle will
acquire the Company's TV and radio broadcasting operations which consist of
nine network-affiliated TV stations and five radio stations. In return, the
Company's stockholders will exchange their shares of the Company's common
stock and Class B common stock for 37,096,774 shares of Hearst-Argyle Series A
common stock, all as described in the Joint Proxy Statement/Prospectus.
Currently, Hearst-Argyle Series A common stock is listed on the New York Stock
Exchange under the symbol "HTV."
THE CHARTER AMENDMENT
The Company's newspaper publishing and related new media businesses will
continue after the proposed merger as "Pulitzer Inc." Pulitzer Inc.,
capitalized with the net proceeds of $700 million in new financing, will be
distributed in a tax-free spin-off to the Company's stockholders.
As part of the spin-off, holders of the Company's common stock will receive
shares of Pulitzer Inc. common stock on a share-for-share basis and holders of
the Company's Class B common stock will receive shares of Pulitzer Inc. Class
B common stock on a share-for-share basis.
To permit the distribution by the Company of the Pulitzer Inc. common stock
to holders of the Company's common stock and Pulitzer Inc. Class B common
stock to holders of the Company's Class B common stock pursuant to the spin-
off, stockholders will be asked to approve an amendment to the Company's
Restated Certificated of Incorporation.
You should be aware that even though the merger agreement proposal and
charter amendment proposal are to be voted upon separately, each is
conditional upon the other and the failure of either proposal will cause the
Company to abandon its plans with respect to the spin-off and merger.
<PAGE>
YOUR VOTE IS IMPORTANT!
Whether or not you plan to attend the Special Meeting in person, it is
important that your shares be represented at the meeting. Accordingly, the
Board strongly encourages all stockholders to vote by completing, signing and
returning the enclosed proxy card as soon as possible.
Please do not send in your Company stock certificates at this time. If the
merger is consummated, you will receive instructions for sending in your share
certificates.
We appreciate your consideration of these proposals and your continuing
interest in Pulitzer Publishing Company.
On behalf of the Board of Directors,
Michael E. Pulitzer
Chairman of the Board and
Chief Executive Officer
If you have questions or need assistance in voting your shares of Pulitzer
Publishing Company, you may call MacKenzie Partners, Inc., which is assisting
the Board with the Special Meeting, toll-free at (800) 322-2885.
<PAGE>
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10106
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A Special Meeting of the Stockholders (the "Hearst-Argyle Meeting") of
Hearst-Argyle Television, Inc., a Delaware corporation ("Hearst-Argyle"), will
be held starting at 10:00 a.m., New York time, on Wednesday, March 17, 1999,
at 959 Eighth Avenue, New York, New York 10019. Attendance at the Hearst-
Argyle Meeting and any adjournments or postponements thereof will be limited
to stockholders of record on January 21, 1999 (the "Hearst-Argyle Record
Date") or their proxies, beneficial owners having evidence of ownership on
that date and invited guests of Hearst-Argyle. The accompanying Joint Proxy
Statement/Prospectus contains detailed information about the matters to be
considered at the Hearst-Argyle Meeting.
The purposes of the Hearst-Argyle Meeting are to consider and vote upon the
following proposals (collectively, the "Hearst-Argyle Proposals"):
1. The approval and adoption of an Amended and Restated Agreement and
Plan of Merger, dated as of May 25, 1998 (the "Merger Agreement"), among
Pulitzer Publishing Company, a Delaware corporation ("Pulitzer"), Pulitzer
Inc., a Delaware corporation and a wholly owned subsidiary of Pulitzer
("New Pulitzer"), and Hearst-Argyle, and all related transactions and
agreements, pursuant to which, in addition to the transactions described in
the accompanying Joint Proxy Statement/Prospectus: (i) Pulitzer will
contribute to New Pulitzer all of its assets (other than broadcasting
assets) and the net proceeds of $700 million of new debt after the
satisfaction of certain liabilities (the "New Debt"), subject to all
liabilities of Pulitzer (other than broadcasting liabilities, the New Debt
and certain other obligations) and distribute shares of capital stock of
New Pulitzer to Pulitzer's stockholders and (ii) Pulitzer with its
remaining television and radio broadcast assets and liabilities, the New
Debt and certain other obligations will be merged with and into Hearst-
Argyle with Hearst-Argyle being the surviving corporation in the merger, in
exchange for the issuance to Pulitzer stockholders of 37,096,774 shares of
Series A Common Stock, par value $.01 per share, of Hearst-Argyle ("Hearst-
Argyle Series A Common Stock") on the terms and subject to the conditions
contained in the Merger Agreement, all as more fully described in the
enclosed Joint Proxy Statement/Prospectus (the "Hearst-Argyle Merger
Proposal");
2. The approval and adoption of an amendment (the "Hearst-Argyle Charter
Amendment") to the Amended and Restated Certificate of Incorporation of
Hearst-Argyle (the "Hearst-Argyle Charter") to increase the number of
authorized shares of common stock of Hearst-Argyle from 200 million to 300
million shares, 200 million of such shares to be designated Hearst-Argyle
Series A Common Stock, and 100 million of such shares to be designated
Series B Common Stock, par value $.01 per share, of Hearst- Argyle (the
"Hearst-Argyle Charter Amendment Proposal"); and,
3. To transact such other business as may properly come before the
Hearst-Argyle Meeting and any adjournments or postponements thereof.
Only holders of record of shares of Hearst-Argyle Series A Common Stock,
Series B Common Stock, par value $.01 per share ("Hearst-Argyle Series B
Common Stock"), Series A Preferred Stock, par value $.01 per share ("Hearst-
Argyle Series A Preferred Stock"), and Series B Preferred Stock, par value
$.01 per share ("Hearst-Argyle Series B Preferred Stock"), at the close of
business on the Hearst-Argyle Record Date are entitled to notice of, and to
vote at, the Hearst-Argyle Meeting and at any postponements or adjournments
thereof. A list of holders of record of shares of Hearst-Argyle Series A
Common Stock, Hearst-Argyle Series B Common Stock, Hearst-Argyle Series A
Preferred Stock and Hearst-Argyle Series B Preferred Stock at the close of
business on the Hearst-Argyle Record Date will be available for inspection at
Hearst-Argyle's office during ordinary business hours for the 10-day period
prior to the Hearst-Argyle Meeting. Hearst-Argyle's transfer books will not be
closed.
<PAGE>
Each of the Hearst-Argyle Proposals will be voted upon separately by the
Hearst-Argyle stockholders entitled to vote thereon at the Hearst-Argyle
Meeting. The actions contemplated by each of the Hearst-Argyle Merger Proposal
and the Hearst-Argyle Charter Amendment Proposal are not conditioned upon
approval of the other proposal.
Whether or not you plan to attend the Hearst-Argyle Meeting in person, you
are requested to complete, date and sign the enclosed proxy card and return it
in the enclosed envelope, which requires no postage if mailed in the United
States. If you attend the Hearst-Argyle Meeting, you may revoke your proxy at
any time before it is voted and vote in person if you wish, even if you have
previously returned your proxy card.
All shares represented at the Hearst-Argyle Meeting by properly executed
proxies received prior to or at the Hearst-Argyle Meeting and not properly
revoked will be voted at the Hearst-Argyle Meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated, such
proxies will be voted "FOR" approval of the Hearst-Argyle Proposals.
THE HEARST-ARGYLE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE HEARST-ARGYLE MERGER PROPOSAL AND "FOR" THE HEARST-ARGYLE CHARTER
AMENDMENT PROPOSAL.
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
By Order of the Board of Directors
of Hearst-Argyle Television, Inc.,
Dean H. Blythe
Secretary
February 11, 1999
New York, New York
2
<PAGE>
Pulitzer Publishing Company
900 North Tucker Boulevard
St. Louis, Missouri 63101
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A Special Meeting of the Stockholders (the "Pulitzer Meeting") of Pulitzer
Publishing Company, a Delaware corporation ("Pulitzer"), will be held starting
at 10:00 a.m., New York time, on Wednesday, March 17, 1999, at the Hotel Plaza
Athenee, Le Trianon Room, 37 East 64th Street, New York, New York 10021.
Attendance at the Pulitzer Meeting and any adjournments or postponements
thereof will be limited to stockholders of record on January 21, 1999 (the
"Pulitzer Record Date") or their proxies, beneficial owners having evidence of
ownership on that date and invited guests of Pulitzer. The accompanying Joint
Proxy Statement/Prospectus contains detailed information about the matters to
be considered at the Pulitzer Meeting.
The purposes of the Pulitzer Meeting are to consider and vote upon the
following proposals (collectively, the "Pulitzer Proposals"):
1. The approval and adoption of an amendment to the Restated Certificate
of Incorporation of Pulitzer required in connection with the Spin-Off (as
defined below) to permit Pulitzer to distribute one share of Common Stock,
par value $.01 per share, of Pulitzer Inc., a Delaware corporation and a
wholly owned subsidiary of Pulitzer ("New Pulitzer"), for each outstanding
share of Common Stock, par value $.01 per share, of Pulitzer ("Pulitzer
Common Stock") and one share of Class B Common Stock, par value $.01 per
share, of New Pulitzer for each outstanding share of Class B Common Stock,
par value $.01 per share, of Pulitzer ("Pulitzer Class B Common Stock")
(the "Pulitzer Charter Amendment Proposal");
2. The approval and adoption of an Amended and Restated Agreement and
Plan of Merger, dated as of May 25, 1998 (the "Merger Agreement"), among
Pulitzer, New Pulitzer and Hearst-Argyle Television, Inc., a Delaware
corporation ("Hearst-Argyle"), and all related transactions and agreements,
pursuant to which, in addition to the transactions described in the
accompanying Joint Proxy Statement/Prospectus: (i) Pulitzer will contribute
to New Pulitzer all of its assets (other than broadcasting assets) and the
net proceeds of $700 million of new debt (the "New Debt") after the
satisfaction of certain liabilities, subject to all liabilities of Pulitzer
(other than broadcasting liabilities, the New Debt and certain other
obligations) and distribute shares of capital stock of New Pulitzer to
Pulitzer's stockholders (collectively, the "Spin-Off") and (ii) Pulitzer,
with its remaining television and radio broadcast assets and liabilities,
the New Debt and certain other obligations, will be merged with and into
Hearst-Argyle with Hearst-Argyle being the surviving corporation in the
merger, in exchange for the issuance to Pulitzer stockholders of 37,096,774
shares of Series A Common Stock, par value $.01 per share, of Hearst-Argyle
("Hearst-Argyle Series A Common Stock"), all as more fully described in the
accompanying Joint Proxy Statement/Prospectus (the "Pulitzer Merger
Proposal"); and
3. To transact such other business as may properly come before the
Pulitzer Meeting and any adjournments or postponements thereof.
Only holders of record of shares of Pulitzer Common Stock and Pulitzer Class
B Common Stock at the close of business on the Pulitzer Record Date are
entitled to notice of, and to vote at, the Pulitzer Meeting and at any
postponements or adjournments thereof. A list of holders of record of shares
of Pulitzer Common Stock and Pulitzer Class B Common Stock at the close of
business on the Pulitzer Record Date will be available for inspection at
Pulitzer's offices during ordinary business hours for the 10-day period prior
to the Pulitzer Meeting. Pulitzer's transfer books will not be closed.
Each of the Pulitzer Proposals will be voted upon separately by the Pulitzer
stockholders entitled to vote thereon at the Pulitzer Meeting. The affirmative
vote of a majority of all outstanding shares of Pulitzer Common
<PAGE>
Stock and a majority of the outstanding shares of Pulitzer Class B Common
Stock entitled to vote thereon, voting together as a single class, and the
affirmative vote of a majority of the outstanding shares of Pulitzer Common
Stock entitled to vote thereon, voting separately as a class, are necessary to
approve the Pulitzer Charter Amendment Proposal. The affirmative vote of a
majority of all outstanding shares of Pulitzer Common Stock and Pulitzer Class
B Common Stock entitled to vote thereon, voting together as a single class, is
necessary to approve the Pulitzer Merger Proposal. The Pulitzer Merger
Proposal and the Pulitzer Charter Amendment Proposal are conditional upon one
another, and the failure of either Pulitzer Proposal to be approved by the
Pulitzer stockholders will result in the abandonment by Pulitzer of all of the
transactions described herein.
Holders of Pulitzer Class B Common Stock are entitled to appraisal rights in
connection with the merger, but holders of Pulitzer Common Stock are not
entitled to such rights. See "Rights of Dissenting Pulitzer Stockholders" in
the accompanying Joint Proxy Statement/Prospectus.
Whether or not you plan to attend the Pulitzer Meeting in person, you are
requested to complete, date and sign the enclosed proxy card and return it in
the enclosed envelope, which requires no postage if mailed in the United
States. It is important that your shares be represented at the Pulitzer
Meeting. If you attend the Pulitzer Meeting, you may revoke your proxy at any
time before it is voted and vote in person if you wish, even if you have
previously returned your proxy card.
All shares represented at the Pulitzer Meeting by properly executed proxies
received prior to or at the Pulitzer Meeting and not properly revoked will be
voted at the Pulitzer Meeting in accordance with the instructions indicated in
such proxies. If no instructions are indicated, such proxies will be voted
"FOR" approval of the Pulitzer Proposals.
THE PULITZER BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
PULITZER MERGER PROPOSAL AND "FOR" THE PULITZER CHARTER AMENDMENT PROPOSAL.
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
By Order of the Board of Directors
of Pulitzer Publishing Company,
James V. Maloney
Secretary
February 11, 1999
St. Louis, Missouri
2
<PAGE>
HEARST-ARGYLE TELEVISION, INC.
AND
PULITZER PUBLISHING COMPANY
JOINT PROXY STATEMENT
----------------
HEARST-ARGYLE TELEVISION, INC.
PROSPECTUS
----------------
This Joint Proxy Statement/Prospectus is being furnished to holders of
common stock and preferred stock of Hearst-Argyle Television, Inc., a Delaware
corporation ("Hearst-Argyle"), in connection with the solicitation of proxies
by the Board of Directors of Hearst-Argyle (the "Hearst-Argyle Board") for use
at a special meeting of stockholders to be held on March 17, 1999, at the time
and place specified in the accompanying notice and at any adjournments or
postponements thereof (the "Hearst-Argyle Meeting"); and to holders of common
stock and Class B common stock of Pulitzer Publishing Company, a Delaware
corporation ("Pulitzer"), in connection with the solicitation of proxies by
the Board of Directors of Pulitzer (the "Pulitzer Board") for use at a special
meeting of stockholders to be held on March 17, 1999, at the time and place
specified in the accompanying notice and at any adjournments or postponements
thereof (the "Pulitzer Meeting").
The Hearst-Argyle Meeting has been called to consider and vote upon the
following proposals (collectively, the "Hearst-Argyle Proposals"): (i) the
approval and adoption of an Amended and Restated Agreement and Plan of Merger,
dated as of May 25, 1998 (the "Merger Agreement"), among Pulitzer, Pulitzer
Inc., a Delaware corporation and a wholly owned subsidiary of Pulitzer ("New
Pulitzer"), and Hearst-Argyle, and all related transactions and agreements,
pursuant to which, in addition to the transactions described below: (x)
Pulitzer will contribute to New Pulitzer all of its assets (other than
broadcasting assets) and the net proceeds of $700 million of new debt after
the satisfaction of certain liabilities (the "New Debt"), subject to all
liabilities of Pulitzer (other than broadcasting liabilities, the New Debt and
certain other obligations) (the "Contribution"), and distribute shares of
capital stock of New Pulitzer to Pulitzer's stockholders (the "Distribution,"
and together with the Contribution, the "Spin-Off") and (y) Pulitzer, with its
remaining television and radio broadcast assets and liabilities, the New Debt
and certain other obligations, will be merged with and into Hearst-Argyle with
Hearst-Argyle being the surviving corporation in the merger, in exchange for
the issuance to Pulitzer stockholders of 37,096,774 shares of Series A Common
Stock, par value $.01 per share, of Hearst-Argyle ("Hearst-Argyle Series A
Common Stock") as described below and on the terms and subject to the
conditions contained in the Merger Agreement (the "Merger") (the "Hearst-
Argyle Merger Proposal") and (ii) the approval and adoption of an amendment
(the "Hearst-Argyle Charter Amendment") to the Amended and Restated
Certificate of Incorporation of Hearst-Argyle (the "Hearst-Argyle Charter") to
increase the number of authorized shares of common stock of Hearst-Argyle from
200 million to 300 million shares, 200 million of such shares to be designated
Hearst-Argyle Series A Common Stock and 100 million of such shares to be
designated Series B Common Stock, par value $.01 per share, of Hearst-Argyle
(the "Hearst-Argyle Series B Common Stock" and together with the Hearst-Argyle
Series A Common Stock, the "Hearst-Argyle Common Stock") (the "Hearst-Argyle
Charter Amendment Proposal"). Hearst-Argyle currently has a sufficient number
of authorized shares of common stock (without the additional authorized shares
contemplated by the Hearst-Argyle Charter Amendment Proposal) to consummate
the Merger. Each of the Hearst-Argyle Proposals will be voted upon separately
by the Hearst-Argyle stockholders entitled to vote thereon at the Hearst-
Argyle Meeting. The actions contemplated by each of the Hearst-Argyle Merger
Proposal and the Hearst-Argyle Charter Amendment Proposal are not conditioned
upon approval of the other proposal.
<PAGE>
The Pulitzer Meeting has been called to consider and vote upon the following
proposals (collectively, the "Pulitzer Proposals"): (i) the approval and
adoption of an amendment (the "Pulitzer Charter Amendment") to the Restated
Certificate of Incorporation of Pulitzer (the "Pulitzer Charter") required in
connection with the Spin-Off to permit Pulitzer to distribute one share of
Common Stock, par value $.01 per share, of New Pulitzer ("New Pulitzer Common
Stock") for each outstanding share of Common Stock, par value $.01 per share,
of Pulitzer ("Pulitzer Common Stock") and one share of Class B Common Stock,
par value $.01 per share, of New Pulitzer ("New Pulitzer Class B Common
Stock," and together with the New Pulitzer Common Stock, the "New Pulitzer
Stock") for each outstanding share of Class B Common Stock, par value $.01 per
share, of Pulitzer ("Pulitzer Class B Common Stock," and together with the
Pulitzer Common Stock, the "Pulitzer Stock") (the "Pulitzer Charter Amendment
Proposal") and (ii) the approval and adoption of the Merger Agreement and all
related transactions and agreements (including the Spin-Off) (the "Pulitzer
Merger Proposal"). Each of the Pulitzer Proposals will be voted upon
separately by the Pulitzer stockholders entitled to vote thereon at the
Pulitzer Meeting. The failure of the Pulitzer stockholders to approve either
of the Pulitzer Proposals, however, will result in the abandonment by Pulitzer
of the Spin-Off, the Pulitzer Charter Amendment, the Merger and any related
transactions.
On February 9, 1999, the closing sales price of the Hearst-Argyle Series A
Common Stock on the New York Stock Exchange, Inc (the "NYSE") was $27.875 per
share. Based on this price, the aggregate value of the 37,096,774 shares of
Hearst-Argyle Series A Common Stock to be delivered in the Merger is
$1,034,072,575.25. The value of such consideration at the time of the closing
of the Merger may be more or less than this amount depending on the then
market price of the Hearst-Argyle Series A Common Stock.
Concurrent with the execution and delivery of the Merger Agreement, Hearst-
Argyle and certain stockholders of Pulitzer (the "Pulitzer Principal
Stockholders") entered into an amended and restated voting agreement, dated as
of May 25, 1998 (the "Pulitzer Voting Agreement"), and Hearst Broadcasting,
Inc. ("Hearst Broadcasting") and Pulitzer entered into a voting agreement (the
"Hearst-Argyle Voting Agreement"). As of January 21, 1999 (the "Pulitzer
Record Date") the Pulitzer Principal Stockholders, collectively, had the power
to direct the vote of 14,443,209 shares of Pulitzer Class B Common Stock,
representing in the aggregate (i) approximately 94.4% of the issued and
outstanding shares of Pulitzer Class B Common Stock and (ii) approximately
90.1% of the outstanding voting power of Pulitzer Stock with respect to the
Pulitzer Merger Proposal. As of the Pulitzer Record Date, the Pulitzer
Principal Stockholders did not own any shares of Pulitzer Common Stock.
Pursuant to the Pulitzer Voting Agreement, the Pulitzer Principal Stockholders
have agreed to direct the vote of all of their shares of Pulitzer Stock in
favor of the Merger Agreement and the transactions contemplated by it
(including the Pulitzer Charter Amendment). Therefore, the Pulitzer Principal
Stockholders have sufficient voting power to approve the Pulitzer Merger
Proposal regardless of the vote of any other stockholders. The consummation of
the transactions contemplated by the Pulitzer Merger Proposal, however, is
conditioned upon the approval and adoption of the Pulitzer Charter Amendment
Proposal. Accordingly, the Spin-Off and the Merger and the related
transactions will not be consummated unless the Pulitzer Charter Amendment
Proposal is approved and adopted by the requisite votes of Pulitzer
stockholders. The Pulitzer Board recommends a vote "FOR" the Pulitzer
Proposals.
Pursuant to the Hearst-Argyle Voting Agreement, Hearst Broadcasting, which
as of January 21, 1999 (the "Hearst-Argyle Record Date") owned 100% of the
issued and outstanding shares of Hearst-Argyle Series B Common Stock and
approximately 37.5% of the issued and outstanding shares of Hearst-Argyle
Series A Common Stock, representing in the aggregate approximately 87.1% of
the outstanding voting power of the Hearst-Argyle Common Stock and
approximately 86.0% of the outstanding voting power of the capital stock of
Hearst-Argyle, has agreed to vote all of its shares of capital stock of
Hearst-Argyle in favor of the Merger Agreement and the transactions
contemplated thereby (including the issuance of the Hearst-Argyle Series A
Common Stock to be issued in the Merger). In addition, Hearst Broadcasting has
advised Hearst-Argyle that it intends to vote in favor of the Hearst-Argyle
Charter Amendment Proposal even though that matter is not covered by the
Hearst-Argyle Voting Agreement. Hearst Broadcasting has sufficient voting
power to approve the Hearst-Argyle Proposals. Accordingly, the approval of the
Hearst-Argyle Proposals is assured regardless of the vote of any other
stockholder of Hearst-Argyle. The Hearst-Argyle Board recommends a vote "FOR"
the Hearst-Argyle Proposals.
ii
<PAGE>
Upon consummation of the Merger, based on the 37,096,774 shares of Hearst-
Argyle Series A Common Stock being delivered to Pulitzer stockholders in the
Merger, if the Merger were consummated as of February 9, 1999, and assuming
the sale prior to the Merger of all shares of Pulitzer Common Stock proposed
to be sold by the Pulitzer Principal Stockholders, the Pulitzer Principal
Stockholders, together with the executive officers, directors and other
affiliates of Pulitzer, would own as a group approximately 24.9% of the
outstanding shares of Hearst-Argyle Common Stock, and Hearst Broadcasting,
together with the current executive officers, directors and other affiliates
of Hearst-Argyle, would own as a group approximately 53.4% of the outstanding
shares of Hearst-Argyle Common Stock.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Hearst-Argyle with respect to the shares of Hearst-Argyle Series A Common
Stock to be issued to the Pulitzer stockholders in the Merger. The NYSE has
approved the listing of such shares of Hearst-Argyle Series A Common Stock on
the NYSE, subject to official notice of issuance.
This Joint Proxy Statement/Prospectus and accompanying forms of proxy are
first being mailed to the stockholders of Hearst-Argyle and the stockholders
of Pulitzer on or about February 16, 1999.
See "Risk Factors" commencing on page 61 for certain information that should
be considered carefully before voting on the matters described herein.
----------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/ PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/ PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Joint Proxy Statement/Prospectus is February 11, 1999.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION..................................................... 1
INFORMATION INCORPORATED BY REFERENCE..................................... 2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS................ 3
SUMMARY................................................................... 4
Transaction Overview.................................................... 4
The Companies........................................................... 5
The Special Meetings.................................................... 8
Risk Factors............................................................ 10
The Pre-Merger Transactions............................................. 10
The Merger and the Merger Agreement..................................... 12
Control by Affiliates of Vote Required to Approve the Hearst-Argyle and
Pulitzer Proposals..................................................... 17
Interests of Officers, Directors and Principal Stockholders in the
Transactions........................................................... 17
Hearst-Argyle Stock Repurchase Program.................................. 19
Ownership of Hearst-Argyle Stock after the Merger....................... 20
Ownership of New Pulitzer after the Spin-Off and the Merger............. 22
Recommendation of the Boards of Directors............................... 22
Opinion of Financial Advisor to Pulitzer................................ 23
Opinion of Financial Advisor to Hearst-Argyle........................... 23
Registration Rights..................................................... 24
Certain Board Representation Rights..................................... 24
FCC Agreement........................................................... 25
Voting Agreements....................................................... 25
Arizona Diamondbacks Letter Agreement................................... 26
Certain Federal Income Tax Considerations............................... 27
Accounting Treatment.................................................... 27
Rights of Dissenting Stockholders....................................... 27
Comparison of Rights of Stockholders.................................... 28
Exchange Agent.......................................................... 28
Comparative Market Prices and Dividend Data............................. 28
Selected Historical and Pro Forma Comparative Per Share Data............ 29
Selected Historical Consolidated and Unaudited Pro Forma Combined
Condensed Financial Information........................................ 31
Hearst-Argyle Unaudited Pro Forma Combined Condensed Financial
Statements (giving effect to the Merger)............................... 49
Pro Forma Combined Condensed Statements of Operations of Hearst-Argyle.. 57
RISK FACTORS.............................................................. 61
Risk Factors Related to the Hearst-Argyle Merger Stock.................. 61
Federal Income Tax Risks Relating to the Spin-Off and the Merger........ 67
Risk Factors Related to the New Pulitzer Stock.......................... 68
Rule 145 Restrictions................................................... 71
THE SPECIAL MEETINGS...................................................... 72
Times and Places; Purposes.............................................. 72
Record Dates; Stock Entitled to Vote; Quorum............................ 72
Required Votes.......................................................... 73
Solicitation and Voting of Proxies...................................... 74
</TABLE>
iv
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<TABLE>
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THE HEARST-ARGYLE MERGER PROPOSAL AND THE PULITZER MERGER PROPOSAL....... 77
Transaction Overview................................................... 77
Background of and Pulitzer's Reasons for the Spin-Off and the Merger... 78
Recommendation of the Pulitzer Board................................... 86
Opinion of Financial Advisor to Pulitzer............................... 87
Background of and Hearst-Argyle's Reasons for the Merger............... 92
Recommendation of the Hearst-Argyle Board.............................. 95
Opinion of Financial Advisor to Hearst-Argyle.......................... 95
Interests of Officers, Directors and Principal Stockholders in the
Transactions.......................................................... 99
Hearst-Argyle Stock Repurchase Program................................. 101
Accounting Treatment................................................... 101
THE MERGER AGREEMENT..................................................... 101
Pre-Merger Transactions................................................ 101
The Merger............................................................. 103
Working Capital Adjustment............................................. 106
Conditions Precedent................................................... 107
Acquisition Proposals.................................................. 108
Certain Covenants...................................................... 109
Certain Representations and Warranties................................. 114
Indemnification........................................................ 115
Tax Matters............................................................ 116
Certain Employee Matters............................................... 117
Pulitzer Stock Option Plans............................................ 117
Termination of Merger Agreement........................................ 117
Amendment; Waiver...................................................... 118
Regulatory Approvals................................................... 119
Ancillary Agreements................................................... 120
CAPITALIZATION........................................................... 125
OWNERSHIP OF HEARST-ARGYLE STOCK BEFORE AND AFTER THE MERGER............. 126
OWNERSHIP OF NEW PULITZER STOCK AFTER THE SPIN-OFF AND THE MERGER........ 128
COMPARATIVE PER-SHARE MARKET AND DIVIDEND INFORMATION.................... 128
FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF, THE MERGER AND RELATED
TRANSACTIONS............................................................ 129
The Spin-Off........................................................... 129
The Merger............................................................. 130
Backup Withholding..................................................... 131
PROPOSAL TO APPROVE AND ADOPT THE HEARST-ARGYLE CHARTER AMENDMENT........ 132
PROPOSAL TO APPROVE AND ADOPT THE PULITZER CHARTER AMENDMENT............. 132
DESCRIPTION OF NEW PULITZER.............................................. 133
Introduction........................................................... 133
General................................................................ 133
Management............................................................. 133
Operating Strategy..................................................... 133
Publishing............................................................. 134
Related "New Media" Operations......................................... 136
Acquisition Strategy................................................... 137
</TABLE>
v
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<TABLE>
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Agency Agreements...................................................... 137
Competition............................................................ 138
Employee Relations..................................................... 138
Raw Materials.......................................................... 139
Employees.............................................................. 139
DESCRIPTION OF NEW PULITZER CAPITAL STOCK................................ 139
Common Stock and Class B Common Stock.................................. 139
Preferred Stock........................................................ 141
Additional Provisions of the New Pulitzer Charter...................... 141
New Pulitzer Voting Trust Agreement.................................... 143
New Pulitzer Registration Rights Agreement............................. 144
Transfer Agent......................................................... 144
COMPARISON OF RIGHTS OF STOCKHOLDERS OF PULITZER AND NEW PULITZER........ 144
COMPARISON OF RIGHTS OF HOLDERS OF HEARST-ARGYLE SERIES A COMMON STOCK
AND HOLDERS OF PULITZER COMMON STOCK.................................... 144
NO RIGHTS OF DISSENTING HEARST-ARGYLE STOCKHOLDERS....................... 147
RIGHTS OF DISSENTING PULITZER STOCKHOLDERS............................... 147
Pulitzer Class B Common Stock.......................................... 147
Pulitzer Common Stock.................................................. 149
PAYMENTS AND DISTRIBUTIONS TO STOCKHOLDERS............................... 150
LEGAL MATTERS............................................................ 151
EXPERTS.................................................................. 151
FUTURE STOCKHOLDER PROPOSALS............................................. 152
Annex I--Amended and Restated Agreement and Plan of Merger
Annex II--Form of Amendment to Hearst-Argyle's Amended and Restated
Certificate of Incorporation
Annex III--Form of Amendment to Pulitzer's Restated Certificate of
Incorporation
Annex IV--Opinion of Financial Advisor to Pulitzer
Annex V--Opinion of Financial Advisor to Hearst-Argyle
Annex VI--Section 262 of the Delaware General Corporation Law
Annex VII--Restated Certificate of Incorporation of Pulitzer Inc.
</TABLE>
vi
<PAGE>
All information in this Joint Proxy Statement/Prospectus relating to Hearst-
Argyle has been supplied by Hearst-Argyle and all information relating to
Pulitzer and New Pulitzer has been supplied by Pulitzer. The unaudited pro
forma financial information contained or incorporated by reference herein
regarding Hearst-Argyle has been prepared by Hearst-Argyle and includes
historical financial information regarding the Pulitzer Broadcasting Business
(as defined herein) that was supplied to Hearst-Argyle by Pulitzer. Pulitzer,
New Pulitzer and Hearst-Argyle have made certain covenants to each other with
respect to the information contained in this Joint Proxy Statement/Prospectus.
See "The Merger Agreement--Certain Covenants," and "--Indemnification."
Pulitzer and New Pulitzer do not have independent knowledge of the matters set
forth herein regarding Hearst-Argyle and take no responsibility for any such
information contained herein, and Hearst-Argyle does not have independent
knowledge of the matters set forth herein regarding Pulitzer and New Pulitzer
and takes no responsibility for any such information contained herein.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE
HEREIN, IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HEARST-
ARGYLE, PULITZER OR NEW PULITZER (OR THEIR SUCCESSORS). THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF HEARST-ARGYLE, PULITZER OR NEW PULITZER SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Hearst-Argyle has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-4 under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Hearst-Argyle Series A
Common Stock to be issued in the Merger. This Joint Proxy Statement/Prospectus
constitutes the Prospectus of Hearst-Argyle filed as part of that Registration
Statement. As permitted by the rules and regulations of the SEC, this Joint
Proxy Statement/Prospectus omits certain information, exhibits and
undertakings contained in the Registration Statement. Reference is made to the
Registration Statement and to the exhibits thereto for further information.
Statements contained herein concerning such documents are not necessarily
complete and, in each instance, reference is made to the copy of each such
document filed as an exhibit to the registration statement. Each such
statement is qualified in its entirety by such reference.
Hearst-Argyle and Pulitzer are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith each files reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
of Hearst-Argyle and Pulitzer can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the SEC's Regional Offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511, and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies
of such materials can be obtained by mail from the public reference branch of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such material may also be accessed electronically by means of the SEC's
home page on the Internet at http://www.sec.gov. Certain securities of Hearst-
Argyle and Pulitzer are listed on the New York Stock Exchange, Inc. ("NYSE")
and reports and other information concerning Hearst-Argyle and Pulitzer can be
inspected at the offices of such exchange at 20 Broad Street, New York, New
York 10006.
1
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WITH RESPECT TO EACH OF HEARST-ARGYLE AND PULITZER THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS RELATING TO HEARST-ARGYLE (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED,
UPON WRITTEN OR ORAL REQUEST TO: SECRETARY, HEARST-ARGYLE TELEVISION, INC.,
888 SEVENTH AVENUE, NEW YORK, NEW YORK 10106, (212) 887-6800. SUCH DOCUMENTS
RELATING TO PULITZER (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE TO
ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY
STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO: SECRETARY,
PULITZER PUBLISHING COMPANY, 900 NORTH TUCKER BOULEVARD, ST. LOUIS, MISSOURI
63101, (314) 340-8000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUESTS SHOULD BE MADE BY MARCH 10, 1999.
The following documents filed by Hearst-Argyle with the SEC (File No. 0-
2700) are incorporated by reference into this Joint Proxy
Statement/Prospectus:
1. Hearst-Argyle's Annual Report on Form 10-K for the year ended December
31, 1997, as amended by the Form 10-K/A filed on December 16, 1998, the
Form 10-K/A filed on January 15, 1999 and the Form 10-K/A filed on February
11, 1999;
2. Hearst-Argyle's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, as amended by the Form 10-Q/A filed on December 10, 1998
and the Form 10-Q/A filed on February 11, 1999; Quarterly Report on Form
10-Q for the quarter ended June 30, 1998, as amended by the Form 10-Q/A
filed on December 10, 1998 and the Form 10-Q/A filed on February 11, 1999;
and Quarterly Report on Form 10-Q for the quarter ended September 30, 1998,
as amended by the Form 10-Q/A filed on February 11, 1999;
3. Hearst-Argyle's Current Reports on Form 8-K filed on January 13, 1998,
March 31, 1998, and May 27, 1998; Current Report on Form 8-K filed
September 17, 1998, as amended by the Form 8-K/A filed on December 7, 1998;
Current Report on Form 8-K filed on September 29, 1998, as amended by the
Form 8-K/A filed on December 16, 1998; and Current Report on Form 8-K filed
December 16, 1998, as amended by the Form 8-K/A filed on January 26, 1999
and the Form 8-K/A filed on February 10, 1999;
4. The description of Hearst-Argyle Series A Common Stock contained in
Hearst-Argyle's Registration Statement on Form 8-A/A filed on July 14,
1998;
5. Argyle's Annual Report on Form 10-K for the year ended December 31,
1996; and,
6. Argyle's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997 and June 30, 1997.
The following documents filed by Pulitzer with the SEC (File No. 1-9329) are
incorporated by reference into this Joint Proxy Statement/Prospectus:
1. Pulitzer's Annual Report on Form 10-K for the year ended December 31,
1997 (except that Items 7 and 8 and Schedule II of this Annual Report are
not incorporated herein by reference as they are superseded by the
information set forth in Pulitzer's Current Report on Form 8-K filed on
January 22, 1999, which is incorporated herein by reference);
2. Pulitzer's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998, as amended by Form 10-Q/A
(except that Items 1 and 2 and Exhibit 27 of these Quarterly Reports are
not incorporated herein by reference as they are superseded by the
information set forth in Pulitzer's Current Report on Form 8-K filed on
January 22, 1999, which is incorporated herein by reference);
2
<PAGE>
3. Pulitzer's Current Reports on Form 8-K filed on June 11, 1998,
September 4, 1998, December 16, 1998 and January 22, 1999; and,
4. The description of the Pulitzer Common Stock contained in Pulitzer's
Registration Statement on Form 8-A filed on November 17, 1986.
In addition, all reports and other documents filed by either Hearst-Argyle
or Pulitzer pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Joint Proxy Statement/Prospectus and prior to the
Hearst-Argyle Meeting or the Pulitzer Meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of
filing of such reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein, or in
any other subsequently filed document that also is incorporated or deemed to
be incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Joint Proxy
Statement/Prospectus. Subject to the foregoing, all information appearing in
this Joint Proxy Statement/Prospectus is qualified in its entirety by the
information appearing in the documents incorporated herein by reference.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus contains forward-looking statements
that are subject to risks and uncertainties. Forward-looking statements
include the information concerning possible or assumed future results of
operations of Hearst-Argyle and Pulitzer under "Risk Factors," "The Hearst-
Argyle Merger Proposal and The Pulitzer Merger Proposal--Background of and
Pulitzer's Reasons for the Spin-Off and the Merger," "--Recommendation of the
Pulitzer Board," "--Opinion of Financial Advisor to Pulitzer," "--Background
of and Hearst-Argyle's Reasons for the Merger," "--Recommendation of the
Hearst-Argyle Board," and "--Opinion of Financial Advisor to Hearst-Argyle"
and those statements preceded by, followed by or that include the words
"believes," "expects," "anticipates" or similar expressions. For those
statements, Hearst-Argyle and Pulitzer claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. Stockholders of Hearst-Argyle and Pulitzer should
understand that the following important factors, in addition to those
discussed elsewhere in this Joint Proxy Statement/Prospectus and in the
documents that are incorporated by reference, could affect the future results
of Hearst-Argyle and could cause those results to differ materially from those
expressed in each forward-looking statement: material adverse changes in
economic conditions in the markets served by Hearst-Argyle; a significant
delay in the expected closing of the Merger; future regulatory actions and
conditions concerning broadcast radio and television stations or their
operating areas; the possibility that currently unanticipated difficulties may
arise in integrating the operations of two major businesses; and, competition
from others in the broadcast television and newspaper markets served by
Hearst-Argyle's and Pulitzer's respective businesses.
3
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus or in documents incorporated herein by
reference. This summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information set forth or
incorporated by reference elsewhere in this Joint Proxy Statement/Prospectus
and its Annexes, all of which should be reviewed carefully.
Transaction Overview
General. Hearst-Argyle Television, Inc., a Delaware corporation ("Hearst-
Argyle"), Pulitzer Publishing Company, a Delaware corporation ("Pulitzer"), and
Pulitzer Inc., a Delaware corporation and a wholly owned subsidiary of Pulitzer
("New Pulitzer"), entered into an Amended and Restated Agreement and Plan of
Merger, dated as of May 25, 1998 (the "Merger Agreement"), which provides for,
among other things, (i) the contribution by Pulitzer to New Pulitzer of all its
assets (other than broadcasting assets) and the net proceeds of the New Debt
(as defined herein) after the satisfaction of certain liabilities, subject to
all liabilities of Pulitzer (other than broadcasting liabilities, the New Debt
and certain other obligations) and the distribution of shares of capital stock
of New Pulitzer to Pulitzer's stockholders and (ii) the Merger (as defined
herein) with and into Hearst-Argyle of Pulitzer with its remaining television
and radio broadcast assets and liabilities, the New Debt and certain other
obligations.
The Spin-Off. Prior to the Merger, Pulitzer will contribute (the
"Contribution") to New Pulitzer (i) all of its assets other than (A) the issued
and outstanding capital stock of Pulitzer Broadcasting Company, a wholly owned
subsidiary of Pulitzer ("Pulitzer Broadcasting"), and of WESH Television, Inc.,
KCCI Television, Inc., and WDSU Television, Inc., each an indirect wholly owned
subsidiary of Pulitzer (collectively, the "Broadcasting Subsidiaries") and (B)
any of the assets of Pulitzer Broadcasting or the Broadcasting Subsidiaries or
other assets related primarily to Pulitzer's broadcasting businesses
(collectively, the "Broadcasting Assets," and together with Pulitzer
Broadcasting and the Broadcasting Subsidiaries, the "Pulitzer Broadcasting
Business"); (ii) the net proceeds of $700 million in new financing (the "New
Debt") after paying or providing for all of Pulitzer's existing indebtedness
(the "Existing Debt") and any fees and expenses incurred by Pulitzer in
connection with the transactions contemplated by the Merger Agreement (the
"Deal Expenses"); and, (iii) any other remaining cash and cash equivalents then
owned by Pulitzer. As part of the Contribution, New Pulitzer will assume all
liabilities of Pulitzer except liabilities associated with the Pulitzer
Broadcasting Business, the New Debt and certain other obligations. Following
the Contribution and prior to the Merger, Pulitzer will distribute one share of
Common Stock, par value $.01 per share, of New Pulitzer ("New Pulitzer Common
Stock") for each outstanding share of Common Stock, par value $.01 per share,
of Pulitzer ("Pulitzer Common Stock"), and one share of Class B Common Stock,
par value $.01 per share, of New Pulitzer ("New Pulitzer Class B Common Stock,"
and together with the New Pulitzer Common Stock, the "New Pulitzer Stock") for
each outstanding share of Class B Common Stock, par value $.01 per share, of
Pulitzer ("Pulitzer Class B Common Stock," and together with the Pulitzer
Common Stock, the "Pulitzer Stock") (the "Distribution," and together with the
Contribution, the "Spin-Off"). In order to effect the Distribution, it will be
necessary for Pulitzer to amend its Restated Certificate of Incorporation
immediately prior thereto as described herein.
The New York Stock Exchange, Inc. ("NYSE") has approved the listing, subject
to official notice of issuance, of the shares of New Pulitzer Common Stock that
will be distributed to holders of Pulitzer Common Stock in the Distribution
under the symbol "PTZ". The shares of New Pulitzer Class B Common Stock to be
distributed to holders of Pulitzer Class B Common Stock in the Distribution
will not be listed on any national securities exchange or any over-the-counter
market.
The Merger. Following the Spin-Off, Pulitzer, with its remaining television
and radio broadcast assets and liabilities, the New Debt and certain other
obligations, will be merged with and into Hearst-Argyle with Hearst-
4
<PAGE>
Argyle being the surviving corporation in the merger, in exchange for the
issuance to Pulitzer stockholders of 37,096,774 shares of Series A Common
Stock, par value $.01 per share, of Hearst-Argyle ("Hearst-Argyle Series A
Common Stock"), as described below and on the terms and subject to the
conditions contained in the Merger Agreement (the "Merger"). As a result of the
Merger, Hearst-Argyle will assume Pulitzer's indebtedness under the $700
million New Debt financing. The New Debt financing initially will be secured by
the cash proceeds of the loan and, upon payment of the Existing Debt and the
occurrence of the Spin-Off, the lien on the cash will be released and replaced
by a pledge of all of the issued and outstanding shares of capital stock of
Pulitzer Broadcasting and the Broadcasting Subsidiaries. The net proceeds of
the New Debt will be contributed to New Pulitzer prior to the Merger pursuant
to the Contribution in order to capitalize New Pulitzer. In addition, pursuant
to a working capital adjustment mechanism in the Merger Agreement, Hearst-
Argyle will pay to New Pulitzer or New Pulitzer will pay to Hearst-Argyle,
respectively, the amount by which Pulitzer's working capital as of the
consummation of the Merger is greater or less than $41 million.
The NYSE has approved the listing of the shares of Hearst-Argyle Series A
Common Stock that will be issued to holders of Pulitzer Stock in the Merger on
the NYSE, subject to official notice of issuance.
The Companies
Hearst-Argyle. Hearst-Argyle owns or manages 17 television stations reaching
approximately 12% of U.S. television households. Hearst-Argyle is the largest
"pure-play" (owning television stations only) publicly owned television
broadcast company in the U.S. and is the fourth-largest, non-network-owned
television group. Formed as a Delaware corporation in 1994 under the name
Argyle Television, Inc. ("Argyle"), Hearst-Argyle is the successor to the
combined operations of Argyle and the television broadcast group of The Hearst
Corporation ("Hearst") pursuant to a merger transaction that was consummated on
August 29, 1997 (the "Hearst Transaction"). In that transaction, Hearst
contributed its television broadcast group and related broadcast operations
(the "Hearst Broadcast Group") to Argyle and merged a wholly owned subsidiary
of Hearst with and into Argyle, with Argyle as the surviving corporation
(renamed "Hearst-Argyle Television, Inc."). Hearst-Argyle currently owns 13
television stations and programs one other television station under a time
brokerage agreement, and manages three additional television stations and two
radio stations that are owned or operated by Hearst. Hearst-Argyle has an
option to acquire one of the managed television stations and Hearst's interests
in another of the managed television stations, and has a right of first refusal
with respect to the third managed television station. Effective June 1, 1998,
Hearst-Argyle completed a tax-deferred exchange with STC Broadcasting, Inc. and
certain related entities (collectively, "STC") whereby Hearst-Argyle exchanged
its television stations WNAC-TV, Providence, Rhode Island, and WDTN-TV, Dayton,
Ohio, for STC's television stations KSBW-TV, Monterey-Salinas, California, and
WPTZ-TV/WNNE-TV, Burlington, Vermont/Plattsburgh, New York (the "STC Swap").
Divestiture of WNAC and WDTN was required under the order of the Federal
Communications Commission (the "FCC") approving the Hearst Transaction.
On January 5, 1999 and effective January 1, 1999 for accounting purposes,
Hearst-Argyle acquired through a merger transaction all of the partnership
interests in Kelly Broadcasting Co., a California limited partnership ("Kelly
Broadcasting"), in exchange for approximately $520 million in cash, subject to
a working capital adjustment (the "Kelly Transaction"). As a result of the
Kelly Transaction, Hearst-Argyle acquired television broadcast station KCRA-TV,
Sacramento, California and the programming rights under an existing Time
Brokerage Agreement with Channel 58, Inc., a California corporation, with
respect to KQCA-TV, Sacramento, California. In addition, Hearst-Argyle acquired
substantially all of the assets and certain of the liabilities of
Kelleproductions, Inc., a California corporation, for approximately $10 million
in cash.
In late December 1998 and early January 1999, Hearst-Argyle issued $450
million aggregate principal amount of Senior Notes to institutional investors
(the "Private Placement Debt"). The notes have a maturity of 12 years, with an
average life of 10 years, and bear interest at 7.18% per annum.
5
<PAGE>
As of the Hearst-Argyle Record Date (as defined herein), Hearst owned through
its wholly owned subsidiary, Hearst Broadcasting, Inc. ("Hearst Broadcasting"),
100% of the issued and outstanding shares of Series B Common Stock, par value
$.01 per share, of Hearst-Argyle ("Hearst-Argyle Series B Common Stock," and
together with the Hearst-Argyle Series A Common Stock, the "Hearst-Argyle
Common Stock") and approximately 37.5% of the issued and outstanding shares of
Hearst-Argyle Series A Common Stock, representing in the aggregate
approximately 87.1% of the outstanding voting power of the Hearst-Argyle Common
Stock and approximately 86.0% of the outstanding voting power of the Hearst-
Argyle Stock, as of the Hearst-Argyle Record Date. Upon consummation of the
Merger, based on the 37,096,774 shares of Hearst-Argyle Series A Common Stock
being delivered to Pulitzer stockholders in the Merger, if the Merger were
consummated as of February 9, 1999, Hearst Broadcasting would own approximately
51.8% of the outstanding shares of Hearst-Argyle Common Stock. Through its
ownership of Hearst-Argyle Series B Common Stock, Hearst Broadcasting is
entitled to elect as a class all but two members of the Board of Directors of
Hearst-Argyle (the "Hearst-Argyle Board"). The remaining common stock of
Hearst-Argyle is in the form of Hearst-Argyle Series A Common Stock, the
holders of which are entitled to elect the remaining two members of the Hearst-
Argyle Board and which is listed on the NYSE under the symbol "HTV." Additional
information regarding Hearst-Argyle is contained in reports filed by Hearst-
Argyle with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference herein.
Hearst-Argyle is organized under the laws of the State of Delaware and its
principal executive offices are located at 888 Seventh Avenue, New York, New
York 10106, (212) 887-6800.
Pulitzer. Pulitzer is engaged in newspaper publishing and television and
radio broadcasting. Its newspaper operations consist of two major metropolitan
dailies: the St. Louis Post-Dispatch, the only major daily newspaper serving
the St. Louis metropolitan area; and The Arizona Daily Star, serving the Tucson
metropolitan area. In addition, the Pulitzer community newspaper group includes
12 dailies that serve smaller markets, primarily in the West and Midwest.
Pulitzer's broadcasting operations consist of nine network-affiliated
television stations located in Daytona Beach/Orlando, Florida; Greenville,
South Carolina; New Orleans, Louisiana; Lancaster, Pennsylvania;
Greensboro/Winston-Salem, North Carolina; Albuquerque, New Mexico; Louisville,
Kentucky; Des Moines, Iowa; and Omaha, Nebraska; and five radio stations
located in Phoenix, Arizona; Eden, North Carolina; and, Louisville, Kentucky.
The Pulitzer Publishing Company was founded by the first Joseph Pulitzer in
1878 to publish the original St. Louis Post-Dispatch and has operated
continuously since that time under the direction of the Pulitzer family.
Michael E. Pulitzer, a grandson of the founder, currently serves as Chairman of
the Board, President and Chief Executive Officer of Pulitzer.
Pulitzer is organized under the laws of the State of Delaware and its
principal executive offices are located at 900 North Tucker Boulevard, St.
Louis, Missouri 63101, (314) 340-8000.
New Pulitzer. After consummation of the Spin-Off and the Merger, New Pulitzer
will operate, directly or through its subsidiaries, the newspaper and related
new media businesses of Pulitzer. Financial and other information about each of
these businesses is contained in reports filed by Pulitzer with the SEC and is
incorporated by reference herein. See "Information Incorporated by Reference."
On January 1, 1999, Robert C. Woodworth began serving as President and Chief
Executive Officer of New Pulitzer, pursuant to a three-year employment
agreement with New Pulitzer. Mr. Woodworth was a Vice President-Newspapers of
Knight Ridder, Inc. from May 1997 until December 1998. Prior to that, Mr.
Woodworth worked for Capital Cities/ABC in various positions, most recently as
Publisher of The Kansas City Star and Senior Vice President-Metro Newspapers.
Mr. Woodworth will be named a director of New Pulitzer following consummation
of the Merger. Mr. Pulitzer will continue to serve as Chairman of the Board of
New Pulitzer.
6
<PAGE>
New Pulitzer was organized in connection with the Spin-Off and the Merger in
May 1998 under the laws of the State of Delaware and its principal executive
offices are located at 900 North Tucker Boulevard, St. Louis, Missouri 63101,
(314) 340-8000.
Hearst-Argyle After the Merger. After consummation of the Merger, Hearst-
Argyle will own or manage 26 television stations and seven radio stations
(collectively, the "Hearst-Argyle Stations"). Under current FCC rules, Hearst-
Argyle will not be able to own both the WBAL-TV (Baltimore, Maryland)
television station and the WGAL(TV) (Lancaster, Pennsylvania) television
station and therefore the FCC, as part of its consent to the Merger, required
Hearst-Argyle to file an application to divest either WBAL-TV or WGAL(TV) (or
propose such other action that would result in compliance with such FCC rules)
within six months following consummation of the Merger. The following tables
set forth information for each of the Hearst-Argyle Stations.
<TABLE>
<CAPTION>
Percentage of
Market Television Network U.S. Television
Market Rank (1) Station Affiliation Channel Households (2)
------ -------- ---------- ----------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Boston, MA.............. 6 WCVB ABC 5 2.20%
Tampa, FL(3)............ 14 WWWB WB 32 1.47%
Pittsburgh, PA.......... 19 WTAE ABC 4 1.14%
Sacramento, CA.......... 20 KCRA NBC 3 1.14%
Sacramento, CA(4)....... 20 KQCA WB 58 --
*Orlando, FL............ 22 WESH NBC 2 1.08%
Baltimore, MD(5)........ 24 WBAL NBC 11 1.00%
Milwaukee, WI........... 31 WISN ABC 12 0.81%
Cincinnati, OH.......... 32 WLWT NBC 5 0.81%
Kansas City, MO......... 33 KMBC ABC 9 0.81%
Kansas City, MO(3)...... 33 KCWE UPN 29 --
*Greenville, SC......... 35 WYFF NBC 4 0.74%
*New Orleans, LA........ 41 WDSU NBC 6 0.63%
West Palm Beach, FL(3).. 44 WPBF ABC 25 0.61%
Oklahoma City, OK....... 45 KOCO ABC 5 0.60%
*Lancaster, PA(5)....... 46 WGAL NBC 8 0.60%
*Greensboro, NC......... 47 WXII NBC 12 0.59%
*Louisville, KY......... 48 WLKY CBS 32 0.57%
*Albuquerque, NM(6)..... 49 KOAT ABC 7 0.57%
*Des Moines, IA......... 70 KCCI CBS 8 0.39%
Honolulu, HI............ 71 KITV ABC 4 0.38%
*Omaha, NE.............. 73 KETV ABC 7 0.38%
Jackson, MS............. 89 WAPT ABC 16 0.30%
Burlington, VT.......... 91 WPTZ/WNNE NBC 5/31 0.29%
Ft. Smith/Fayetteville,
AR..................... 117 KHBS/KHOG ABC/ABC 40/29 0.22%
Monterey-Salinas, CA.... 119 KSBW NBC 8 0.22%
-----
Total................. 17.55%
=====
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Market Radio
Market Rank(7) Station Format
------ ------- -------- -------------------
<S> <C> <C> <C>
*Phoenix, AR............................... 17 KTAR--AM News
KMVP--AM Sports
KKLT--FM Light Rock
Baltimore, MD(3)........................... 19 WBAL--AM News
WIYY--FM Album Oriented Rock
*Greensboro, NC............................ 40 WXII--AM News
*Louisville, KY............................ 52 WLKY--AM News
</TABLE>
- --------
* Designates a station to be owned or operated by Hearst-Argyle as a
consequence of the Merger.
(1) Market rank is based on the relative size of the Designated Market Area
(defined by A.C. Nielsen Co. ("Nielsen") as geographic markets for the sale
of national "spot" and local advertising time) ("DMA") among the 211
generally recognized DMAs in the U.S., based on Nielsen estimates for the
1998-99 season.
(2) Based on Nielsen estimates for the 1998-99 season.
(3) WWWB-TV and WPBF-TV television stations and WBAL-AM and WIYY-FM radio
stations are managed by Hearst-Argyle under a management agreement with
Hearst. In addition, Hearst-Argyle provides certain management services to
Hearst in order to allow Hearst to fulfill its obligations under a program
services and time brokerage agreement between Hearst and the permittee of
KCWE in Kansas City, Missouri.
(4) Provides programming and other services under a time brokerage agreement
with Channel 58, Inc., the FCC licensee of KQCA.
(5) Under current FCC rules, Hearst-Argyle would not be able to own both the
WBAL-TV (Baltimore, Maryland), and the WGAL(TV) (Lancaster, Pennsylvania)
television stations. The FCC, as part of its order granting consent to the
transfer of control of Pulitzer, has granted to Hearst-Argyle a temporary,
six-month waiver (from the date of consummation of the Merger) of the
applicable rule in order to enable it to divest one of the stations in
order to achieve compliance with the rules.
(6) Market Rank and Percentage of U.S. Television Households include
information relating to two satellite stations currently owned by Pulitzer,
which Hearst-Argyle will own after consummation of the Merger: KOCT(TV),
Channel 6 in Carlsbad, New Mexico and KOVT(TV), Channel 10 in Silver City,
New Mexico.
(7) Market rank is based on BIA Research Inc.'s Investing in Radio 1998 Market
Report.
The Special Meetings
Hearst-Argyle. A Special Meeting of the Stockholders of Hearst-Argyle (the
"Hearst-Argyle Meeting") will be held at 959 Eighth Avenue, New York, New York
10019, on March 17, 1999, beginning at 10:00 a.m. New York time. The purpose of
the Hearst-Argyle Meeting is to consider and vote upon the following proposals
(the "Hearst-Argyle Proposals"): (i) the approval and adoption of the Merger
Agreement and all related transactions and agreements (the "Hearst-Argyle
Merger Proposal") and (ii) the approval and adoption of an amendment (the
"Hearst-Argyle Charter Amendment") to the Amended and Restated Certificate of
Incorporation of Hearst-Argyle (the "Hearst-Argyle Charter") to increase the
number of authorized shares of Hearst-Argyle Common Stock from 200 million to
300 million shares, 200 million of such shares to be designated Hearst-Argyle
Series A Common Stock and 100 million of such shares to be designated Hearst-
Argyle Series B Common Stock (the "Hearst-Argyle Charter Amendment Proposal").
A copy of the Merger Agreement is attached hereto as Annex I. A copy of the
Hearst-Argyle Charter Amendment is attached hereto as Annex II. See "The
Special Meetings--Solicitation and Voting of Proxies--Hearst-Argyle."
The record date for the Hearst-Argyle Meeting is January 21, 1999 (the
"Hearst-Argyle Record Date"). Accordingly, holders of record of Hearst-Argyle
Series A Common Stock, Hearst-Argyle Series B Common Stock, Series A Preferred
Stock, par value $.01 per share, of Hearst-Argyle ("Hearst-Argyle Series A
Preferred Stock") and Series B Preferred Stock, par value $.01 per share, of
Hearst-Argyle ("Hearst-Argyle Series B
8
<PAGE>
Preferred Stock," and together with the Hearst-Argyle Series A Preferred Stock
and the Hearst-Argyle Common Stock, the "Hearst-Argyle Stock") as of the
Hearst-Argyle Record Date will be entitled to notice of and to vote at, the
Hearst-Argyle Meeting. As of the Hearst-Argyle Record Date, 10,752,457 shares
of Hearst-Argyle Series A Common Stock, 41,298,648 shares of Hearst-Argyle
Series B Common Stock, 10,938 shares of Hearst-Argyle Series A Preferred Stock
and 10,938 shares of Hearst-Argyle Series B Preferred Stock were issued and
outstanding and entitled to vote at the Hearst-Argyle Meeting. Each share of
Hearst-Argyle Series A Common Stock and Hearst-Argyle Series B Common Stock is
entitled to one vote per share and each share of Hearst-Argyle Series A
Preferred Stock and Hearst-Argyle Series B Preferred Stock is entitled to 29
votes per share.
Under the Delaware General Corporation Law (the "DGCL"), the affirmative vote
of the holders of a majority of the outstanding shares of Hearst-Argyle Series
A Common Stock, Hearst-Argyle Series B Common Stock, Hearst-Argyle Series A
Preferred Stock and Hearst-Argyle Series B Preferred Stock, voting together as
a single class, is required for approval of the Hearst-Argyle Merger Proposal.
Stockholder approval of the Hearst- Argyle Merger Proposal will also constitute
approval of the issuance of the 37,096,774 shares of Hearst-Argyle Series A
Common Stock being delivered to Pulitzer stockholders in the Merger, which by
the rules of the NYSE must be approved by a majority of the votes cast by the
holders of the Hearst-Argyle Series A Common Stock, Hearst-Argyle Series B
Common Stock, Hearst-Argyle Series A Preferred Stock and Hearst-Argyle Series B
Preferred Stock, voting together as a single class, provided that the total
vote cast in respect of the proposal represents a majority of all shares of
capital stock of Hearst-Argyle entitled to vote thereon.
Under the DGCL, the Hearst-Argyle Charter and the By-Laws of Hearst-Argyle
(the "Hearst-Argyle By- Laws"), approval of the Hearst-Argyle Charter Amendment
Proposal requires the affirmative vote of (i) the holders of a majority of the
outstanding shares of Hearst-Argyle Series A Common Stock, Hearst-Argyle
Series B Common Stock, Hearst-Argyle Series A Preferred Stock and Hearst-Argyle
Series B Preferred Stock represented in person or by proxy at the Hearst-Argyle
Meeting and voting together as a single class and (ii) the holders of a
majority of the outstanding shares of Hearst-Argyle Series A Common Stock and
Hearst-Argyle Series B Common Stock, represented in person or by proxy at the
Hearst-Argyle Meeting and voting together as a single class. The actions
contemplated by each of the Hearst-Argyle Merger Proposal and the Hearst-Argyle
Charter Amendment Proposal are not conditioned upon the approval of the other
proposal.
As of the Hearst-Argyle Record Date, Hearst Broadcasting owned 100% of the
issued and outstanding shares of Hearst-Argyle Series B Common Stock and
4,036,725 of the issued and outstanding shares of Hearst- Argyle Series A
Common Stock representing in the aggregate approximately 87.1% of the
outstanding voting power of the Hearst-Argyle Common Stock and 86.0% of the
outstanding voting power of the Hearst-Argyle Stock. Therefore, Hearst
Broadcasting has sufficient voting power to approve the Hearst-Argyle Proposals
regardless of the vote of any other stockholders. See "--Control by Affiliates
of Vote Required to Approve the Hearst-Argyle and Pulitzer Proposals." Hearst
Broadcasting has entered into a voting agreement with Pulitzer pursuant to
which it has agreed to vote in favor of the Hearst-Argyle Merger Proposal.
Hearst Broadcasting has also advised Hearst-Argyle that it intends to vote in
favor of the Hearst-Argyle Charter Amendment Proposal even though that matter
is not covered by the Hearst-Argyle Voting Agreement. As of the Hearst-Argyle
Record Date, the directors and executive officers of Hearst-Argyle as a group
beneficially owned approximately 2.8% of the outstanding shares of Hearst-
Argyle Common Stock. These shares are not subject to any voting agreements and
such directors and executive officers have not indicated any intention as to
how they will vote. See "The Merger Agreement--Ancillary Agreements--Hearst-
Argyle Voting Agreement."
Pulitzer. A Special Meeting of the Stockholders of Pulitzer (the "Pulitzer
Meeting") will be held at the Hotel Plaza Athenee, Le Trianon Room, 37 East
64th Street, New York, New York 10021, on March 17, 1999, beginning at 10:00
a.m. New York time. The purpose of the Pulitzer Meeting is to consider and vote
upon the following proposals (collectively, the "Pulitzer Proposals"): (i) the
approval and adoption of an amendment (the "Pulitzer Charter Amendment") to the
Restated Certificate of Incorporation of Pulitzer (the "Pulitzer Charter")
required in connection with the Spin-Off to permit Pulitzer to effect the
Distribution (the "Pulitzer Charter
9
<PAGE>
Amendment Proposal") and (ii) the approval and adoption of the Merger Agreement
and all related transactions and agreements (the "Pulitzer Merger Proposal"). A
copy of the Pulitzer Charter Amendment is attached hereto as Annex III. See
"The Special Meetings--Solicitation and Voting of Proxies--Pulitzer."
The record date for the Pulitzer Meeting is January 21, 1999 (the "Pulitzer
Record Date"). Accordingly, holders of record of Pulitzer Common Stock and
Pulitzer Class B Common Stock as of the Pulitzer Record Date will be entitled
to notice of and to vote at the Pulitzer Meeting. As of the Pulitzer Record
Date, 7,321,465 shares of Pulitzer Common Stock and 15,297,449 shares of
Pulitzer Class B Common Stock were issued and outstanding and entitled to vote
at the Pulitzer Meeting. Each share of Pulitzer Common Stock is entitled to one
vote per share and each share of Pulitzer Class B Common Stock is entitled to
10 votes per share.
Under the DGCL, the affirmative vote of the holders of a majority of the
outstanding shares of the Pulitzer Stock, voting together as a single class, is
required for approval of the Merger Agreement. Under the DGCL, the Pulitzer
Charter and the By-Laws of Pulitzer (the "Pulitzer By-Laws"), the affirmative
vote of the holders of a majority of the outstanding shares of the Pulitzer
Stock, voting together as a single class, and the vote of the holders of a
majority of the outstanding shares of the Pulitzer Common Stock, voting
separately as a class, are required for approval of the Pulitzer Charter
Amendment.
As of the Pulitzer Record Date, certain holders of Pulitzer Stock (the
"Pulitzer Principal Stockholders"), including David E. Moore, Emily Rauh
Pulitzer and Michael E. Pulitzer, individually or as trustees or controlling
persons of certain Pulitzer Principal Stockholders, collectively, had the power
to direct the vote of 14,443,209 shares of Pulitzer Class B Common Stock,
representing approximately 94.4% of the issued and outstanding shares of
Pulitzer Class B Common Stock and approximately 90.1% of the outstanding voting
power of Pulitzer Stock with respect to the Pulitzer Merger Proposal. As of the
Pulitzer Record Date, the Pulitzer Principal Stockholders did not own any
shares of Pulitzer Common Stock. Pursuant to the Pulitzer Voting Agreement, the
Pulitzer Principal Stockholders have agreed to direct the vote of all their
shares or Pulitzer Stock in favor of the Merger Agreement and the transactions
contemplated by it (including the Pulitzer Charter Amendment). Therefore, the
Pulitzer Principal Stockholders have sufficient voting power to approve the
Pulitzer Merger Proposal regardless of the vote of any other stockholders. The
consummation of the transactions contemplated by the Pulitzer Merger Proposal,
however, is conditioned upon the approval and adoption of the Pulitzer Charter
Amendment Proposal. Accordingly, the Spin-Off and the Merger and the related
transactions will not be consummated unless the Pulitzer Charter Amendment
Proposal is approved and adopted by the requisite votes of Pulitzer
stockholders. See "--Control by Affiliates of Vote Required to Approve the
Hearst-Argyle and Pulitzer Proposals" and "--Interests of Officers, Directors
and Principal Stockholders in the Transactions." The Pulitzer Principal
Stockholders have entered into a voting agreement with Hearst-Argyle pursuant
to which they have agreed to vote or direct the vote of all their shares of
Pulitzer Stock in favor of the Pulitzer Proposals. See "The Merger Agreement--
Ancillary Agreements--Pulitzer Voting Agreement."
Risk Factors
In determining whether to vote for the Hearst-Argyle Proposals and the
Pulitzer Proposals, stockholders should carefully read and evaluate certain
risks associated with Hearst-Argyle, Pulitzer, New Pulitzer, the Spin-Off and
the Merger, including, without limitation, risk factors related to the Hearst-
Argyle Merger Stock, certain tax and other risk factors associated with the
transactions contemplated by the Spin-Off and the Merger, risk factors related
to the New Pulitzer Stock and risk factors related to certain legal
restrictions on the sale of Hearst-Argyle Merger Stock after the Merger. See
"Risk Factors."
The Pre-Merger Transactions
Prior to and as a condition to the Merger, each of the following transactions
must be consummated. See "The Merger Agreement--Pre-Merger Transactions" for a
more complete description of these transactions.
10
<PAGE>
Financing. Prior to the Spin-Off, Pulitzer has agreed to use commercially
reasonable efforts to obtain the New Debt through a financing in the amount of
$700 million on terms reasonably and mutually acceptable to Pulitzer and
Hearst-Argyle, which may be secured by the proceeds thereof, the Broadcasting
Assets or the issued and outstanding shares of capital stock of Pulitzer
Broadcasting and/or the Broadcasting Subsidiaries. Pulitzer expects to enter
into a commitment letter with The Chase Manhattan Bank ("Chase"), pursuant to
which Chase, subject to the negotiation, execution and delivery of definitive
documentation and several conditions, will commit to lend to Pulitzer $700
million, which loan will be due and payable upon two days' prior written notice
and secured initially by the cash proceeds of the loan. Upon payment of the
Existing Debt and the occurrence of the Spin-Off, the lien on the cash will be
released and replaced by a pledge of all the issued and outstanding shares of
capital stock of Pulitzer Broadcasting and the Broadcasting Subsidiaries. On or
before the closing date of the Merger, Pulitzer will use a portion of the
proceeds of the New Debt to pay or provide for the payment of the Existing Debt
and the Deal Expenses. Pulitzer will contribute the balance of the proceeds of
the New Debt, along with any other remaining cash and cash equivalents then
owned by Pulitzer, to New Pulitzer pursuant to the Contribution Agreement (as
defined herein).
Under the terms of the proposed commitment letter, Pulitzer will pay a
corporate finance fee to Chase of $500,000, payable on or before the Closing
Date. If for any reason the Merger is not consummated, Pulitzer expects to
repay a portion of the New Debt with the proceeds remaining after any payment
of Existing Debt or Deal Expenses. However, under such circumstances, if the
New Debt is not fully repaid on the day after the New Debt is borrowed, Chase
Securities Inc. ("CSI"), on behalf of Chase, will be permitted to structure,
arrange and syndicate senior secured credit facilities in the amount of $700
million, the proceeds of which will be applied to refinance the New Debt. If
the New Debt remains unpaid and outstanding for more than three business days,
Pulitzer will pay to Chase an advisory fee in the amount of $5.25 million,
provided that if the New Debt is repaid from the proceeds of a syndicated
financing arranged or underwritten by CSI or any of its affiliates, the
advisory fee will be credited against any syndication or underwriting fees
payable to Chase in connection with the refinancing.
Spin-Off. Prior to the closing of the Merger, Pulitzer will effect the
Contribution by contributing and transferring to New Pulitzer and/or its wholly
owned subsidiaries (collectively, the "New Pulitzer Group") all the assets of
Pulitzer other than the issued and outstanding capital stock of Pulitzer
Broadcasting and the Broadcasting Subsidiaries, any of the Broadcasting Assets
and certain other rights (the "Retained Assets"), pursuant to a Contribution
and Assumption Agreement between Pulitzer and New Pulitzer, a form of which is
attached as Exhibit C to Annex I hereto (the "Contribution Agreement"). In
connection with the Contribution, New Pulitzer, among other things, will (i)
assume all liabilities of Pulitzer that exist as of, or otherwise relate to any
period ending on or prior to the effective time of the Merger, other than those
liabilities associated with the Pulitzer Broadcasting Business, the New Debt
and Pulitzer's obligations under the Merger Agreement and the other agreements
contemplated thereby (the "Retained Liabilities") and (ii) issue and deliver to
Pulitzer such number of shares of New Pulitzer Common Stock and New Pulitzer
Class B Common Stock as will be required for the Distribution.
Following the Contribution, and immediately prior to the Merger, Pulitzer
will effect the Distribution by distributing to each holder of Pulitzer Common
Stock one share of New Pulitzer Common Stock for each share of Pulitzer Common
Stock held and to each holder of Pulitzer Class B Common Stock one share of New
Pulitzer Class B Common Stock for each share of Pulitzer Class B Common Stock
held. As a result, each holder of Pulitzer capital stock immediately prior to
the Distribution will own the same number and class of shares in New Pulitzer
as such holder owns in Pulitzer. Each share of Pulitzer Stock owned directly or
indirectly by Pulitzer as treasury stock will be cancelled at the time of the
Distribution. Each share of the capital stock of New Pulitzer issued and
outstanding immediately prior to the Distribution and owned, directly or
indirectly, by Pulitzer or any of its subsidiaries (other than those to be
distributed in accordance with the Distribution) will be cancelled at the time
of the Distribution.
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The Contribution and the Distribution collectively constitute the Spin-Off.
As part of the Contribution, Pulitzer will agree to indemnify, defend and hold
harmless the New Pulitzer Group, and their respective successors-in-interest
and each of their respective past and present directors and officers from all
losses, claims, damages or liabilities, joint or several, of Pulitzer, to the
extent they arise out of, or are based upon or otherwise relate to, the
Retained Liabilities, the Retained Assets or the operations of Pulitzer
Broadcasting or the Broadcasting Subsidiaries, except for certain liabilities
relating to taxes, employee benefits, litigation and certain other matters. See
"The Merger Agreement--Indemnification." Notwithstanding the foregoing, New
Pulitzer will be responsible for all tax liabilities of Pulitzer and its
subsidiaries for periods through the date (the "Closing Date") on which the
closing of the Merger and related transactions occurs (the "Closing"), and
Hearst-Argyle, as the surviving corporation, will be responsible for all such
liabilities pertaining to the Retained Liabilities or the Retained Assets for
periods thereafter. New Pulitzer will also be responsible for certain taxes
arising from or relating to the Merger, the Contribution, the Spin-Off and
related transactions. See "The Merger Agreement--Tax Matters."
Amendments to Organizational Documents of Pulitzer and New Pulitzer. Prior to
the Spin-Off, the Pulitzer Charter will be amended in order to permit the
Distribution. Currently, the Pulitzer Charter provides that, if dividends or
other distributions (other than of Pulitzer Stock) are declared, the amount of
such dividend or other distribution payable on each share of Pulitzer Stock
shall in all cases be equal to the amount of such dividend or other
distribution payable on each other share of Pulitzer Stock. This provision
prohibits the distribution of shares of New Pulitzer Common Stock to holders of
Pulitzer Common Stock and the simultaneous distribution of shares of New
Pulitzer Class B Common Stock to holders of Pulitzer Class B Common Stock, as
contemplated by the Distribution. The Pulitzer Charter Amendment, if approved
and adopted, will permit such distributions by creating a specific exception
for distributions of shares of New Pulitzer. See "Proposal to Approve and Adopt
the Pulitzer Charter Amendment" and a copy of the form of Pulitzer Charter
Amendment attached as Annex III hereto. The New Pulitzer Certificate of
Incorporation (the "New Pulitzer Charter") has been amended and restated and
contains provisions substantially similar to the current Pulitzer Charter, as
proposed to be amended by the Pulitzer Charter Amendment. See "Comparison of
Rights of Stockholders of Pulitzer and New Pulitzer" and a copy of the New
Pulitzer Charter attached as Annex VII hereto.
The Merger and the Merger Agreement
General. In addition to providing for the transactions described above under
"--The Pre-Merger Transactions," the Merger Agreement provides that, subject to
(i) the requisite adoption and approval by Hearst- Argyle stockholders of the
Hearst-Argyle Merger Proposal; (ii) the requisite adoption and approval by
Pulitzer stockholders of the Pulitzer Proposals; and, (iii) the satisfaction or
waiver of certain other conditions, at the Effective Time (as defined herein),
Pulitzer (which, at the time of the Merger, will own only the Pulitzer
Broadcasting Business subject to the related liabilities, the New Debt and
certain other obligations) will be merged with and into Hearst-Argyle, the
separate existence of Pulitzer will cease, and Hearst-Argyle will continue as
the surviving corporation in the Merger. As a result of the Merger, (i) Hearst-
Argyle will acquire the Pulitzer Broadcasting Business and, with certain
exceptions, will be responsible for all of the liabilities of Pulitzer relating
to the Pulitzer Broadcasting Business, the New Debt and the obligations of
Pulitzer under the Merger Agreement and the other agreements contemplated
thereby and (ii) shares of Pulitzer Stock outstanding immediately prior to the
Merger will be converted into shares of Hearst-Argyle Merger Stock (as defined
below). Because the Merger is structured as a merger of Pulitzer with and into
Hearst-Argyle, Hearst-Argyle will assume all liabilities of Pulitzer as a
matter of law at the Effective Time, including the New Debt. Pursuant to the
Merger Agreement and the Contribution Agreement, Pulitzer, New Pulitzer and
Hearst-Argyle have agreed to indemnify each other with respect to certain
matters, including New Pulitzer's indemnification of Hearst-Argyle in respect
of all liabilities of Pulitzer not related to the Pulitzer Broadcasting
Business (including any tax to which Pulitzer is subject as a result of the
Spin-Off) other than the New Debt and the obligations of Pulitzer under the
Merger Agreement and the other agreements contemplated thereby and the
indemnification of Hearst-Argyle in respect
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of certain liabilities relating to the Pulitzer Broadcasting Business. See "The
Hearst-Argyle Merger Proposal and The Pulitzer Merger Proposal" and "The Merger
Agreement--Indemnification."
Effective Time of Merger. The Merger will become effective upon the filing of
a certificate of merger with the Secretary of State of the State of Delaware in
accordance with applicable law (the "Effective Time"). It is anticipated that,
if approved by the stockholders of both Hearst-Argyle and Pulitzer, the Merger
will become effective in March 1999; however, because the Merger and the
related transactions are conditioned upon, among other things, certain
regulatory approvals and third party consents, no assurances can be given as to
when the consummation of the Merger will actually occur, if at all.
Merger Consideration. Pursuant to the Merger Agreement and without any action
on the part of the holder of any shares of capital stock, at the Effective Time
each share of Pulitzer Stock outstanding immediately prior to the Merger
(except for shares of Pulitzer Class B Common Stock with respect to which
dissenters' rights are properly exercised) will be converted into and become
the number of fully-paid and nonassessable shares of Hearst-Argyle Series A
Common Stock (the "Common Stock Conversion Number") equal to the quotient
obtained by dividing the 37,096,774 shares of Hearst-Argyle Series A Common
Stock to be delivered to Pulitzer stockholders in the Merger (the "Hearst-
Argyle Merger Stock") by the number of shares of Pulitzer Stock outstanding
immediately prior to the Effective Time. Based on the number of shares of
Pulitzer Stock outstanding on the Pulitzer Record Date, if the Merger were
consummated on the date hereof, the Common Stock Conversion Number (or the
number of shares of Hearst-Argyle Series A Common Stock to be delivered per
share of Pulitzer Stock) would be 1.64 shares. On February 9, 1999, the closing
price of Hearst-Argyle Series A Common Stock on the NYSE was $27.875. Based on
this price, the aggregate value of the Hearst-Argyle Merger Stock is
$1,034,072,575.25 and the value of Hearst-Argyle Merger Stock to be received
per share of Pulitzer Stock is $45.717. Because the aggregate number of shares
of Hearst-Argyle Merger Stock is fixed and the actual market price of the
Hearst-Argyle Series A Common Stock is subject to fluctuation, the actual
aggregate market value of Hearst-Argyle Merger Stock and market value of
Hearst-Argyle Merger Stock to be received per share of Pulitzer Stock, at the
Effective Time, may be greater or less than these amounts.
If, between May 25, 1998 and the Effective Time, the outstanding shares of
Hearst-Argyle Series A Common Stock are changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
or if any extraordinary dividend or distribution is made with respect to the
Hearst-Argyle Series A Common Stock, then the Common Stock Conversion Number
will be correspondingly adjusted to reflect such event.
The Merger Agreement provides that no fractional shares of Hearst-Argyle
Merger Stock will be issued in connection with the Merger. In lieu of any such
fractional interests, each holder of Pulitzer Stock entitled to receive Hearst-
Argyle Merger Stock in the Merger will be entitled to receive an amount in cash
(without interest), rounded to the nearest cent, determined by multiplying the
fractional interest in the share of Hearst-Argyle Merger Stock to which such
holder would otherwise be entitled (after taking into account all shares of
Pulitzer Stock then held of record by such holder) by the closing sale price of
a share of Hearst-Argyle Series A Common Stock on the NYSE on the Closing Date.
Hearst-Argyle currently expects that any such payments will be made from cash
on hand.
Payment for Shares. For a description of the method of delivery of shares of
Hearst-Argyle Series A Common Stock to be issued to Pulitzer stockholders in
the Merger, see "Payments and Distributions to Stockholders." PULITZER
STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER
OF TRANSMITTAL.
Working Capital Adjustment. The Merger Agreement provides that two days prior
to the Effective Time, Pulitzer will inform Hearst-Argyle of its estimate of
the difference between its total current assets and its total current
liabilities (other than the New Debt, the Existing Debt and the Deal Expenses)
(the "Working Capital
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Amount") as of the end of the most recently available month end period
immediately preceding the Effective Time and after giving effect to the
Contribution, the Distribution and the disposition of cash and cash equivalents
(the "Estimated Working Capital Amount"). At the Effective Time, if the
Estimated Working Capital Amount exceeds $41 million, Hearst-Argyle will pay to
New Pulitzer the amount of such excess, and if $41 million exceeds the
Estimated Working Capital Amount, New Pulitzer will pay to Hearst-Argyle the
amount of such excess.
Within 90 days after the Effective Time, Hearst-Argyle will deliver to New
Pulitzer its determination of the Working Capital Amount as of the Closing Date
(the "Closing Working Capital Amount"). Within 10 days thereafter (or within 10
days of the resolution of any dispute regarding such determination, which
dispute, if not resolved by Hearst-Argyle and New Pulitzer, will be resolved by
an independent certified public accounting firm mutually acceptable to Hearst-
Argyle and New Pulitzer, the decision of which shall be final and binding on
Hearst- Argyle and New Pulitzer), adjustment payments will be made as follows:
If the Closing Working Capital Amount as adjusted, if at all, by the preceding
dispute resolution process (the "Final Working Capital Amount") exceeds the
Estimated Working Capital Amount, then Hearst-Argyle will pay to New Pulitzer
the amount of such excess, and if the Estimated Working Capital Amount exceeds
the Final Working Capital Amount, New Pulitzer will pay to Hearst-Argyle the
amount of excess. Any such payments will include interest from the Closing Date
to the date of payment at the prime rate charged by Citibank, N.A. in New York
City, will be made in immediately available funds and will be made on an after-
tax basis.
Conditions to the Merger; Regulatory and Other Approvals. The obligations of
the parties to consummate the Merger and each of the other transactions
contemplated by the Merger Agreement are subject to the fulfillment or waiver
of various conditions, including, among others: conditions relating to
stockholder approval; consummation of the Spin-Off (including receipt of the
proceeds from the New Debt); the declaration of effectiveness of the
Registration Statement of which this Joint Proxy Statement/Prospectus is a
part; receipt of FCC approval (which has been received) and other regulatory
approvals; the expiration or termination (which has occurred) of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"); receipt from the United States Internal Revenue
Service (the "IRS") of the IRS Ruling (as defined herein) (which has been
received); approval of the Hearst-Argyle Merger Stock for listing on the NYSE
(which has been obtained, subject to official notice of issuance) and the New
Pulitzer Common Stock for listing on the NYSE (which has been obtained, subject
to official notice of issuance); the absence of certain governmental orders or
judgments prohibiting any of the transactions contemplated by the Merger
Agreement or that could have a material adverse effect on the Pulitzer
Broadcasting Business or Hearst-Argyle; continued accuracy of representations
and warranties; receipt of certain third party consents and legal opinions; and
delivery of conveyancing and other closing documents. There can be no assurance
that any or all of these conditions will be satisfied as expected.
Neither Hearst-Argyle nor Pulitzer currently intends to waive any material
conditions to the consummation of the Merger Agreement and the transactions
contemplated thereby. In determining whether to waive a material condition to
the Merger Agreement, each of the Hearst-Argyle Board and the Board of
Directors of Pulitzer (the "Pulitzer Board"), consistent with its fiduciary
duties, would consider all relevant facts and circumstances existing at that
time, including, without limitation, the advice of its legal counsel, in
determining whether a resolicitation of its stockholders is necessary. See "The
Merger Agreement--Conditions Precedent."
Acquisition Proposals. The Merger Agreement prohibits Pulitzer, its
subsidiaries and their respective officers, directors, representatives and
agents from, directly or indirectly, knowingly encouraging, soliciting,
initiating or participating in any way in discussions or negotiations with, or
knowingly providing any confidential information to, any individual,
partnership, corporation or any other person (other than Hearst-Argyle or any
affiliate or associate of Hearst-Argyle and their respective directors,
officers, employees, representatives and agents) concerning any merger,
consolidation, business combination, recapitalization, liquidation or
dissolution of Pulitzer, Pulitzer Broadcasting or any Broadcasting Subsidiary,
the sale of any substantial part of the assets of Pulitzer Broadcasting or any
of the Broadcasting Subsidiaries (other than in the ordinary course of business
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consistent with past practice), the sale of any shares of capital stock of
Pulitzer Broadcasting or any of the Broadcasting Subsidiaries, or the sale of
shares representing a controlling interest of the capital stock of Pulitzer,
Pulitzer Broadcasting or the Broadcasting Subsidiaries or any similar
transactions or series of transactions involving Pulitzer Broadcasting.
However, the Pulitzer Board may (i) take and disclose to Pulitzer's
stockholders a position with respect to a tender offer for Pulitzer Stock by a
third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange
Act; (ii) make such disclosure to Pulitzer's stockholders as, in the judgment
of the Pulitzer Board, with the advice of outside counsel, may be required
under applicable law; and, (iii) respond to any unsolicited third party
proposal or inquiry by advising the individual, partnership, corporation or any
other person making such proposal or inquiry of the terms of the provisions
summarized in this paragraph. In addition, the Merger Agreement provides that
the Pulitzer Board may respond to any proposal, offer or any expression of
interest by any third party relating to a transaction described above (an
"Acquisition Proposal") and may provide information and afford access to, and
negotiate and hold discussions with, any third party or group in connection
therewith if the Pulitzer Board determines, with the advice of outside counsel,
that it may be required to do so to comply with its fiduciary duties. Subject
to the fiduciary duties of the Pulitzer Board, in the event that Pulitzer, New
Pulitzer or any of their subsidiaries or any of their respective officers,
directors, employees, representatives or agents receives from any third party
an Acquisition Proposal, Pulitzer must advise Hearst-Argyle promptly of such
Acquisition Proposal and thereafter keep Hearst-Argyle reasonably and promptly
informed of all material facts and circumstances relating to the Acquisition
Proposal and Pulitzer's response thereto.
The Merger Agreement also requires Hearst-Argyle to notify Pulitzer and
provide it with pertinent information in the event Hearst-Argyle or any of its
subsidiaries, or any of their respective directors, officers, representatives
or agents (i) solicits, initiates or participates in any way in discussions or
negotiations with, or provides any confidential information to, any third party
concerning any merger, sale of substantially all of the assets of Hearst-
Argyle, sale of shares representing a controlling interest of capital stock of
Hearst-Argyle or similar transactions or series of transactions involving
Hearst-Argyle or (ii) receives any proposal or inquiry in respect of any such
transaction or any request to provide any such information or hold any such
negotiations or discussions.
Termination of Merger Agreement. The Merger Agreement may be terminated and
the transactions contemplated thereby, including the Merger, abandoned at any
time prior to the Closing: (i) by mutual written consent duly authorized by the
Boards of Directors of Pulitzer, New Pulitzer and Hearst-Argyle; (ii) by either
Hearst-Argyle or Pulitzer if the stockholders of Hearst-Argyle fail to approve
the Hearst-Argyle Merger Proposal or the stockholders of Pulitzer fail to
approve the Pulitzer Proposals; (iii) by either Pulitzer or Hearst-Argyle,
provided the terminating party is not then in breach of its obligations under
the Merger Agreement, if the Merger is not consummated by May 1, 1999 (the
"Termination Date"); (iv) by Pulitzer, provided neither it nor New Pulitzer is
then in breach of any of its material obligations under the Merger Agreement,
if either (A) Hearst-Argyle fails to perform, in any material respect, any
covenant in the Merger Agreement and fails to cure such failure within 20
business days after written notice by Pulitzer of such failure or (B) if any
condition to the obligations of Pulitzer and New Pulitzer has not been
satisfied and is not capable of being satisfied prior to the Termination Date;
(v) by Pulitzer, whether or not the conditions to its obligations under the
Merger Agreement have been satisfied, if its Board determines, with the advice
of outside counsel, in the exercise of its fiduciary duties to approve or
recommend a Superior Proposal (as defined herein) or to authorize Pulitzer to
enter into an agreement with respect to a Superior Proposal; (vi) by Hearst-
Argyle, provided it is not then in breach of any of its material obligations
under the Merger Agreement, if either (A) Pulitzer or New Pulitzer fails to
perform, in any material respect, any covenant in the Merger Agreement and
fails to cure such failure within 20 business days after written notice by
Hearst-Argyle of such failure, or, (B) any condition to the obligations of
Hearst-Argyle has not been satisfied and is not capable of being satisfied
prior to the Termination Date; (vii) by either Pulitzer or Hearst-Argyle if
either receives a notice that the United States Department of Justice or the
United States Federal Trade Commission has authorized the institution of
litigation challenging the Merger and related transactions under the antitrust
laws of the United States, which litigation includes a motion seeking to
prohibit
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the consummation of the Merger and related transactions; or, (viii) by Hearst-
Argyle if the Pulitzer Board shall have withdrawn or modified in any manner
materially adverse to Hearst-Argyle its approval or recommendation of the
Merger Agreement or the transactions contemplated thereby or has approved or
recommended a Superior Proposal. "Superior Proposal" is defined in the Merger
Agreement to mean an Acquisition Proposal that the Pulitzer Board determines in
the good faith exercise of its business judgment (after consultation with
Pulitzer's independent financial advisors) to be more favorable to Pulitzer's
stockholders than the Merger.
If the Merger Agreement is terminated for any reason set forth above, the
Merger Agreement will become void and there will be no liability or obligation
on the part of Pulitzer, New Pulitzer or Hearst-Argyle, or the directors,
officers or stockholders of any party, except that (i) the parties'
indemnification obligations with respect to misstatements or omissions in
documents filed with the SEC shall survive; (ii) the provisions of the
confidentiality agreement Hearst-Argyle entered into with Pulitzer on February
24, 1998 shall survive; (iii) certain provisions with respect to the
reimbursement of expenses and the payment by Pulitzer or Hearst-Argyle, as the
case may be, of a termination fee under certain circumstances, as described
below, and certain other expense allocation provisions, shall survive; and,
(iv) each party will remain liable for any breach of the Merger Agreement.
Termination Fees. If the Merger Agreement is terminated (i) by Pulitzer,
because the Pulitzer Board determines, in the exercise of its fiduciary duties,
to approve or recommend or to authorize Pulitzer to enter into an agreement
with respect to a Superior Proposal; (ii) by Pulitzer or Hearst-Argyle if the
Merger and related transactions are not approved by the stockholders of
Pulitzer; or, (iii) by Hearst-Argyle if the Pulitzer Board shall have modified
or withdrawn in any manner materially adverse to Hearst-Argyle its approval and
recommendation of the Merger and related transactions, as described above, then
Pulitzer will pay to Hearst-Argyle a fee of $50 million.
If the Merger Agreement is terminated by either Pulitzer or Hearst-Argyle
because the Merger and related transactions are not approved by the
stockholders of Hearst-Argyle, then Hearst-Argyle will pay to Pulitzer a fee of
$50 million. In addition, Hearst-Argyle has agreed to pay Pulitzer a fee of $50
million in the event that Pulitzer is unable to obtain the New Debt at the time
that the Merger Agreement is terminated (i) by the mutual agreement of
Pulitzer, New Pulitzer and Hearst-Argyle; (ii) because the Merger has not
occurred by the Termination Date; or, (iii) due to Hearst-Argyle's failure to
perform, in any material respect, any covenant in the Merger Agreement when
performance thereof is due and is not cured within 20 business days after
written notice by Pulitzer thereof, in each case, for any reason other than (A)
Pulitzer's failure to use commercially reasonable efforts to obtain the New
Debt or (B) a breach of the Merger Agreement by Pulitzer. See "The Merger
Agreement--Termination of the Merger Agreement--Termination Fee."
Indemnification. The Merger Agreement provides for indemnification by each of
Pulitzer, New Pulitzer and Hearst-Argyle for misleading statements or omissions
in documents filed with the SEC, certain tax liabilities and certain third
party claims and stockholder suits. In addition, the Merger Agreement and the
Contribution Agreement provide for New Pulitzer's indemnification of Hearst-
Argyle for certain employee benefit liabilities, certain amounts that may be
due to certain stockholders of Pulitzer as a result of the Merger and all
liabilities of Pulitzer other than those relating to the Pulitzer Broadcasting
Business, the New Debt and the obligations of Pulitzer under the Merger
Agreement and the other agreements contemplated thereby. The Contribution
Agreement also provides for, subject to certain limited exceptions, Pulitzer's
indemnification of New Pulitzer against liabilities relating to the Retained
Liabilities, the Retained Assets and the operations of the Pulitzer
Broadcasting Business. See "The Merger Agreement--Indemnification" and "--Tax
Matters."
For a more detailed description of the terms of the Merger Agreement, see
"The Merger Agreement." A conformed copy of the Merger Agreement is set forth
as Annex I to this Joint Proxy Statement/Prospectus. The Merger Agreement is
incorporated herein by reference.
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Control by Affiliates of Vote Required to Approve the Hearst-Argyle and
Pulitzer Proposals
Hearst Broadcasting, which is a wholly owned subsidiary of Hearst, owned 100%
of the issued and outstanding shares of Hearst-Argyle Series B Common Stock and
approximately 37.5% of the issued and outstanding shares of Hearst-Argyle
Series A Common Stock, representing in the aggregate approximately 87.1% of the
outstanding voting power of the Hearst-Argyle Common Stock and 86.0% of the
outstanding voting power of the Hearst-Argyle Stock as of the Hearst-Argyle
Record Date. As such, Hearst Broadcasting has voting power sufficient to
approve the Hearst-Argyle Proposals regardless of the vote of any other
stockholders of Hearst-Argyle entitled to vote on the Hearst-Argyle Proposals.
Hearst Broadcasting has entered into a voting agreement with Hearst-Argyle and
Pulitzer pursuant to which it has agreed to vote in favor of the Hearst-Argyle
Merger Proposal. Hearst Broadcasting has also advised Hearst-Argyle that it
intends to vote in favor of the Hearst-Argyle Charter Amendment Proposal even
though that matter is not covered by the Hearst-Argyle Voting Agreement. See
"The Merger Agreement--Ancillary Agreements--Hearst-Argyle Voting Agreement."
As of the Pulitzer Record Date, the Pulitzer Principal Stockholders,
collectively, had the power to direct the vote of 14,443,209 shares of Pulitzer
Class B Common Stock, representing in the aggregate (i) approximately 94.4% of
the issued and outstanding shares of Pulitzer Class B Common Stock and (ii)
approximately 90.1% of the outstanding voting power of Pulitzer Stock with
respect to the Pulitzer Merger Proposal. As of the Pulitzer Record Date, the
Pulitzer Principal Stockholders did not own any shares of Pulitzer Common
Stock. Pursuant to the Pulitzer Voting Agreement, the Pulitzer Principal
Stockholders have agreed to direct the vote of all their shares of Pulitzer
Stock in favor of the Merger Agreement and the transactions contemplated by it
(including the Pulitzer Charter Amendment). Therefore, the Pulitzer Principal
Stockholders have sufficient voting power to approve the Pulitzer Merger
Proposal regardless of the vote of any other holders of Pulitzer Stock. The
consummation of the transactions contemplated by the Pulitzer Merger Proposal,
however, is conditioned upon the approval and adoption of the Pulitzer Charter
Amendment Proposal. Accordingly, the Spin-Off and the Merger and the related
transactions will not be consummated unless the Pulitzer Charter Amendment
Proposal is approved and adopted by the requisite votes of Pulitzer
stockholders. The Pulitzer Principal Stockholders have entered into a voting
agreement with Hearst-Argyle pursuant to which they have agreed to vote or
direct the vote of all their shares of Pulitzer Stock in favor of the Pulitzer
Proposals. In accordance with the terms of the Voting Trust Agreement, dated
June 19, 1995, by and among certain holders of Pulitzer Class B Common Stock,
including the Pulitzer Principal Stockholders (the "Pulitzer Voting Trust
Agreement"), pursuant to which the shares of Pulitzer Class B Common Stock held
by the Pulitzer Principal Stockholders have been deposited into a voting trust
(the "Pulitzer Trust"), each of the Pulitzer Principal Stockholders will
instruct, or cause the instruction of, the trustees of the Pulitzer Trust to
vote in favor of the Pulitzer Proposals. See "The Merger Agreement--Ancillary
Agreements--Pulitzer Voting Agreement." David E. Moore, Emily Rauh Pulitzer and
Michael E. Pulitzer (collectively, the "Pulitzer Parties"), each of whom is a
director of Pulitzer and New Pulitzer and a voting trustee of the Pulitzer
Trust, beneficially own certain shares of Pulitzer Stock held by the Pulitzer
Principal Stockholders.
Interests of Officers, Directors and Principal Stockholders in the Transactions
In connection with the execution of the Merger Agreement, the Pulitzer
Parties and Hearst-Argyle entered into a Registration Rights Agreement, dated
May 25, 1998, pursuant to which the Pulitzer Parties and related parties will
be entitled to certain registration rights with respect to public offerings of
Hearst-Argyle Series A Common Stock. In addition, the Pulitzer Parties, Hearst-
Argyle and Hearst Broadcasting entered into a Board Representation Agreement,
dated May 25, 1998, pursuant to which the Pulitzer Parties have been granted
the right, subject to certain conditions and restrictions, to cause Hearst-
Argyle to nominate for election to the Hearst-Argyle Board, and Hearst
Broadcasting to vote in favor of the election of, two individuals designated by
the Pulitzer Parties. Subject to the terms and conditions of the Board
Representation Agreement (as described herein), after the consummation of the
Merger, Michael E. Pulitzer and Ken J. Elkins shall serve as the initial
directors nominated by the Pulitzer Parties on the Hearst-Argyle Board. See
"The Merger Agreement--Ancillary Agreements--Registration Rights Agreement" and
"--Board Representation Agreement."
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The Pulitzer Principal Stockholders have advised Pulitzer that they expect to
sell a portion of the Pulitzer Common Stock issuable upon conversion of their
shares of Pulitzer Class B Common Stock prior to the consummation of the Spin-
Off and the Merger. These sales may occur in transactions (that may include
block transactions) on the NYSE, in negotiated transactions, or a combination
of such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale or at negotiated prices. The Pulitzer Principal
Stockholders may effect such transactions by selling Pulitzer Common Stock
directly to purchasers or to or through broker-dealers that may act as agents
or principals. The Pulitzer Principal Stockholders intend to sell up to
1,126,000 shares of Pulitzer Common Stock, although any such sales are not
expected to exceed 5% of the total combined voting power and equity value of
all the issued and outstanding shares of Pulitzer Stock.
Other than the Pulitzer Parties, as of the Pulitzer Record Date, executive
officers or directors of Pulitzer beneficially owned an aggregate of 79,421
shares of Pulitzer Common Stock, representing approximately 1.1% of the
outstanding shares of Pulitzer Common Stock, and no shares of Pulitzer Class B
Common Stock.
Directors and executive officers of Hearst-Argyle beneficially owned
1,432,511 shares of Hearst-Argyle Series A Common Stock, or approximately 13.3%
of the outstanding shares of Hearst-Argyle Series A Common Stock, as of the
Hearst-Argyle Record Date. As indicated above, Hearst Broadcasting beneficially
owned all of the outstanding shares of Hearst-Argyle Series B Common Stock and
4,036,725 shares of Hearst-Argyle Series A Common Stock as of the Hearst-Argyle
Record Date.
Upon consummation of the Merger, based on the 37,096,774 shares of Hearst-
Argyle Merger Stock being delivered to Pulitzer stockholders in the Merger and
assuming the sale prior to the Merger of all shares of Pulitzer Common Stock
proposed to be sold by the Pulitzer Principal Stockholders, if the Merger were
consummated as of February 9, 1999, the Pulitzer Principal Stockholders,
together with the executive officers, directors and other affiliates of
Pulitzer, would own as a group approximately 24.9% of the outstanding shares of
Hearst-Argyle Common Stock, and Hearst Broadcasting, together with the current
executive officers, directors and other affiliates of Hearst-Argyle, would own
as a group approximately 53.4% of the outstanding shares of Hearst-Argyle
Common Stock.
Pursuant to the Merger Agreement and the Contribution Agreement, Hearst-
Argyle, Pulitzer and New Pulitzer have agreed to indemnify each other's
respective officers and directors for certain customary matters, including for
misleading statements or omissions in documents filed with the SEC, certain
third party claims and liabilities relating to the Pulitzer Broadcasting
Business and Pulitzer's publishing business. See "The Merger Agreement--
Indemnification."
Pulitzer is a party to agreements with each of Michael E. Pulitzer, Ken J.
Elkins, Nicholas G. Penniman IV, Ronald H. Ridgway, C. Wayne Godsey and John
Kueneke (collectively, the "Pulitzer Executives") pursuant to which Pulitzer
has agreed to pay each Pulitzer Executive a retention award on the earlier of
(i) January 1, 2000, and (ii) the Closing Date, provided the Pulitzer Executive
remains in the continuous employ of Pulitzer until such earlier date. The
amounts of the retention awards are $900,000, $600,000, $150,000, $450,000,
$250,000 and $250,000, respectively. These agreements also provide for the
payment of bonuses upon completion of the Merger. The amounts of the
transaction completion bonuses are $1,000,000, $1,000,000, $150,000, $450,000,
$375,000 and $375,000, respectively. The Compensation Committee of the Pulitzer
Board may award additional transaction completion bonuses to each Pulitzer
Executive and certain other management personnel, other than Messrs. Elkins,
Godsey and Kueneke. The agreements for Messrs. Elkins, Godsey and Kueneke
provide for cash separation payments of approximately $1,350,000, $850,000 and
$650,000 respectively. The exact amount of the cash separation payments to
these individuals will depend in large part upon the values assigned to the
accelerated vesting of their unvested stock options and other non-cash
benefits, and may be limited by the deductibility provisions of Section 280G of
the Internal Revenue Code. Each of these agreements provides for full payment
to the Pulitzer Executive's estate if the Pulitzer Executive dies before the
Closing. Pulitzer has entered into similar agreements with certain of its other
officers and executives who will be entitled to receive
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<PAGE>
transaction completion bonuses aggregating approximately $984,000. Certain of
these individuals will also be entitled to receive, among other things,
retention awards aggregating approximately $289,000. In addition, pursuant to
the Merger Agreement, Hearst-Argyle has agreed to assume the obligation to make
payments of retirement or other benefits that have been earned as of the
Effective Time (which will become fully vested at that time) to certain
broadcasting executives of Pulitzer under Pulitzer's supplemental executive
retirement plan. New Pulitzer has agreed to pay to Hearst-Argyle an amount
equal to the aggregate amount of such payments net of a deferred tax benefit.
The net amount has been estimated to be $100,000, although the actual amount
may be higher or lower depending on the final actuarial calculations at the
Effective Time.
Pulitzer and New Pulitzer anticipate that following the consummation of the
Merger, upon approval of New Pulitzer's Board of Directors and the
recommendation of its outside compensation consultants, New Pulitzer will enter
into an employment agreement with each of Messrs. Pulitzer and Ridgway. It is
anticipated that these agreements will be for varying terms and will provide
each with salary and other compensation substantially similar to the salary and
other compensation currently provided by Pulitzer. New Pulitzer has entered
into employment agreements with Messrs. Cole C. Campbell, Terry Egger and James
V. Maloney that will become effective upon consummation of the Merger. Mr.
Campbell will serve as Editor of the St. Louis Post-Dispatch, Mr. Egger will
serve as General Manager of the St. Louis Post-Dispatch and Mr. Maloney will
serve as Secretary, Director of Shareholder Relations of New Pulitzer. Each of
these agreements is for a term of three years, and each agreement includes
salary and bonus opportunities that are substantially similar to what is
currently provided by Pulitzer, except that the agreement with Mr. Egger
includes a provision for a restricted stock grant that would vest if his
employment with New Pulitzer continues until the end of the three-year term.
James M. Snowden, Jr., who is a director of Pulitzer and a director of New
Pulitzer, is an executive vice president of Huntleigh Securities Corporation
("Huntleigh"). Since November 6, 1995, Huntleigh has had a retainer
relationship with Pulitzer with respect to general financial advisory services.
In addition, in December 1997, Pulitzer entered into an engagement letter with
Huntleigh pursuant to which Huntleigh has acted as a financial advisor to
Pulitzer with respect to various alternatives regarding the Pulitzer
Broadcasting Business. Pursuant to this engagement letter, Pulitzer has paid
Huntleigh $200,000 in financial advisory fees. In addition, Pulitzer will be
obligated to pay Huntleigh a fee of $1.5 million upon consummation of the Spin-
Off and additional fees aggregating approximately $9.1 million (based on the
closing price of Hearst-Argyle Series A Common Stock on January 21, 1999) upon
consummation of the Merger. New Pulitzer intends to retain Huntleigh in the
future as a financial advisor in connection with such matters as it deems
appropriate. Pulitzer has agreed to reimburse Huntleigh, and its affiliates,
partners, directors, agents, employees and control persons for certain legal
and other expenses and to indemnify Huntleigh against certain liabilities,
including certain liabilities under the federal securities laws.
William Bush, who is a director of Pulitzer and a director of New Pulitzer,
is a partner in Fulbright & Jaworski L.L.P. Pulitzer has retained, and New
Pulitzer intends to retain in the future, Fulbright & Jaworski L.L.P. as legal
counsel in connection with such legal matters as it deems appropriate.
Hearst-Argyle Stock Repurchase Program
Simultaneously with the public announcement of the Merger Agreement, the
Hearst-Argyle Board authorized a market repurchase program (the "Repurchase
Program") pursuant to which Hearst-Argyle may purchase, at such times and on
such terms as it determines appropriate, up to $300 million of Hearst-Argyle
Series A Common Stock. The Hearst-Argyle Board authorized the Repurchase
Program in order to adjust the capital structure of Hearst-Argyle in respect of
the debt to equity ratio in light of the significant amount of equity to be
issued in the Merger. Hearst-Argyle has no obligation to Pulitzer or New
Pulitzer to make any such purchases. As of February 9, 1999, Hearst-Argyle had,
pursuant to the Repurchase Program, purchased
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<PAGE>
1,835,727 shares of Hearst-Argyle Series A Common Stock for aggregate
consideration of $54.0 million. In addition, at the time of the public
announcement of the Merger Agreement, Hearst Broadcasting notified Hearst-
Argyle of its intention to purchase up to 10 million shares of Hearst-Argyle
Series A Common Stock from time to time in the open market, in private
transactions or otherwise. As of February 9, 1999, and subsequent to the public
announcement of the Merger Agreement, Hearst Broadcasting had purchased
4,136,698 shares of Hearst-Argyle Series A Common Stock for an aggregate
consideration of $124.5 million.
Ownership of Hearst-Argyle Stock after the Merger
If the Merger were consummated as of the Hearst-Argyle Record Date, the
37,096,774 shares of Hearst-Argyle Merger Stock being delivered to Pulitzer
stockholders in the Merger would represent approximately 77.5% of the
outstanding Hearst-Argyle Series A Common Stock on the Hearst-Argyle Record
Date and approximately 41.6% of the outstanding Hearst-Argyle Common Stock on
such date (each on a pro forma basis for the Merger), and the stockholders of
Pulitzer would receive 1.64 shares of Hearst-Argyle Series A Common Stock per
share of Pulitzer Stock. The closing price of Hearst-Argyle Series A Common
Stock on the NYSE on February 9, 1999 was $27.875 per share.
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<PAGE>
The following table sets forth, based on information as of the Hearst-Argyle
Record Date, the ownership of Hearst-Argyle Common Stock before the Merger and
the anticipated beneficial ownership of Hearst-Argyle Common Stock after
giving effect to the Merger, as to (i) all Hearst-Argyle stockholders, as a
group; (ii) all Hearst-Argyle directors and executive officers, as a group;
(iii) Hearst Broadcasting; (iv) unaffiliated Hearst-Argyle stockholders, as a
group; (v) all Pulitzer stockholders, as a group; (vi) the Pulitzer Principal
Stockholders; (vii) all Pulitzer directors and executive officers, as a group;
and, (viii) unaffiliated Pulitzer stockholders.
<TABLE>
<CAPTION>
Before the Merger
-------------------------------------------------------
% of
% of % of Common
Series A Series Series B Series Common Stock
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Hearst-Argyle
Stockholders, (as a
group)................... 10,752,457 100.0% 41,298,648 100.0% 52,051,105 100.0%
All Hearst-Argyle
directors and executive
officers (as a group) (16
persons)(1).............. 1,432,511 13.3% -- -- 1,432,511 2.8%
Hearst Broadcasting,
Inc...................... 4,036,725 37.5% 41,298,648 100.0% 45,335,373 87.1%
Non-affiliates (as a
group)................... 5,283,221 49.1% -- -- 5,283,221 10.2%
Pulitzer Stockholders (as
a group)(2).............. -- -- -- -- -- --
Pulitzer Principal
Stockholders............. -- -- -- -- -- --
All Pulitzer directors
and executive officers
(as a group) (14
persons)................. -- -- -- -- -- --
Non-affiliates of
Pulitzer (as a group).... -- -- -- -- -- --
<CAPTION>
After the Merger
-------------------------------------------------------
% of
% of % of Common
Series A Series Series B Series Common Stock
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Hearst-Argyle
Stockholders, (as a
group)(3)................ 10,752,457 22.5% 41,298,648 100.0% 52,051,105 58.4%
All Hearst-Argyle
directors and executive
officers (as a group) (18
persons)(1)(3)........... 7,589,200 15.9% -- -- 7,589,200 8.5%
Hearst Broadcasting,
Inc...................... 4,036,725 8.4% 41,298,648 100.0% 45,335,373 50.9%
Non-affiliates (as a
group)................... 5,283,221 11.0% -- -- 5,283,221 5.9%
Pulitzer Stockholders (as
a group)(2)(3)........... 37,096,774 77.5% -- -- 37,096,774 41.6%
Pulitzer Principal
Stockholders(3).......... 23,687,983 49.5% -- -- 23,687,983 26.6%
All Pulitzer directors
and executive officers
(as a group) (14
persons)(2)(3)........... 23,818,539 49.8% -- -- 23,818,539 26.7%
Non-affiliates of
Pulitzer (as a group).... 13,278,235 27.8% -- -- 13,278,235 14.9%
</TABLE>
- ----
(1) Does not include 343,336 presently exercisable options.
(2) Assumes all outstanding options as of the Pulitzer Record Date are cashed
out and terminated. See "The Merger Agreement--Pulitzer Stock Option
Plans."
(3) Upon consummation of the Merger, two current Pulitzer stockholders (who
are also Pulitzer directors, and one of whom is a Pulitzer Principal
Stockholder) will become directors of Hearst-Argyle. The shares of Hearst-
Argyle Series A Common Stock to be held by these two Pulitzer stockholders
after the Merger (6,156,689) are not included in the row "Hearst-Argyle
Stockholders," but are included in the following rows: "All Hearst-Argyle
directors and executive officers;" "Pulitzer Stockholders;" "Pulitzer
Principal Stockholders;" and, "All Pulitzer directors and executive
officers."
See "Ownership of Hearst-Argyle Stock Before and After the Merger."
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<PAGE>
Ownership of New Pulitzer after the Spin-Off and the Merger
Following the Spin-Off and the Merger, holders of shares of Pulitzer Common
Stock and Pulitzer Class B Common Stock immediately prior to the Spin-Off will
own the same number of shares of New Pulitzer Common Stock and New Pulitzer
Class B Common Stock, respectively, constituting 100% of the equity and voting
power of New Pulitzer, that such holders owned of the corresponding class of
Pulitzer Stock immediately prior to the Spin-Off. See "Ownership of New
Pulitzer Stock After the Spin-Off and Merger."
Recommendation of the Boards of Directors
Hearst-Argyle. The Hearst-Argyle Board has unanimously (with one member being
absent) approved and adopted the Merger Agreement and the transactions
contemplated thereby (including the Merger and the issuance of the Hearst-
Argyle Merger Stock) and has determined that such transactions are fair to, and
in the best interests of, Hearst-Argyle and its stockholders. The Hearst-Argyle
Board also has unanimously (with one member being absent) approved the Hearst-
Argyle Charter Amendment. The Hearst-Argyle Board recommends that holders of
Hearst-Argyle Stock vote "FOR" each of the Hearst-Argyle Proposals.
In reaching its determination with respect to the Hearst-Argyle Merger
Proposal, the Hearst-Argyle Board considered, among other things, the
following: (i) the judgment, advice and analyses of Hearst-Argyle's management;
(ii) regulatory, competitive, technological and other developments affecting
the broadcast television industry; (iii) the characteristics and locations of
the Pulitzer television stations; (iv) the financial condition, results of
operations and cash flows of the Pulitzer Broadcasting Business and Hearst-
Argyle, on a historical basis and a prospective basis; (v) the strategic
benefits of the proposed Merger; (vi) the financial terms of the proposed
transaction; (vii) the financial presentation of Hearst-Argyle's financial
advisor, Credit Suisse First Boston Corporation ("CSFB"), to the Hearst-Argyle
Board on May 15, 1998 (see "--Opinion of Financial Advisor to Hearst-Argyle");
(viii) the terms and conditions of the Merger Agreement and related documents;
(ix) historical market prices of, trading information for and expected market
impact on Hearst-Argyle Series A Common Stock; and, (x) any impact on existing
Hearst-Argyle stockholders of the issuance of a significant amount of Hearst-
Argyle Series A Common Stock in the proposed Merger. The foregoing factors were
all of the material factors considered by the Board in making its decision. The
Hearst-Argyle Board did not assign relative weights to the above factors or
determine that any factor was of particular or controlling significance. The
Hearst-Argyle Board did consider each such material factor in arriving at its
decision, which was based on the totality of the information presented to and
considered by it. In addition, it is possible that different members of the
Hearst-Argyle Board assigned different weights to different factors. See "The
Hearst-Argyle Merger Proposal and the Pulitzer Merger Proposal--Background of
and Hearst-Argyle's Reasons for the Merger" and "--Recommendation of the
Hearst-Argyle Board."
The Hearst-Argyle Board is recommending that the holders of Hearst-Argyle
Stock voting as a single class, approve and adopt the Merger Agreement and the
transactions contemplated thereby and the Hearst-Argyle Charter Amendment, and
that the holders of Hearst-Argyle Common Stock, voting as a single class, also
approve and adopt the Hearst-Argyle Charter Amendment.
Pulitzer. The Pulitzer Board has unanimously approved and adopted the Merger
Agreement and the transactions contemplated thereby (including the Pulitzer
Charter Amendment, the Spin-Off and the Merger) and has determined that such
transactions are fair to, and in the best interests of, Pulitzer and its
stockholders. The Pulitzer Board recommends that holders of Pulitzer Stock vote
"FOR" each of the Pulitzer Proposals.
In reaching its determination, the Pulitzer Board considered, among other
things, the following factors: (i) Pulitzer's business, operations, financial
condition and prospects, particularly in relation to the substantial operating
scale needed to compete in the television and radio broadcast industries, and
the business, operations, financial condition, earnings and prospects of
Pulitzer Broadcasting; (ii) the business, operations, financial
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<PAGE>
condition, earnings and prospects of Hearst-Argyle, including the combined
operating scale of Pulitzer and Hearst-Argyle's broadcast television and radio
stations; (iii) the value and liquidity of Hearst-Argyle Merger Stock to be
received by the stockholders of Pulitzer; (iv) the oral opinion of Goldman,
Sachs & Co., one of the financial advisors to Pulitzer (subsequently confirmed
in a written opinion, dated as of May 25, 1998) and Goldman, Sachs & Co.'s
written opinion, dated as of February 11, 1999, described below, see "--Opinion
of Financial Advisor to Pulitzer"; (v) other possible transactions available to
Pulitzer, as presented in the proposals submitted by other potential merger
partners; and, (vi) the terms and conditions of the Merger Agreement. See "The
Hearst-Argyle Merger Proposal and The Pulitzer Merger Proposal--Background of
and Pulitzer's Reasons for the Spin-off and the Merger" and "--Recommendation
of the Pulitzer Board."
The Pulitzer Board is recommending that holders of Pulitzer Common Stock and
Pulitzer Class B Common Stock, voting together as a single class, approve and
adopt the Merger Agreement and the Merger and that holders of Pulitzer Common
Stock and Pulitzer Class B Common Stock, voting together as a single class, and
the holders of Pulitzer Common Stock, voting separately as a class, approve and
adopt the Pulitzer Charter Amendment.
Opinion of Financial Advisor to Pulitzer
Goldman Sachs & Co. ("Goldman"), financial advisor to Pulitzer, has delivered
its written opinion to the Pulitzer Board that, as of February 11, 1999, the
consideration to be received by the holders of Pulitzer Stock in the Spin-Off
and the Merger, taken as a whole, is fair from a financial point of view to the
holders of Pulitzer Stock.
The full text of the written opinion of Goldman, dated as of February 11,
1999, which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, is attached hereto as
Annex IV and is incorporated herein by reference (the "Goldman Opinion").
Holders of Pulitzer Stock are urged to, and should, read such opinion in its
entirety. The Goldman Opinion is directed to the Pulitzer Board and relates
only to the fairness, from a financial point of view, of the consideration to
be received by the holders of Pulitzer Stock in the Merger and the Spin-Off,
taken as a whole, and does not address any other aspect of the Merger or any
related transaction and does not constitute a recommendation to any stockholder
as to how such stockholder should vote at the Pulitzer Meeting. Pulitzer
requested that the Goldman Opinion relate to the consideration to be received
by the holders of Pulitzer Stock in the Spin-Off and the Merger taken as a
whole (rather than just the Merger consideration), because consummation of each
transaction is contingent upon the consummation of the other, and, if the
Merger is consummated, holders of Pulitzer Stock would receive shares of New
Pulitzer Stock as a result of the Spin-Off and shares of Hearst-Argyle Series A
Common Stock as a result of the Merger. See "The Hearst-Argyle Merger Proposal
and The Pulitzer Merger Proposal--Opinion of Financial Advisor to Pulitzer."
Opinion of Financial Advisor to Hearst-Argyle
Credit Suisse First Boston Corporation ("CSFB"), financial advisor to Hearst-
Argyle, rendered to the Hearst-Argyle Board a written opinion dated May 25,
1998 (the original execution date of the Merger Agreement) to the effect that,
as of such date and based upon and subject to certain matters stated in such
opinion, the consideration to be paid by Hearst-Argyle in the Merger was fair
to Hearst-Argyle from a financial point of view. CSFB has confirmed its earlier
opinion by delivery of a written opinion to the Hearst-Argyle Board dated
January 15, 1999 (the date on which the Hearst-Argyle Board approved the terms
of the amendment to the Merger Agreement). A copy of the written opinion of
CSFB dated January 15, 1999 is attached hereto as Annex V and should be read
carefully in its entirety with respect to the procedures followed, assumptions
made, matters considered and limitations on the review undertaken in connection
with such opinion. The opinion of CSFB is directed to the Hearst-Argyle Board
and relates only to the fairness of the consideration to be paid by Hearst-
Argyle in the Merger from a financial point of view to Hearst-Argyle, does not
address any other
23
<PAGE>
aspect of the proposed Merger or any related transaction and does not
constitute a recommendation to any stockholder as to how such stockholder
should vote at the Hearst-Argyle Meeting. See "The Hearst-Argyle Merger
Proposal and The Pulitzer Merger Proposal--Opinion of Financial Advisor to
Hearst-Argyle."
Registration Rights
In connection with the execution of the Merger Agreement, Hearst-Argyle and
the Pulitzer Parties entered into a Registration Rights Agreement, dated May
25, 1998, relating to the Hearst-Argyle Merger Stock to be issued to the
Pulitzer Parties and their respective affiliates pursuant to the Merger, in the
form attached as Exhibit D to Annex I hereto. Such agreement provides that,
subject to certain terms and conditions contained in the agreement, until May
25, 2005 each of the Pulitzer Parties will generally be entitled to two demand
registrations and after such date, if such two demand registrations were not
used, one additional demand registration and unlimited "piggyback"
registrations until May 25, 2005 with respect to public offerings of Hearst-
Argyle Series A Common Stock. See "The Merger Agreement--Ancillary Agreements--
Registration Rights Agreement."
Certain Board Representation Rights
In connection with the execution of the Merger Agreement, Hearst-Argyle,
Hearst Broadcasting and the Pulitzer Parties entered into a Board
Representation Agreement, dated May 25, 1998 (the "Representation Agreement").
The Representation Agreement grants the Pulitzer Parties the right to designate
two persons (the "Designees") for election as additional members of the Hearst-
Argyle Board following consummation of the Merger. The initial Designees will
be Michael E. Pulitzer and Ken J. Elkins.
Hearst-Argyle has agreed that the Designees would be proposed for election to
the Hearst-Argyle Board either (i) if, following the consummation of the
Merger, there are one or more vacancies on the Hearst-Argyle Board or the
members of such Board have the power to create new directorships, at the first
meeting of the Hearst-Argyle Board following consummation of the Merger or (ii)
if there are no such vacancies or power to create new directorships, at the
first meeting of stockholders of Hearst-Argyle held after consummation of the
Merger. Following the election of the initial Designees, in each instance in
which individuals are nominated for election to the Hearst-Argyle Board,
Hearst-Argyle agreed to cause the Designees to be validly and timely nominated
for election to the Hearst-Argyle Board in the same manner as other proposed
directors are nominated and Hearst Broadcasting agreed to vote all the Hearst-
Argyle Stock it owns for the election of the Designees to the Hearst-Argyle
Board.
The parties to the Representation Agreement have further agreed that Hearst-
Argyle's and Hearst Broadcasting's obligations thereunder shall be suspended
for so long as the nomination or appointment of, or the Pulitzer Parties' right
to designate a Designee would, (i) create a violation or, as a result of any
proposed acquisition of an ownership interest in, management or control of, or
other relationship with, a radio or television broadcast station, a potential
violation by Hearst-Argyle or any of its subsidiaries of any rule, regulation
or policy of the FCC, including the FCC rules and policies regarding
attribution of ownership (collectively, the "FCC Cross-Ownership Rules"), or
(ii) restrict or prohibit or, as a result of any proposed acquisition of an
ownership interest in, management or control of, or other relationship with, a
radio or television broadcast station, would restrict or prohibit Hearst-Argyle
or any of its subsidiaries from maintaining, obtaining or renewing any license,
approval or authorization granted by the FCC (in each case, an "Ownership
Conflict"). Subject to applicable law, in the event that by virtue of such an
Ownership Conflict, the Pulitzer Parties are no longer entitled to
representation on the Hearst-Argyle Board, or in the event the Pulitzer Parties
should elect from time to time in lieu of a seat or seats on the Hearst-Argyle
Board, the Pulitzer Parties shall be entitled to designate a non-voting
observer or observers to the Hearst-Argyle Board. In addition, the rights of
the Pulitzer Parties under the Representation Agreement shall terminate if the
Pulitzer Parties cease to beneficially own in the aggregate at least 50% of the
Hearst-Argyle Merger Stock received by such Pulitzer Parties. See "The Merger
Agreement--Ancillary Agreements--Board Representation Agreement."
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<PAGE>
FCC Agreement
In connection with the execution of the Merger Agreement, Hearst-Argyle and
the Pulitzer Principal Stockholders entered into an FCC Agreement, dated May
25, 1998 (the "FCC Agreement"). The FCC Agreement provides that if, at any time
(including at the Effective Time), whether as a consequence of action by the
Pulitzer Principal Stockholders, New Pulitzer or Hearst-Argyle, the Pulitzer
Principal Stockholders' ownership of shares of Hearst-Argyle Series A Common
Stock would cause an Ownership Conflict to arise, then each Pulitzer Principal
Stockholder whose ownership of shares of Hearst-Argyle Series A Common Stock is
determined, according to the FCC's ownership attribution principles, to be a
contributing cause of Hearst-Argyle's non-compliance (each an "Attributable
Stockholder") will exchange its shares of Hearst-Argyle Series A Common Stock
for new shares in Hearst-Argyle (the "Replacement Shares") to the limited
extent necessary for Hearst-Argyle to be in compliance with the FCC Cross-
Ownership Rules.
The FCC Agreement provides that the Replacement Shares will possess
characteristics identical in every respect to the then existing shares held by
the Pulitzer Principal Stockholders, provided however, that (i) they will be
non-voting in nature, except on such matters as the rules, regulations and
policies of the FCC and relevant decisions of the FCC would permit, consistent
with preserving the non-attributable status of the Replacement Shares, and
except as otherwise required by law and (ii) to the extent the Replacement
Shares are shares of Hearst-Argyle Series A or Series B Preferred Stock, such
Replacement Shares shall be senior to shares of common stock of Hearst-Argyle
in liquidation as to the par value of such shares. In addition, each
Replacement Share shall be convertible into a full voting common share of
Hearst-Argyle at the Attributable Stockholder's election, at such time as an
Ownership Conflict no longer would exist upon such conversion. See "The Merger
Agreement--Ancillary Agreements--FCC Agreement."
Voting Agreements
Hearst-Argyle Voting Agreement. In connection with the execution of the
Merger Agreement, Hearst Broadcasting and Pulitzer entered into the Hearst-
Argyle Voting Agreement, dated May 25, 1998 (the "Hearst- Argyle Voting
Agreement"), pursuant to which Hearst Broadcasting agreed that from May 25,
1998 until either the Merger is consummated or the Merger Agreement is
terminated, at any meeting of the holders of Hearst-Argyle Stock, however
called, or in connection with any written consent of the holders of Hearst-
Argyle Stock, Hearst Broadcasting will vote (or cause to be voted) all shares
of Hearst-Argyle Stock held of record or beneficially owned by Hearst
Broadcasting (i) in favor of the Merger, the Merger Agreement, and each of the
other transactions and actions contemplated by the Merger Agreement and the
Hearst-Argyle Voting Agreement and (ii) against any action or agreement that
would result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of Hearst-Argyle under the Merger
Agreement or Hearst-Argyle Voting Agreement or that would result in any of the
conditions to the obligations of Hearst-Argyle under the Merger Agreement not
being fulfilled.
Hearst Broadcasting owned 100% of the outstanding shares of Hearst-Argyle
Series B Common Stock and 4,036,725 shares of Hearst-Argyle Series A Common
Stock, representing in the aggregate approximately 87.1% of the outstanding
voting power of the Hearst-Argyle Common Stock and 86.0% of the outstanding
voting power of the Hearst-Argyle Stock as of the Hearst-Argyle Record Date.
Therefore, Hearst Broadcasting has sufficient voting power to approve the
Hearst-Argyle Proposals regardless of the vote of any other stockholders. See
"The Merger Agreement--Ancillary Agreements--Hearst-Argyle Voting Agreements,"
"The Special Meetings Required Votes" and "--Solicitation and Voting Proxies."
Pulitzer Voting Agreement. In connection with and as a condition to the
execution and delivery of the Merger Agreement, Hearst-Argyle and the Pulitzer
Principal Stockholders entered into the Amended and Restated Pulitzer Voting
Agreement, dated as of May 25, 1998 (the "Pulitzer Voting Agreement," and
together with the Hearst-Argyle Voting Agreement, the "Voting Agreements"),
pursuant to which each Pulitzer Principal
25
<PAGE>
Stockholder agreed that from May 25, 1998 until either the Merger is
consummated or the Merger Agreement is terminated, at any meeting or by written
consent of the holders of Pulitzer Stock, such Pulitzer Principal Stockholder
shall vote (or cause to be voted) all shares of Pulitzer Stock that it may vote
or of which it may direct the vote (i) in favor of the Merger, the Merger
Agreement and the Contribution Agreement and the approval of the terms thereof,
and each of the other actions contemplated by the Merger Agreement, the
Contribution Agreement and the Pulitzer Voting Agreement; (ii) against any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
Pulitzer under the Merger Agreement, the Contribution Agreement or the Voting
Agreement; and, (iii) except as otherwise agreed to in writing in advance by
Hearst-Argyle, against the following actions (other than the Merger, the
transactions contemplated by the Merger Agreement and the Contribution
Agreement and the Pulitzer Charter Amendment): (A) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving Pulitzer or its subsidiaries; (B) a sale, lease or transfer of a
material amount of assets of Pulitzer or its subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of Pulitzer or its subsidiaries;
(C) any change in a majority of the persons who constitute the Pulitzer Board;
(D) any change in the present capitalization of Pulitzer or any amendment of
Pulitzer's Charter or By-Laws; (E) any other material change in Pulitzer's
corporate structure or business; or, (F) any other action involving Pulitzer or
its subsidiaries that is intended, or could reasonably be expected, to
interfere with, postpone, or materially adversely affect the Merger and the
transactions contemplated by the Merger Agreement, the Contribution Agreement
and the Pulitzer Voting Agreement.
As of the Pulitzer Record Date, the Pulitzer Principal Stockholders,
collectively, had the power to direct the vote of 14,443,209 shares of Pulitzer
Class B Common Stock, representing in the aggregate (i) approximately 94.4% of
the issued and outstanding shares of Pulitzer Class B Common Stock and (ii)
approximately 90.1% of the outstanding voting power of Pulitzer Stock with
respect to the Pulitzer Merger Proposal. As of the Pulitzer Record Date, the
Pulitzer Principal Stockholders did not own any shares of Pulitzer Common
Stock. Pursuant to the Pulitzer Voting Agreement, the Pulitzer Principal
Stockholders have agreed to direct the vote of all their shares of Pulitzer
Stock in favor of the Merger Agreement and the transactions contemplated by it
(including the Pulitzer Charter Amendment). See "--Interests of Officers,
Directors and Principal Stockholders in the Transactions." Therefore, the
Pulitzer Principal Stockholders have voting power sufficient to approve the
Pulitzer Merger Proposal, regardless of the vote of any other holders of
Pulitzer Stock. The consummation of the transactions contemplated by the
Pulitzer Merger Proposal, however, is conditioned upon the approval and
adoption of the Pulitzer Charter Amendment Proposal. Accordingly, the Spin-Off
and the Merger and the related transactions will not be consummated unless the
Pulitzer Charter Amendment Proposal is approved and adopted by the requisite
votes of Pulitzer stockholders. See "The Merger Agreement--Ancillary
Agreements--Pulitzer Voting Agreement," "The Special Meetings--Required Votes"
and "--Solicitation and Voting of Proxies."
Arizona Diamondbacks Letter Agreement
In connection with the execution of the Merger Agreement, Pulitzer, New
Pulitzer and Hearst-Argyle entered into a Letter Agreement, dated May 25, 1998,
whereby Hearst-Argyle agreed to acquire and New Pulitzer agreed to sell all the
issued and outstanding shares (the "Pulitzer Sports Shares") of capital stock
of Pulitzer Sports, Inc. ("Pulitzer Sports"), a Delaware corporation and wholly
owned subsidiary of Pulitzer Broadcasting. Pulitzer Sports owns certain
partnership interests in AZPB Limited Partnership, a partnership that owns a
certain percentage of the Arizona Diamondbacks Major League Baseball team. In
consideration of the transfer by New Pulitzer of the Pulitzer Sports Shares to
Hearst-Argyle, Hearst-Argyle has agreed to pay to New Pulitzer the sum of $5
million. The consummation date of the transfer of the Pulitzer Sports Shares
shall be the date of (i) the Effective Time or (ii) three (3) business days
after receipt of all necessary consents and authorizations of Major League
Baseball and the National League with respect to the transfer of the Pulitzer
Sports Shares. See "The Merger Agreement--Ancillary Agreements--Arizona
Diamondbacks Letter Agreement."
26
<PAGE>
Certain Federal Income Tax Considerations
The IRS has issued to Pulitzer a private letter ruling (the "IRS Ruling")
that the Spin-Off will qualify as a reorganization within the meaning of
Section 368(a)(1)(D) of the Code and as a tax-free distribution to Pulitzer
stockholders under Section 355(a) of the Code. A ruling from the IRS, while
generally binding on the IRS, may under certain circumstances be revoked or
modified by the IRS retroactively. Pulitzer and Hearst-Argyle are not currently
aware of any facts or circumstances that would cause the IRS to revoke or
modify the IRS Ruling.
Pulitzer will be required under Section 355(e) of the Code to recognize
taxable gain in an amount equal to the excess, if any, of the fair market value
of the New Pulitzer Stock distributed to Pulitzer's stockholders in the
Distribution over Pulitzer's adjusted tax basis in such New Pulitzer Stock
immediately prior to the Distribution. There can be no assurance that the IRS
will agree with Pulitzer's determination of the fair market value of the New
Pulitzer Stock distributed to Pulitzer's stockholders in the Distribution or
Pulitzer's resulting tax liability. Under the Merger Agreement, New Pulitzer
will be liable and will indemnify Hearst-Argyle and its subsidiaries, on an
after-tax basis, for any unpaid tax liabilities of Pulitzer or any Pulitzer
subsidiaries arising by reason of the application of Section 355(e) of the Code
to the Spin-Off.
Rogers & Wells LLP, counsel to Hearst-Argyle, and Fulbright & Jaworski
L.L.P., counsel to Pulitzer, have opined that the Merger will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code.
Accordingly, in the Merger, no gain or loss will be recognized by Pulitzer
stockholders, except in respect of cash received in lieu of fractional shares
of Hearst-Argyle Merger Stock, and no gain or loss will be recognized by
Pulitzer, Hearst-Argyle or Hearst-Argyle stockholders. The opinions of Rogers &
Wells LLP and Fulbright & Jaworski L.L.P. are based on various assumptions and
conditioned upon certain representations made by Pulitzer and Hearst-Argyle as
to factual matters. Opinions of counsel are not binding on the IRS or the
courts, and there can be no assurance that the IRS will agree with the
conclusions set forth in such opinions. For a more detailed discussion of the
material federal income tax consequences of the Spin-Off and the Merger, and
certain other matters related thereto, see "Federal Income Tax Consequences of
the Spin-Off, the Merger and Related Transactions." All Pulitzer stockholders
are also urged to consult with their own tax advisors regarding the federal,
state, local and foreign tax consequences of the Spin-Off and the Merger in
their particular circumstances.
Accounting Treatment
The Merger will be accounted for by Hearst-Argyle using the purchase method.
Pulitzer's historical basis in its assets and liabilities relating to its
newspaper publishing and related new media businesses will be carried over to
New Pulitzer. The Merger, the Spin-Off and the related transactions will be
accounted for by New Pulitzer as a reverse-spin transaction. See "The Hearst-
Argyle Merger Proposal and The Pulitzer Merger Proposal--Accounting Treatment."
Rights of Dissenting Stockholders
Hearst-Argyle. Holders of Hearst-Argyle Stock will not be entitled to
dissenters' appraisal rights in connection with the Merger.
Pulitzer. Holders of record of Pulitzer Class B Common Stock are entitled to
dissenters' appraisal rights in connection with the Merger, but holders of
Pulitzer Common Stock are not entitled to such rights. Pursuant to the DGCL,
any holder of Pulitzer Class B Common Stock who files a demand for appraisal in
writing prior to the vote taken at the Pulitzer Meeting, whose shares are not
voted in favor of the Merger and who satisfies certain other conditions shall
be entitled to appraisal rights under Section 262 of the DGCL ("Section 262").
See "Rights of Dissenting Pulitzer Stockholders--Pulitzer Class B Common Stock"
for a description of such rights, including a summary of the steps that must be
taken to comply with Section 262. A copy of the text of Section 262 is set
forth as Annex VI hereto. See "Rights of Dissenting Pulitzer Stockholders--
Pulitzer Common Stock."
27
<PAGE>
Comparison of Rights of Stockholders
The rights of holders of Pulitzer Common Stock currently are governed by the
DGCL, the Pulitzer Charter and the Pulitzer By-Laws. Upon the consummation of
the Spin-Off and the Merger, Pulitzer stockholders, other than holders of
record of Pulitzer Class B Common Stock who exercise and perfect their
statutory dissenters' rights, will become New Pulitzer stockholders and Hearst-
Argyle stockholders. The rights of New Pulitzer stockholders will be governed
by the DGCL, the New Pulitzer Charter and the by-laws of New Pulitzer (the "New
Pulitzer By-Laws"). The rights of the Hearst-Argyle stockholders will be
governed by the DGCL, the Hearst-Argyle Charter, and the Hearst-Argyle By-Laws.
See "Comparison of Rights of Stockholders of Pulitzer and New Pulitzer" and
"Comparison of Rights of Holders of Hearst-Argyle Series A Common Stock and
Holders of Pulitzer Common Stock."
Exchange Agent
Harris Trust and Savings Bank will act as the exchange agent in connection
with the Merger (the "Exchange Agent"). As soon as practicable after the
Effective Time, the Exchange Agent will mail a letter of transmittal to each
holder of record of Pulitzer Stock (other than Pulitzer, New Pulitzer or any of
their respective subsidiaries) immediately prior to the Effective Time to be
used by such holder in surrendering such holder's certificates evidencing
shares of Pulitzer Stock for certificates evidencing the shares of Hearst-
Argyle Merger Stock to which such holder has become entitled pursuant to the
Merger and, if applicable, cash in lieu of a fractional share of Hearst-Argyle
Merger Stock. The letter of transmittal will be accompanied by instructions
specifying the other details of the exchange. Pulitzer stockholders should not
send in their certificates until they receive the letter of transmittal. See
"Payments and Distributions to Stockholders."
Comparative Market Prices and Dividend Data
The NYSE is the principal exchange on which Hearst-Argyle Series A Common
Stock (symbol: "HTV") and the Pulitzer Common Stock (symbol: "PTZ") are traded.
Prior to July 22, 1998, the Hearst-Argyle Series A Common Stock was quoted on
the Nasdaq National Market (symbol: "HATV"). Neither Hearst-Argyle Series B
Common Stock nor Pulitzer Class B Common Stock is listed or traded on any
exchange. On May 22, 1998, the last full trading day prior to the public
announcement of the Merger, the closing price of the Hearst-Argyle Series A
Common Stock on the Nasdaq National Market and the Pulitzer Common Stock on the
NYSE, was $34.25 per share and $90.00 per share, respectively. On February 9,
1999, the most recent practicable date prior to the mailing of this Joint Proxy
Statement/Prospectus, the closing price of the Hearst-Argyle Series A Common
Stock and the Pulitzer Common Stock, in each case on the NYSE, was $27.875 per
share and $81.25 per share, respectively. Holders of Hearst-Argyle Stock and
Pulitzer Stock are urged to obtain current market quotations for the Hearst-
Argyle Series A Common Stock and the Pulitzer Common Stock prior to making any
decision with respect to the Merger and other transactions contemplated by the
Merger Agreement. See "Comparative Per-Share Market and Dividend Information."
Following the Spin-Off and the Merger, New Pulitzer expects to pay quarterly
dividends on the New Pulitzer Common Stock and the New Pulitzer Class B Common
Stock at the same rate as that currently paid with respect to the Pulitzer
Common Stock and the Pulitzer Class B Common Stock. Future dividends will,
however, be subject to the earnings, financial condition and capital
requirements of New Pulitzer as well as the limitations under any credit
agreement or other agreement to which New Pulitzer may become a party in the
future.
Hearst-Argyle has not paid any dividends on the Hearst-Argyle Series A Common
Stock since its inception and does not anticipate that it will pay any
dividends on the Hearst-Argyle Series A Common Stock in the foreseeable future.
Hearst-Argyle's senior credit facility limits the ability of Hearst-Argyle to
pay dividends on the Hearst-Argyle Series A Common Stock except under certain
conditions.
28
<PAGE>
Selected Historical and Pro Forma Comparative Per Share Data
The following historical and unaudited pro forma financial information
reflects certain comparative per share data relating to income per share from
continuing operations, book value per share and dividends per share (i) on an
historical basis for Hearst-Argyle; (ii) on a historical basis for Pulitzer;
(iii) on an unaudited pro forma basis for Hearst-Argyle per share of Hearst-
Argyle Common Stock assuming consummation of the Merger; (iv) on an unaudited
equivalent pro forma basis per share of Pulitzer Stock for Hearst-Argyle Series
A Common Stock assuming consummation of the Merger; and, (v) on an unaudited
pro forma basis for New Pulitzer per share of Pulitzer Stock assuming
consummation of the Merger and related transactions.
The information shown below should be read in conjunction with the
consolidated historical financial statements of Hearst-Argyle and Pulitzer,
respectively, including the respective notes thereto, and the unaudited pro
forma combined condensed financial statements of Hearst-Argyle and Pulitzer,
respectively, including the notes thereto, incorporated by reference and/or
included herein, in this Joint Proxy Statement/Prospectus. See "Information
Incorporated by Reference." The unaudited pro forma per share data are
presented for comparative purposes only and are not necessarily indicative of
the financial position or results of operations that would have been realized
had the Merger and certain other transactions of Hearst-Argyle and Pulitzer
been consummated during the periods or as of the dates for which the unaudited
pro forma data are presented. The unaudited interim financial information
presented herein is not necessarily indicative of the financial position as of
the end of, or results of operations for, the full year. See also "--Selected
Historical Consolidated and Unaudited Pro Forma Combined Condensed Financial
Information--Selected Financial Data of Hearst-Argyle," "--Selected Historical
Financial Data of Argyle," and "--Selected Historical Financial Data of
Pulitzer."
29
<PAGE>
Selected Historical and Pro Forma Comparative Per Share Data
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1997 1998
------------ -------------
<S> <C> <C>
Historical:
Hearst-Argyle
Basic and diluted income (loss) per share from
continuing operations before extraordinary item... $ 1.13 $ 0.69
Book value per share............................... $ 6.07 $ 6.24
Pulitzer (a)
Basic income per share from continuing operations.. $ 2.99 $ 2.33
Diluted income per share from continuing
operations........................................ $ 2.94 $ 2.29
Book value per share............................... $14.00 $15.84
Dividends per share................................ $ 0.52 $ 0.45
Unaudited Pro Forma:
Hearst-Argyle per Hearst-Argyle Common Stock (b)
Basic and diluted income per share from continuing
operations........................................ $ 0.22 $ 0.20
Book value per share............................... N/A $16.41
Equivalent Hearst-Argyle per Pulitzer Stock (c)
Basic and diluted income per share from continuing
operations........................................ $ 0.36 $ 0.33
Book value per share............................... N/A $26.91
New Pulitzer per Pulitzer Stock (d)
Basic income per share from continuing operations.. $(0.44) $(0.72)
Diluted income per share from continuing
operations........................................ $(0.43) $(0.71)
Book value per share............................... N/A $33.76
Dividends per share (e)............................ $ 0.52 $ 0.45
</TABLE>
See notes on the following page.
30
<PAGE>
Notes to Selected Historical and Pro Forma Comparative Per Share Data:
(a) Historical Pulitzer includes the operations of both the publishing and
related new media businesses that will continue as New Pulitzer after the
Spin-off and the Broadcasting Business that will be acquired by Hearst-
Argyle through the Merger.
(b) Assumes the market price of Hearst-Argyle Series A Common Stock on the
Closing Date is $31.00 per share.
(c) Pro forma equivalent Hearst-Argyle per Pulitzer common share data
represents the equivalent per share interest of Pulitzer stockholders in
Hearst-Argyle and the Pulitzer Broadcasting Business, assuming consummation
of the Spin-Off and Merger and that the market price of Hearst-Argyle
Series A Common Stock on the Closing Date is $31.00 per share. These
amounts were calculated assuming that the outstanding shares of Pulitzer
Common Stock and Pulitzer Class B Common Stock are exchanged for Hearst-
Argyle Series A Common Stock at an assumed exchange ratio of 1.64 shares
for each share of Pulitzer Common Stock and Pulitzer Class B Common Stock
outstanding immediately prior to the Merger. The assumed exchange ratio is
based upon the fixed number of shares of Hearst-Argyle Series A Common
Stock (37,096,774 shares) that will be exchanged for outstanding shares of
Pulitzer Common Stock and Pulitzer Class B Common Stock (22,618,914 shares
as of the Pulitzer Record Date). These amounts are the product of the
assumed exchange ratio of 1.64 multiplied by the data for the Hearst-Argyle
per Hearst-Argyle Common Stock.
(d) New Pulitzer income per share amounts include the historical operations of
the publishing and related new media businesses as well as pro forma
adjustments which reduce net income by approximately $35.4 million. The pro
forma adjustments represent the cash-out of outstanding stock options and
the payment of management bonuses at the time of the Spin-off and Merger.
Dividend per share amounts and shares outstanding for New Pulitzer are
equivalent to the historical Pulitzer amounts. In addition, the
Distribution of New Pulitzer Common Stock and New Pulitzer Class B Common
Stock for Pulitzer Common Stock and Pulitzer Class B Common Stock will be
on a one-for-one basis, resulting in a New Pulitzer capital structure
unchanged from historical Pulitzer.
(e) Management of New Pulitzer expects to pay quarterly dividends at the same
rate as that currently paid by Pulitzer. Future dividends, however, will be
subject to the earnings, financial condition and capital requirements of
New Pulitzer as well as the limitations under any credit agreement or other
agreement to which New Pulitzer may become a party in the future.
Selected Historical Consolidated and Unaudited Pro Forma Combined Condensed
Financial Information
Selected Financial Data of Hearst-Argyle. The selected financial data should
be read in conjunction with the historical and unaudited pro forma combined
condensed financial statements and notes thereto incorporated herein by
reference and included herein. On August 29, 1997, effective September 1, 1997
for accounting purposes, Hearst contributed its television broadcast group and
related broadcast operations, Hearst Broadcast Group, to Argyle and merged the
wholly-owned subsidiary of Hearst with and into Argyle, with Argyle as the
surviving corporation (renamed Hearst-Argyle Television). The merger was
accounted for as a purchase of Argyle by Hearst in a reverse acquisition. The
assets and liabilities of Argyle have been adjusted to the extent acquired by
Hearst to their estimated fair values based upon purchase price allocations.
The net assets of the Hearst Broadcast Group have been reflected at their
historical cost basis. In a reverse acquisition, the accounting treatment
differs from the legal form of the transaction, as the continuing legal parent
company (Argyle) is not assumed to be the acquiror and the historical financial
statements of the entity become those of the accounting acquiror (Hearst
Broadcast Group). Consequently, the presentation of Hearst-Argyle's
consolidated historical financial statements prior to September 1, 1997 have
been revised to reflect the financial statements of the Hearst Broadcast Group.
In addition, the divisional equity of the Hearst Broadcast Group, which
includes the amounts due to Hearst and affiliates, has been reclassified
retroactively to reflect the par value of the approximately 41.3 million shares
received by Hearst in the Hearst Transaction in the Hearst-Argyle historical
financial statements incorporated herein by reference.
The historical financial data for the year ended December 31, 1993 have been
derived from the unaudited combined financial statements of the Hearst
Broadcast Group. The historical financial data for the years ended December 31,
1994, 1995 and 1996 have been derived from the audited combined financial
statements of the Hearst Broadcast Group. The historical financial data for the
year ended December 31, 1997 have been derived from the audited consolidated
financial statements of Hearst-Argyle and the nine-months ended September 30,
1997 and 1998 have been derived from the unaudited condensed consolidated
financial statements of Hearst-Argyle. The unaudited pro forma combined
condensed financial data for the year ended December 31, 1997 and the nine-
months ended September 30, 1997 and 1998 have been prepared as if the
transaction consummated on January 31, 1997 in which Argyle exchanged its WZZM
and WGRZ stations for Gannett Co., Inc.'s WLWT and KOCO stations located in
Cincinnati, OH and Oklahoma City, OK, respectively (the "Gannett Swap"), the
Hearst Transaction, the STC Swap and the Kelly Transaction had been completed
at the beginning of each period presented. Such pro forma data is not
necessarily indicative of the actual results that would have occurred nor of
results that may occur. The historical financial data for the year ended
December 31, 1993 and for the nine-months ended September 30, 1997 and 1998 are
unaudited but, in the opinion of management of Hearst-Argyle, have been
prepared on the same basis as the audited consolidated financial statements and
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position and results of
operations for those periods. Results for the nine-months ended September 30,
1997 and 1998 are not necessarily indicative of the results for a full year.
31
<PAGE>
<TABLE>
<CAPTION>
Hearst-Argyle
---------------------------------------------------------------------------------------------------
Nine Months Pro Forma
Pro Forma Ended Nine Months
Years Ended December 31, December 31, September 30, Ended September 30,
-------------------------------------------- ------------ ------------------ --------------------
1993 1994 1995 1996 1997(a) 1997(b) 1997(c) 1998(d) 1997(b) 1998(b)
-------- -------- -------- -------- -------- ------------ -------- -------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
operations data:
Total revenues........ $224,067 $259,459 $279,340 $283,971 $333,661 $453,708 $221,296 $292,010 $ 324,088 $ 344,714
Station operating
expenses.............. 103,880 106,281 117,535 121,501 142,096 202,318 96,919 127,595 147,237 150,772
Amortization of
program rights........ 37,087 40,266 38,619 40,297 40,129 46,816 29,201 32,027 33,934 37,980
Depreciation and
amortization.......... 26,008 23,071 22,134 16,971 22,924 57,169 13,694 26,678 37,177 39,462
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Station operating
income................ 57,092 89,841 101,052 105,202 128,512 147,405 81,482 105,710 105,740 116,500
Corporate expenses.... 5,924 8,007 7,857 7,658 9,527 12,635 6,546 9,619 9,619 9,619
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Operating income...... 51,168 81,834 93,195 97,544 118,985 134,770 74,936 96,091 96,121 106,881
Interest expense,
net................... 22,773 22,678 22,218 21,235 32,484 75,138 20,524 29,978 56,354 56,354
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income from continuing
operations before
income taxes.......... 28,395 59,156 70,977 76,309 86,501 59,632 54,412 66,113 39,767 50,527
Income taxes.......... 17,123 25,265 30,182 31,907 35,363 25,045 22,362 28,111 16,702 21,221
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income from continuing
operations............ 11,272 33,891 40,795 44,402 51,138 34,587 32,050 38,002 23,065 29,306
Extraordinary
item(e)............... (16,212) (10,826)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net income............ 11,272 33,891 40,795 44,402 34,926 34,587 32,050 27,176 23,065 29,306
Less: preferred stock
dividends(f).......... (711) (1,422) (355) (1,066) (1,066) (1,066)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Income applicable to
common stockholders... $ 11,272 $ 33,891 $ 40,795 $ 44,402 $ 34,215 $ 33,165 $ 31,695 $ 26,110 $ 21,999 $ 28,240
======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Basic:
Income from continuing
operations per common
share................. $ 0.27 $ 0.82 $ 0.99 $ 1.08 $ 1.13 $ 0.62 $ 0.75 $ 0.69 $ 0.41 $ 0.53
======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Income applicable to
common stockholders
per common share...... $ 0.27 $ 0.82 $ 0.99 $ 1.08 $ 0.77 $ 0.62 $ 0.75 $ 0.49 $ 0.41 $ 0.53
======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Number of shares used
in per share
calculation........... 41,299 41,299 41,299 41,299 44,632 53,828 42,208 53,678 53,678 53,678
======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Diluted:
Income from continuing
operations per common
share................. $ 0.27 $ 0.82 $ 0.99 $ 1.08 $ 1.13 $ 0.62 $ 0.75 $ 0.68 $ 0.41 $ 0.52
======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Income applicable to
common stockholders
per common share...... $ 0.27 $ 0.82 $ 0.99 $ 1.08 $ 0.77 $ 0.62 $ 0.75 $ 0.48 $ 0.41 $ 0.52
======== ======== ======== ======== ======== ======== ======== ======== ========= =========
Number of shares used
in per share
calculation........... 41,299 41,299 41,299 41,299 44,674 53,873 42,223 53,943 53,943 53,943
======== ======== ======== ======== ======== ======== ======== ======== ========= =========
</TABLE>
See notes on the following page.
32
<PAGE>
<TABLE>
<CAPTION>
Hearst-Argyle
--------------------------------------------------------------------------------------
Nine Months
Pro Forma Ended
Years Ended December 31, December 31, September 30,
------------------------------------------------- ------------ ---------------------
1993 1994 1995 1996 1997(a) 1997(b) 1997(c) 1998(d)
------- -------- -------- -------- ---------- ------------ --------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other data:
Broadcast cash
flow(g)......... $82,626 $113,999 $123,038 $117,947 $ 150,972 $204,043 $ 94,897 $ 131,762
Broadcast cash
flow margin(h).. 36.9% 43.9% 44.0% 41.5% 45.2% 45.0% 42.9% 45.1%
Operating cash
flow(i)......... $79,147 $108,749 $117,087 $109,457 $ 141,445 $191,408 $ 88,351 $ 122,143
Operating cash
flow margin(j).. 35.3% 41.9% 41.9% 38.5% 42.4% 42.2% 39.9% 41.8%
Cash flows from
operating
activities...... N/A $ 44,460 $ 61,185 $ 65,802 $ 67,689 87,096 $ 57,630 $ 71,850
Cash flows used
in investing
activities...... N/A $ (8,430) $ (8,621) $ (7,764) $ (131,973) (m) $(114,838) $ (34,437)
Cash flows from
(used in)
financing
activities...... N/A $(33,584) $(52,020) $(58,145) $ 74,161 (m) $ 84,990 $ 1,082
After--tax cash
flow(k)......... $37,280 $ 56,962 $ 62,929 $ 61,373 $ 74,062 $ 91,756 $ 45,744 $ 64,680
Capital
expenditures.... $ 4,879 $ 8,430 $ 8,621 $ 7,764 $ 21,897 N/A $ 3,762 $ 12,775
Program
payments........ $37,561 $ 39,179 $ 38,767 $ 44,523 $ 40,593 $ 47,347 $ 29,480 $ 32,653
Balance sheet
data (at year
end):
Cash and cash
equivalents..... N/A $ 2,446 $ 2,990 $ 2,882 $ 12,759 N/A $ 30,664 $ 51,254
Total assets.... N/A $387,984 $385,406 $366,956 $1,044,109 N/A $ 937,342 $1,084,504
Total debt
(including
current
portion)........ N/A N/A N/A N/A $ 490,000 N/A $ 565,000 $ 502,596
Divisional/Stockholders'
equity(l)....... N/A $283,988 $272,762 $259,020 $ 326,654 N/A $ 150,149 $ 332,345
<CAPTION>
Pro Forma
Nine Months
Ended
September 30,
--------------------
1997(b) 1998(b)
--------- ----------
<S> <C> <C> <C>
Other data:
Broadcast cash
flow(g)......... $141,563 $ 156,819
Broadcast cash
flow margin(h).. 43.7% 45.5%
Operating cash
flow(i)......... $131,944 $ 147,200
Operating cash
flow margin(j).. 40.7% 42.7%
Cash flows from
operating
activities...... 73,762 79,367
Cash flows used
in investing
activities...... (m) (m)
Cash flows from
(used in)
financing
activities...... (m) (m)
After--tax cash
flow(k)......... $ 60,242 $ 68,768
Capital
expenditures.... N/A N/A
Program
payments........ $ 35,288 $ 37,123
Balance sheet
data (at year
end):
Cash and cash
equivalents..... N/A 53,282
Total assets.... N/A 1,635,695
Total debt
(including
current
portion)........ N/A 1,032,596
Divisional/Stockholders'
equity(l)....... N/A 332,345
</TABLE>
- ----
(a) The Hearst Transaction was consummated on August 29, 1997. The selected
financial data includes results from (i) WCVB, WTAE, WBAL, WISN, KMBC and
WDTN for the entire period presented; (ii) WAPT, KITV, KHBS/KHOG, WLWT,
KOCO and Hearst-Argyle's share of the 1996 Joint Marketing and Programming
Agreement relating to television station WNAC, with the owner of another
television station in the same market (the "Clear Channel Venture") from
September 1 through December 31, 1997; and, (iii) the management fees
derived by Hearst-Argyle from WWWB, WPBF, KCWE and WBAL-radio (the
"Managed Stations") from September 1 through December 31, 1997.
(b) Includes the results of operations of the Argyle Stations, Hearst
Broadcast Group and the management fee derived by Hearst-Argyle from the
Managed Stations on a combined pro forma basis as if the Hearst
Transaction, the Gannett Swap, the STC Swap and the Kelly Transaction had
occurred at the beginning of the period presented.
(c) Includes results from (i) WCVB, WTAE, WBAL, WISN, KMBC and WDTN for the
entire period presented; (ii) WAPT, KITV, KHBS/KHOG, WLWT, KOCO and
Hearst-Argyle's share of the Clear Channel Venture for September only;
and, (iii) the management fees derived by Hearst-Argyle from the Managed
Stations for September only.
(d) Includes the results of operations of Hearst-Argyle, which includes: (i)
WCVB, WTAE, WBAL, WISN and KMBC for the entire period presented; (ii)
WLWT, KOCO, WAPT, KITV and KHBS/KHOG for the entire period presented;
(iii) the management fee derived by Hearst-Argyle from the Managed
Stations for the entire-period presented; (iv) Hearst-Argyle's share of
the Clear Channel Venture and WDTN from January 1 through May 31, 1998;
and, (v) KSBW and WPTZ/WNNE from June 1 through September 30, 1998.
(e) Represents the write-offs of unamortized financing costs and premiums paid
upon early extinguishment of debt for Hearst-Argyle.
(f) Gives effect to dividends on the Preferred Stock issued in connection with
the acquisition of KHBS/KHOG.
(g) Broadcast cash flow is defined as station operating income, plus
depreciation and amortization and write down of intangible assets, plus
amortization of program rights, minus program payments. The Company has
included broadcast cash flow data because management utilizes and believes
that such data are commonly used as a measure of performance among
companies in the broadcast industry. Broadcast cash flow ia also
frequently used by investors, analysts, valuation firms and lenders as one
of the important determinants of underlying asset value. Broadcast cash
flow should not be considered in isolation or as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles) as an indicator of the entity's operating
performance, or to cash flow from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. This measure is believed to be, but may not be, comparable to
similarly titled measures used by other companies.
(h) Broadcast cash flow margin is broadcast cash flow divided by total
revenues, expressed as a percentage.
(i) Operating cash flow is defined as operating income, plus depreciation and
amortization and write down of intangible assets, plus amortization of
program rights, minus program payments, plus non-cash compensation
expense. The Company has included operating cash flow data, also known as
EBITDA, because management utilizes and believes that such data are
commonly used as a measure of performance among companies in the broadcast
industry. Operating cash flow is also used by investors, analysts, rating
agencies and lenders to measure a company's ability to service debt.
Operating cash flow should not be considered in isolation or as an
alternative to operating income (as determined in accordance with
generally accepted accounting principles) as an indicator of the entity's
operating performance, or of cash flow from operating activities (as
determined in accordance with generally accepted accounting principles) as
a measure of liquidity. This measure is believed to be, but may not be,
comparable to similarly titled measures used by other companies.
(j) Operating cash flow margin is broadcast cash flow divided by total
revenues, expressed as a percentage.
(k) After-tax cash flow is defined as income before extraordinary item plus
depreciation and amortization. The Company has included after-tax cash
flow data because management utilizes and believes that such data are
commonly used by investors, analysts, rating agencies and lenders to
measure a company's ability to service debt and as an alternative
determinant of enterprise value. After-tax cash flow should not be
considered in isolation or as an alternative to operating income (as
determined in accordance with generally accepted accounting principles) as
an indicator of the entity's operating performance, or to cash flow from
operating activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity. This measure is believed
to be, but may not be, comparable to similarly titled measures used by
other companies.
(l) Hearst-Argyle has not paid any dividends on its Series A Common Stock
since inception.
(m) The cash flow data for investing activities and financing activities is
not determinable for pro forma purposes.
33
<PAGE>
Selected Historical Financial Data of Argyle. The selected consolidated
financial data of Argyle should be read in conjunction with Argyle's historical
financial statements and notes thereto incorporated by reference elsewhere
herein. The historical financial data for the years ended December 31, 1993 and
1994 have been derived from the audited combined financial statements of WZZM,
WAPT and WNAC (collectively, the "Northstar") acquired by Argyle effective
January 4, 1995, the accounting predecessor to Argyle. The historical financial
data for the years ended December 31, 1995 and 1996 have been derived from the
audited consolidated financial statements of Argyle.
The historical financial data for the six-months ended June 30, 1997 are
unaudited but, in the opinion of management of Hearst-Argyle, have been
prepared on the same basis as the audited combined financial statements and
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position and results of
operations for those periods. Results for the six-months ended June 30, 1997
are not necessarily indicative of the results for a full year.
<TABLE>
<CAPTION>
Northstar Argyle
Historical Historical
---------------- ------------------------------
Years Ended Years Ended Six Months
December 31, December 31, Ended
---------------- ------------------ June 30,
1993 1994 1995 1996 1997
------- ------- -------- -------- ----------
(In thousands, except per
(In thousands) share data)
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Total revenues................ $28,440 $34,538 $ 46,944 $ 73,294 $39,765
Station operating expenses.... 14,295 16,430 23,603 37,639 21,367
Amortization program rights... 3,876 3,600 3,961 4,725 2,119
Depreciation and
amortization................. 2,884 3,126 12,294 23,965 12,760
------- ------- -------- -------- -------
Station operating income...... 7,385 11,382 7,086 6,965 3,519
Corporate expenses............ 1,174 1,103 2,324 4,285 1,904
Non-cash compensation
expense...................... 675 675 503
------- ------- -------- -------- -------
Operating income.............. 6,211 10,279 4,087 2,005 1,112
Interest expense, net......... 5,885 4,745 12,052 16,566 9,407
------- ------- -------- -------- -------
Income (loss) from continuing
operations before income
taxes........................ 326 5,534 (7,965) (14,561) (8,295)
Income taxes.................. 301 170
------- ------- -------- -------- -------
Income (loss) from continuing
operations................... 25 5,364 (7,965) (14,561) (8,295)
Cumulative effect of a change
in accounting principle(a)... (213)
Extraordinary item(b)......... (774) (7,842)
------- ------- -------- -------- -------
Net income (loss)............. $ (188) $ 4,590 (15,807) (14,561) (8,295)
======= =======
Less: preferred stock
dividends.................... (829) (711)
-------- -------- -------
Loss applicable to common
stockholders................. $(15,807) $(15,390) $(9,006)
======== ======== =======
Basic:
Loss from continuing
operations before
extraordinary item per common
share........................ $ (1.25) $ (1.37) $ (0.79)
======== ======== =======
Loss from continuing
operations per common share.. $ (2.47) $ (1.37) $ (0.79)
======== ======== =======
Number of shares used in per
share calculation............ $ 6,388 $ 11,246 $11,347
======== ======== =======
Diluted:
Loss from continuing
operations before
extraordinary item per common
share........................ $ (1.25) $ (1.37) $ (0.79)
======== ======== =======
Loss from continuing
operations per common share.. $ (2.47) $ (1.37) $ (0.79)
======== ======== =======
Number of shares used in per
share calculation............ $ 6,388 $ 11,246 $11,347
======== ======== =======
</TABLE>
See notes on the following page.
34
<PAGE>
<TABLE>
<CAPTION>
Northstar Argyle
Historical Historical
----------------- -------------------------------
Years Ended Years Ended Six Months
December 31, December 31, Ended
----------------- ------------------- June 30,
1993 1994 1995 1996 1997
------- -------- --------- -------- ----------
(In thousands, except per
(In thousands) share data)
<S> <C> <C> <C> <C> <C>
Other data:
Broadcast cash flow, as
defined(c)................ $ 9,868 $ 14,223 $ 20,440 $ 31,889 $ 16,060
Broadcast cash flow
margin(d)................. 34.7% 41.2% 43.5% 43.5% 40.4%
Operating cash flow, as
defined(e)................ $ 8,694 $ 13,120 $ 18,116 $ 27,604 $ 14,156
Operating cash flow
margin(f)................. 30.6% 38.0% 38.6% 37.7% 35.6%
Cash flows from operating
activities................ $ 9,734 $ 12,774 $ 6,859 $ 6,943 $ 1,601
Cash flows used in
investing activities...... $(1,103) $ (668) $(237,501) $(28,745) $(27,179)
Cash flows from (used in)
financing activities...... $(8,734) $(10,887) $ 232,846 $ 20,545 $ 26,789
Capital Expenditures....... $ 1,136 $ 701 $ 3,767 $ 6,633 $ 4,091
Program payments........... $ 4,277 $ 3,885 $ 2,901 $ 3,766 $ 2,338
Balance sheet data:
Cash and cash equivalents.. $ 93 $ 1,313 $ 2,206 $ 949 $ 2,160
Total assets............... $76,015 $ 78,575 $ 291,141 $328,608 $338,468
Total debt (including
current portion).......... $63,235 $ 42,670 $ 150,000 $171,500 $199,000
Stockholders' equity....... $(3,440) $ 24,513 $ 116,293 $129,152 $120,650
</TABLE>
- --------
(a) Represents the cumulative effect of the adoption of SFAS No. 109,
Accounting for Income Taxes.
(b) Represents the write-offs of unamortized financing costs and premiums paid
upon early extinguishment of debt for each respective company.
(c) Broadcast cash flow is defined as station operating income, plus
depreciation and amortization and write down of intangible assets, plus
amortization of program rights, minus program payments. The Company has
included broadcast cash flow data because management utilizes and believes
that such data are commonly used as a measure of performance among
companies in the broadcast industry. Broadcast cash flow is also frequently
used by investors, analysts, valuation firms and lenders as one of the
important determinants of underlying asset value. Broadcast cash flow
should not be considered in isolation or as an alternative to operating
income (as determined in accordance with generally accepted accounting
principles) as an indicator of the entity's operating performance, or to
cash flow from operating activities (as determined in accordance with
generally accepted accounting principles) as a measure of liquidity. This
measure is believed to be, but may not be, comparable to similarly titled
measures used by other companies.
(d) Broadcast cash flow margin is broadcast cash flow divided by total
revenues, expressed as a percentage.
(e) Operating cash flow is defined as operating income, plus depreciation and
amortization and write down of intangible assets, plus amortization of
program rights, minus program payments, plus non-cash compensation expense.
The Company has included operating cash flow data, also known as EBITDA,
because management utilizes and believes that such data are commonly used
as a measure of performance among companies in the broadcast industry.
Operating cash flow is also used by investors, analysts, rating agencies
and lenders to measure a company's ability to service debt. Operating cash
flow should not be considered in isolation or as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles) as an indicator of the entity's operating
performance, or to cash flow from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. This measure is believed to be, but may not be, comparable to
similarly titled measures used by other companies.
(f) Operating cash flow margin is broadcast cash flow divided by total
revenues, expressed as a percentage.
Selected Unaudited Pro Forma Financial Data of Hearst-Argyle, including
estimated impact of the Merger. The unaudited pro forma combined condensed
financial data for Hearst-Argyle as of September 30, 1998 and for the nine-
months ended September 30, 1997 and 1998 and for the year ended December 31,
1997, are presented to reflect the estimated impact of the Merger on the
unaudited pro forma combined condensed financial statements of Hearst-Argyle.
The Merger will be accounted for by Hearst-Argyle using the purchase method.
For a description of the purchase method of accounting with respect to the
Merger, see "--Accounting Treatment." The unaudited pro forma combined
condensed statement of operations data assume that the Merger, the Hearst
Transaction, the Gannett Swap, the STC Swap and the Kelly Transaction had been
consummated as of the beginning of the periods presented and the unaudited pro
forma combined condensed balance sheet data assume that the Kelly Transaction
and the Merger, assuming that the market price of Hearst-Argyle Series A Common
Stock on the Closing Date is $31.00 per share, had been consummated on
September 30, 1998. The selected unaudited pro forma combined condensed
financial data presented herein have been derived from, and should be read in
conjunction with, Hearst-Argyle's historical and unaudited pro forma combined
condensed financial statements and other financial information included
elsewhere herein and contained in Hearst-Argyle's Annual Report on Form 10-K
for the year ended December 31, 1997, as amended by Forms 10-K/A, Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998, as amended by
Form 10-Q/A, and Current Report on Form 8-K dated December 16, 1998, as amended
by Forms 8-K/A. See "Information Incorporated by Reference" and "--Hearst-
Argyle Unaudited Pro Forma Combined Condensed Financial Statements." The
results presented in Hearst-Argyle's unaudited pro forma combined condensed
financial statements are not necessarily indicative of the results for the full
year nor are they necessarily indicative of the results that actually would
have occurred had the Merger, as well as certain other transactions described
in related unaudited pro forma financial information, occurred on the dates
indicated or that may result in the future.
35
<PAGE>
<TABLE>
<CAPTION>
Pro Forma including the Merger
-----------------------------------------
Nine Months Ended
Year Ended September 30,
December 31, --------------------------
1997(a) 1997(a) 1998(b)
-------------------------- -------------
(In thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Total revenues..................... $ 689,762 $ 495,723 $ 524,592
Station operating expenses......... 317,692 232,714 239,033
Amortization of program rights..... 59,306 43,379 47,144
Depreciation and amortization...... 131,062 94,603 95,761
----------- ----------- -------------
Station operating income........... 181,702 125,027 142,654
Corporate expenses................. 15,800 11,850 11,850
----------- ----------- -------------
Operating income................... 165,902 113,177 130,804
Interest expense, net.............. 124,138 93,104 93,104
----------- ----------- -------------
Income before income taxes......... 41,764 20,073 37,700
Income taxes....................... 20,047 9,635 18,096
----------- ----------- -------------
Net income......................... 21,717 10,438 19,604
Less: preferred stock dividends.... (1,422) (1,066) (1,066)
----------- ----------- -------------
Income applicable to common stock.. $ 20,295 $ 9,372 $ 18,538
=========== =========== =============
Basic:
Income per common share............ $ 0.22 $ 0.10 $ 0.20
=========== =========== =============
Number of shares used in per share
calculation....................... 90,925 90,775 90,775
Diluted:
Income per common share............ $ 0.22 $ 0.10 $ 0.20
=========== =========== =============
Number of shares used in per share
calculation....................... 90,970 91,040 91,040
Other Data:
Broadcast cash flow(c)............. $ 312,623 $ 218,256 $ 239,668
Broadcast cash flow margin(d)...... 45.3% 44.0% 45.7%
Operating cash flow(e)............. $ 296,823 $ 206,406 $ 227,818
Operating cash flow margin(f)...... 43.0% 41.6% 43.4%
Cash flows from operating
activities........................ 142,159 116,867 131,865
Cash flows from investing
activities........................ (h) (h) (h)
Cash flows from financing
activities........................ (h) (h) (h)
After-tax cash flow(g)............. $ 152,779 $ 105,041 $ 115,365
Program payments................... $ 59,447 $ 44,753 $ 45,891
Balance Sheet Data (at period end):
Total assets....................... N/A N/A $ 4,219,642
Long-term debt..................... N/A N/A $ 1,732,596
Stockholders' equity............... N/A N/A $ 1,482,345
</TABLE>
See notes on the following page.
36
<PAGE>
- --------
(a) Includes the results of operations of the Hearst Broadcast Group, Argyle,
the management fee derived by Hearst-Argyle from the Managed Stations,
Pulitzer Broadcasting and Kelly Broadcasting on a combined pro forma basis
as if the Hearst Transaction, the Gannett Swap, the STC Swap, the Kelly
Transaction and the Merger had occurred at the beginning of the periods
presented.
(b) Includes the results of operations of Hearst-Argyle, Pulitzer Broadcasting
and Kelly Broadcasting on a combined pro forma basis as if the STC Swap,
the Kelly Transaction and the Merger had occurred at the beginning of the
period presented.
(c) Broadcast cash flow is defined as station operating income, plus
depreciation and amortization and write down of intangible assets, plus
amortization of program rights, minus program payments. The Company has
included broadcast cash flow data because management utilizes and believes
that such data are commonly used as a measure of performance among
companies in the broadcast industry. Broadcast cash flow is also frequently
used by investors, analysts, valuation firms and lenders as one of the
important determinants of underlying asset value. Broadcast cash flow
should not be considered in isolation or as an alternative to operating
income (as determined in accordance with generally accepted accounting
principles) as an indicator of the entity's operating performance, or to
cash flow from operating activities (as determined in accordance with
generally accepted accounting principles) as a measure of liquidity. This
measure is believed to be, but may not be, comparable to similarly titled
measures used by other companies.
(d) Broadcast cash flow margin is broadcast cash flow divided by total
revenues, expressed as a percentage.
(e) Operating cash flow is defined as operating income, plus depreciation and
amortization and write down of intangible assets, plus amortization of
program rights, minus program payments, plus non-cash compensation expense.
The Company has included operating cash flow data, also known as EBITDA,
because management utilizes and believes that such data are commonly used
as a measure of performance among companies in the broadcast industry.
Operating cash flow is also used by investors, analysts, rating agencies
and lenders to measure a company's ability to service debt. Operating cash
flow should not be considered in isolation or as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles) as an indicator of the entity's operating
performance, or to cash flow from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. This measure is believed to be, but may not be, comparable to
similarly titled measures used by other companies.
(f) Operating cash flow margin is broadcast cash flow divided by total
revenues, expressed as a percentage.
(g) After-tax cash flow is defined as income before extraordinary item plus
depreciation and amortization. The Company has included after-tax cash flow
data because management utilizes and believes that such data commonly used
by investors, analysts, rating agencies and lenders to measure a company's
ability to service debt and as an alternative determinant of enterprise
value. After-tax cash flow should not be considered in isolation or as an
alternative to operating income (as determined in accordance with generally
accepted accounting principles) as an indicator of the entity's operating
performance, or to cash flow from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. This measure is believed to be, but may not be, comparable to
similarly titled measures used by other companies.
(h) The cash flow data for investing activities and financing activities is not
determinable for pro forma purposes.
37
<PAGE>
Selected Historical Financial Data of Pulitzer. The following table sets
forth selected consolidated historical financial data for each of the five
years in the period ended December 31, 1997 and for the nine-month periods
ended September 30, 1998 and 1997 for Pulitzer. Such data has been derived
from, and should be read in conjunction with, the audited consolidated
financial statements and notes thereto and the unaudited consolidated financial
statements and notes thereto for the nine months ended September 30, 1998 and
1997 included in Pulitzer's Current Report on Form 8-K, filed on January 22,
1999. See "Information Incorporated by Reference." The historical financial
data below include the operations of both the publishing and related new media
businesses that will continue as New Pulitzer after the Spin-Off and the
Pulitzer Broadcasting Business that will be acquired by Hearst-Argyle through
the Merger.
<TABLE>
<CAPTION>
For the
Nine Months Ended
or
As of September
For the Years Ended or As of December 31, 30,
------------------------------------------------- ------------------
1993(a)(h) 1994(a) 1995(g) 1996(e) 1997 1997 1998
---------- -------- -------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Income
Statement Data:
Operating revenues--
net.................... $426,985 $485,579 $472,327 $534,088 $584,985 $428,648 $448,888
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Operations............ 180,998 191,570 190,013 205,885 214,935 157,939 165,980
Selling, general and
administrative....... 163,578 174,239 155,996 172,838 190,429 140,447 144,720
St. Louis Agency
adjustment........... 10,660 14,706 12,502 13,972 19,450 14,749 15,926
Depreciation and
amortization......... 23,792 30,486 27,150 31,102 36,454 27,435 26,750
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses........... 379,028 411,001 385,661 423,797 461,268 340,570 353,376
-------- -------- -------- -------- -------- -------- --------
Operating income........ 47,957 74,578 86,666 110,291 123,717 88,078 95,512
Interest income......... 1,090 1,971 5,203 4,522 4,652 3,476 3,541
Interest expense........ (9,823) (12,009) (10,171) (13,592) (16,081) (12,553) (10,255)
Gain on sale of
properties (a)......... 2,791
Net other expense (b)... (1,011) (1,461) (2,330) (5,449) (1,203) (867) (1,303)
-------- -------- -------- -------- -------- -------- --------
Income before provision
for income taxes and
cumulative effects of
changes in accounting
principles............. 38,213 65,870 79,368 95,772 111,085 78,134 87,495
Provision for income
taxes.................. 15,260 25,960 30,046 38,272 45,057 31,735 35,422
-------- -------- -------- -------- -------- -------- --------
Income before cumulative
effects of changes in
accounting principles.. 22,953 39,910 49,322 57,500 66,028 46,399 52,073
Cumulative effects of
changes in accounting
principles, net of tax
(c).................... 360 (719)
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 23,313 $ 39,191 $ 49,322 $ 57,500 $ 66,028 $ 46,399 $ 52,073
======== ======== ======== ======== ======== ======== ========
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
For the
Nine Months Ended or
For the Years Ended or As of December 31, As of September 30,
----------------------------------------------- ---------------------
1993(a)(h) 1994(a) 1995(g) 1996(e) 1997 1997 1998
---------- -------- -------- -------- -------- ---------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Data (d) (f):
Basic Earnings per Share
of Stock:
Earnings per share
before cumulative
effects of changes in
accounting
principles........... $ 1.13 $ 1.84 $ 2.26 $ 2.62 $ 2.99 $ 2.10 $ 2.33
Cumulative effects of
changes in accounting
principles (c)....... 0.02 (0.03)
-------- -------- -------- -------- -------- ---------- ----------
Earnings per share.... $ 1.15 $ 1.81 $ 2.26 $ 2.62 $ 2.99 $ 2.10 $ 2.33
======== ======== ======== ======== ======== ========== ==========
Weighted average
number of shares
outstanding.......... 20,371 21,655 21,800 21,926 22,110 22,088 22,343
======== ======== ======== ======== ======== ========== ==========
Diluted Earnings per
Share of Stock:
Earnings per share
before cumulative
effects of changes in
accounting
principles........... $ 1.11 $ 1.83 $ 2.23 $ 2.58 $ 2.94 $ 2.07 $ 2.29
Cumulative effects of
changes in accounting
principles (c)....... 0.02 (0.03)
-------- -------- -------- -------- -------- ---------- ----------
Earnings per share.... $ 1.13 $ 1.80 $ 2.23 $ 2.58 $ 2.94 $ 2.07 $ 2.29
======== ======== ======== ======== ======== ========== ==========
Weighted average
number of shares
outstanding.......... 20,609 21,822 22,097 22,273 22,452 22,427 22,726
======== ======== ======== ======== ======== ========== ==========
Dividends per share of
common stock and
Class B common
stock................ $ 0.32 $ 0.35 $ 0.41 $ 0.46 $ 0.52 $ 0.39 $ 0.45
======== ======== ======== ======== ======== ========== ==========
Consolidated Balance
Sheet Data:
Working capital......... $ 60,688 $ 96,729 $128,853 $ 95,330 $ 99,322 $ 86,900 $ 134,881
Total assets............ 461,618 468,312 495,073 683,851 682,956 673,061 714,886
Long-term debt, less
current maturities..... 161,920 128,750 114,500 235,410 172,705 186,705 160,000
Stockholders' equity.... 122,143 155,019 198,771 249,937 310,777 287,929 355,938
</TABLE>
- --------
(a) In 1994, the gain on the sale of Pulitzer's Chicago publishing subsidiary
added $1,051 (after tax) to net income ($0.05 per share); the subsidiary's
operating results are included in 1993 and 1994 through the sale on
December 22, 1994.
(b) In 1996, a joint venture investment of $2,700 was written off resulting in
an after-tax charge of $1,600 or $0.07 per share.
(c) Effective January 1, 1994, Pulitzer adopted the provisions of Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." Effective January 1, 1993, Pulitzer adopted the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which recalculated deferred income taxes at
the lower 34% federal statutory rate as opposed to the higher tax rates
that were in effect when the deferred income taxes originated.
(d) In 1996, shares outstanding, dividends per share and earnings per share
were adjusted for 1996 and restated for 1995, 1994 and 1993 to reflect the
impact of a four-for-three stock split (payable in the form of a 33 1/3%
Pulitzer Common Stock and Pulitzer Class B Common Stock dividend) declared
by Pulitzer on September 12, 1996.
(e) The year 1996 included a partial year of operation of Scripps League
Newspapers, Inc. (subsequently renamed Pulitzer Community Newspapers, Inc.)
following its acquisition on July 1, 1996.
(f) In 1994, shares outstanding, dividends per share and earnings per share
were adjusted for 1994 and restated for 1993 to reflect the impact of a
five-for-four stock split (payable in the form of a 25% Pulitzer Common
Stock and Pulitzer Class B Common Stock dividend) declared by Pulitzer on
January 4, 1995.
(g) Pulitzer's fiscal year ends on the last Sunday of the calendar year, which
in 1995 resulted in a 53-week year.
(h) The year 1993 included a partial year of operations for WESH-TV and KCCI-
TV, acquired on June 30, 1993 and September 9, 1993, respectively.
39
<PAGE>
Selected Historical Financial Data of the Pulitzer Broadcasting Business. The
following table sets forth selected consolidated historical financial data for
each of the five years in the period ended December 31, 1997 and for the nine-
month periods ended September 30, 1998 and 1997 for Pulitzer Broadcasting. Such
data has been derived from, and should be read in conjunction with, the
consolidated financial statements and notes thereto of Pulitzer Broadcasting
contained in Pulitzer's Current Report on Form 8-K, filed with the SEC on
January 22, 1999, incorporated herein by reference. See "Information
Incorporated by Reference." The consolidated income statement data for the
years ended December 31, 1997, 1996 and 1995 and the balance sheet data as of
December 31, 1997 and 1996 have been derived from the audited consolidated
financial statements of Pulitzer Broadcasting. The data for the remaining
periods presented below are derived from the unaudited consolidated financial
statements of Pulitzer Broadcasting, which, in the opinion of Pulitzer's
management, include all adjustments necessary for a fair presentation of
financial position and results of operations for such periods.
<TABLE>
<CAPTION>
For the
Nine Months Ended or
For the Years Ended or As of December 31, As of September 30,
------------------------------------------------ ----------------------
1993(b) 1994 1995(c) 1996 1997 1997 1998
-------- -------- -------- -------- -------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Income
Statement Data:
Operating revenues--
net.................... $136,839 $180,800 $202,939 $224,992 $227,016 $ 165,002 $ 173,681
-------- -------- -------- -------- -------- ---------- ----------
Operating expenses:
Operations............. 52,778 61,351 64,202 66,626 69,205 51,502 54,313
Selling, general and
administrative........ 41,506 49,613 53,707 56,535 55,885 41,514 41,633
Depreciation and
amortization.......... 16,854 24,358 22,843 22,442 23,447 17,622 16,512
-------- -------- -------- -------- -------- ---------- ----------
Total operating
expenses.............. 111,138 135,322 140,752 145,603 148,537 110,638 112,458
-------- -------- -------- -------- -------- ---------- ----------
Operating income........ 25,701 45,478 62,187 79,389 78,479 54,364 61,223
Interest expense........ (9,823) (12,009) (10,171) (13,592) (16,081) (12,553) (10,255)
Net other income
(expense).............. 5 5 (4) 434 10 8 11
-------- -------- -------- -------- -------- ---------- ----------
Income before provision
for income taxes and
cumulative effect of
change in accounting
principle.............. 15,883 33,474 52,012 66,231 62,408 41,819 50,979
Provision for income
taxes.................. 6,500 13,786 19,433 25,876 24,387 16,344 19,918
-------- -------- -------- -------- -------- ---------- ----------
Income before cumulative
effect of change in
accounting principle... 9,383 19,688 32,579 40,355 38,021 25,475 31,061
Cumulative effect of
change in accounting
principle, net of
tax(a)................. 432
-------- -------- -------- -------- -------- ---------- ----------
Net income.............. $ 9,815 $ 19,688 $ 32,579 $ 40,355 $ 38,021 $ 25,475 $ 31,061
======== ======== ======== ======== ======== ========== ==========
Consolidated Balance
Sheet Data:
Working capital......... $ 7,923 $ 14,317 $ 15,864 $ 16,403 $ 23,491 $ 19,929 $ 18,582
Total assets............ 281,349 263,254 260,696 260,278 256,688 256,429 242,108
Long-term debt, less
current maturities..... 161,920 128,750 114,500 235,410 172,705 186,705 160,000
Stockholder's equity
(deficit).............. 59,927 82,447 94,409 (28,767) 36,069 19,996 34,043
</TABLE>
- --------
(a) Effective January 1, 1993, Pulitzer adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which recalculated deferred income taxes at the lower 34% federal statutory
rate as opposed to the higher tax rates that were in effect when the
deferred income taxes originated.
(b) The year 1993 included a partial year of operations of WESH (Daytona
Beach/Orlando, Florida) following its acquisition on June 30, 1993 and KCCI
(Des Moines, Iowa) following its acquisition on September 9, 1993.
(c) Pulitzer's fiscal year ends on the last Sunday of the calendar year, which
in 1995 resulted in a 53-week year.
40
<PAGE>
Unaudited Pro Forma Condensed Consolidated Financial Statements. The
following unaudited pro forma condensed statement of consolidated financial
position as of September 30, 1998 and the unaudited pro forma condensed
statements of consolidated income for the nine months ended September 30, 1998
and for the year ended December 31, 1997 give effect to the Spin-Off, the
Merger and related transactions described in this Joint Proxy
Statement/Prospectus. The pro forma condensed statement of consolidated
financial position is presented as if the Spin-Off, the Merger and related
transactions had occurred on September 30, 1998, and the pro forma condensed
statements of consolidated income are presented as if the Spin-Off, the Merger
and related transactions had occurred as of the beginning of the periods
presented. The "Pulitzer As Adjusted" amounts show the effects on reported
results of operations and financial position of Pulitzer assuming the proposed
Spin-Off and Merger were consummated, and as a result, the Pulitzer
Broadcasting Business was presented as discontinued operations. These financial
statements are presented on a pro forma basis pending the occurrence of the
event that would establish the measurement date for treatment of the Pulitzer
Broadcasting Business as discontinued operations, namely the approval of the
Spin-Off, Merger and related stockholder proposals by Pulitzer's stockholders.
The pro forma information is presented for illustrative purposes only and may
not be indicative of the results that would have been obtained had the Spin-
Off, the Merger and related transactions actually occurred on the dates assumed
nor is it necessarily indicative of the future consolidated results of
operations.
Several of the pro forma adjustments included herein are computed based upon
the closing share prices for Pulitzer Common Stock and, in one adjustment,
Hearst-Argyle Series A Common Stock. Depending on the share prices of Pulitzer
Common Stock and Hearst-Argyle Series A Common Stock near and/or on the dates
of the Spin-Off and Merger, the actual amounts may differ significantly from
the pro forma adjustments. Disclosures are included in each of the notes to
these pro forma adjustments to provide a range of possible results for changes
in the share prices of Pulitzer Common Stock and Hearst-Argyle Series A Common
Stock.
The unaudited pro forma condensed statement of consolidated financial
position should be read in conjunction with the historical consolidated
financial statements and the related notes thereto of Pulitzer, incorporated by
reference into this Joint Proxy Statement/Prospectus from Pulitzer's Current
Report on Form 8-K, filed on January 22, 1999. See "Information Incorporated by
Reference."
41
<PAGE>
Pulitzer Publishing Company and Subsidiaries
Unaudited Pro Forma Condensed Statement of Consolidated Financial Position
As of September 30, 1998
(In thousands)
<TABLE>
<CAPTION>
Pro Forma
---------------------------------------------
Divestiture of
Pulitzer Additions Pulitzer
Historical (Deductions) Broadcasting (j) New Pulitzer
---------- ------------ ---------------- ------------
Assets
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents.......... $107,291 $700,000 (a) $ (7,625)(k) $525,993
(174,793)(b)
(21,800)(b)
(33,600)(c)
5,000 (d)
0 (e)
(40,369)(f)
(8,111)(g)
Accounts receivable--
net.................. 78,663 -- (41,770)(k) 36,893
Other................. 21,474 -- (11,688)(k) 9,786
-------- -------- --------- --------
Total Current
Assets.............. 207,428 426,327 (61,083) 572,672
-------- -------- --------- --------
Properties--Net......... 163,663 -- (82,806) 80,857
Intangibles--Net........ 277,148 -- (96,744) 180,404
Receivable from The
Herald Company......... 37,339 -- -- 37,339
Other Assets............ 29,308 (3,400)(c) (2,756) 49,316
(5,000)(d)
31,164 (h)
-------- -------- --------- --------
Total Assets........ $714,886 $449,091 $(243,389) $920,588
======== ======== ========= ========
Liabilities and
Stockholders' Equity
Current portion of
long-term debt....... $ 12,705 $(12,705)(b) $ -- $ --
Interest payable...... 2,088 (2,088)(b) -- --
Other................. 57,754 -- (20,083)(k) 37,671
-------- -------- --------- --------
Total Current
Liabilities........ 72,547 (14,793) (20,083) 37,671
-------- -------- --------- --------
Long-term Debt.......... 160,000 700,000 (a) (700,000) --
(160,000)(b)
Postretirement and
Postemployment Benefit
Obligations............ 91,495 -- (2,711) 88,784
Other Long-term
Liabilities............ 34,906 4,838 (f) (9,134) 35,399
4,789 (g)
Commitments and
Contingencies (l)...... --
Stockholders' Equity:
Common stock.......... 71 -- -- 71
Class B common stock.. 271 (117)(i) -- 154
Additional paid-in
capital.............. 142,077 (37,000)(c) 488,539 405,760
0 (e)
(187,856)(i)
Retained earnings..... 401,492 (21,800)(b) -- 352,749
(45,207)(f)
(12,900)(g)
31,164 (h)
Treasury stock........ (187,973) 187,973 (i) -- --
-------- -------- --------- --------
Total Stockholders'
Equity............. 355,938 (85,743) 488,539 758,734
-------- -------- --------- --------
Total Liabilities
and Equity......... $714,886 $449,091 $(243,389) $920,588
======== ======== ========= ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Statement of Consolidated Financial
Position on the following pages.
42
<PAGE>
Notes to Unaudited Pro Forma Condensed Statement of Consolidated Financial
Position of New Pulitzer:
(a) To record the borrowing of the New Debt by Pulitzer. See "The Merger
Agreement--Pre-Merger Transactions." The New Debt will be assumed by
Hearst-Argyle in the Merger.
(b) To record the prepayment of Pulitzer's Existing Debt ($172.7 million) and
related interest payable ($2.1 million). In connection with the debt
prepayment, a prepayment penalty based on current interest rates and
remaining years to maturity will be payable to the lender. For purposes of
this pro forma, a prepayment penalty of $21.8 million was computed assuming
a prepayment date of December 31, 1998. This will be reflected as an
extraordinary charge in Pulitzer's financial statements in the period
incurred. The actual prepayment penalty may be higher or lower depending
primarily on interest rate levels on the date of the debt prepayment. See
"The Merger Agreement--Pre-Merger Transactions."
(c) To record the payment of estimated professional fees of $37 million related
to the Spin-Off and Merger. These fees will be recorded as a reduction in
the contribution to New Pulitzer at the time of the Spin-Off and Merger. As
of September 30, 1998, approximately $3.4 million of fees had been paid and
recorded as a deferred charge in "Other Assets."
(d) To record Hearst-Argyle's acquisition, separate from the Merger, of
Pulitzer's investment in the Arizona Diamondbacks Major League Baseball
franchise for $5 million.
(e) To the extent a gain is generated by the Spin-Off and Merger, a corporate-
level income tax (the "Spin-Off Tax") will be due. The gain is measured by
the excess, if any, of the fair market value of the New Pulitzer Stock
distributed by Pulitzer to its stockholders in the Spin-Off over Pulitzer's
adjusted tax basis in such New Pulitzer Stock immediately prior to the
distribution. For purposes of this pro forma, the fair market value of the
New Pulitzer Stock was estimated as the difference between the closing
price of Pulitzer Common Stock on December 31, 1998 ($86.63) and an
estimate of the fair market value for the Pulitzer Broadcasting Business of
$54.32 per share. The fair market value for the Pulitzer Broadcasting
Business was estimated based upon the fixed number of shares of Hearst-
Argyle Series A Common Stock (37,096,774 shares) that will be exchanged for
Pulitzer Stock (22,536,412 shares at December 31, 1998) and the closing
price of Hearst-Argyle Series A Common Stock on December 31, 1998 ($33.00)
(i.e., 37,096,774 shares multiplied by $33.00 per share divided by
22,536,412 shares equals $54.32). Using a fair market value of $32.31 (the
excess of $86.63 over $54.32) per common share for the New Pulitzer Stock,
no gain (or tax) would result from the Spin-Off and the Merger because the
adjusted tax basis of the New Pulitzer Stock would be approximately $34.20
per share.
The following table illustrates the calculation of several Spin-Off Tax
estimates under various common stock closing prices for Pulitzer and Hearst-
Argyle.
<TABLE>
<CAPTION>
As of For the Month Ended
January 19, 1999 December 31, 1998
---------------- ----------------------------
High Low
<S> <C> <C> <C>
Closing price of Pulitzer
Common Stock............... $ 85.19 $ 86.63 $ 76.63
-------------- -------------- ------------
Estimated fair market value
for Pulitzer Broadcasting
Business:
Hearst-Argyle shares to be
exchanged for Pulitzer
shares.................... 37,096,774 37,096,774 37,096,774
Closing price of Hearst-
Argyle Series A Common
Stock..................... $ 30.94 $ 33.00 $ 24.38
-------------- -------------- ------------
Estimated fair market
value..................... $1,147,774,188 $1,224,193,542 $904,419,350
Divide by the number of
shares of Pulitzer Stock
outstanding on December
31, 1998.................. 22,536,412 22,536,412 22,536,412
-------------- -------------- ------------
Estimated fair market value
per share for Pulitzer
Broadcasting Business..... $ 50.93 $ 54.32 $ 40.13
-------------- -------------- ------------
Estimated fair market value
per share for New Pulitzer
Stock...................... $ 34.26 $ 32.31 $ 36.50
Estimated tax basis per
share for New Pulitzer
Stock...................... $ 34.25 $ 34.20 $ 34.52
-------------- -------------- ------------
Estimated gain (loss) per
share from Spin-Off........ $ 0.01 $ (1.89) $ 1.98
Estimated Number of shares
of New Pulitzer Stock at
the time of the
Spin-Off (based on the
number of shares of
Pulitzer Stock outstanding
on December 31, 1998)...... 22,536,412 22,536,412 22,536,412
-------------- -------------- ------------
Estimated gain (loss) from
Spin-Off................... $ 225,364 $ (42,593,819) $ 44,622,096
Estimated U.S. federal and
state income tax rate...... 39% 39% 39%
-------------- -------------- ------------
Estimated Spin-Off Tax...... $ 87,892 N/A $ 17,402,617
============== ============== ============
</TABLE>
The above amounts are estimates provided to show the range of possible
results based upon historical price per share data for Pulitzer and Hearst-
Argyle. The actual gain and related income tax will depend on the fair
market value of, and Pulitzer's adjusted tax basis in, the New Pulitzer
Stock at the time of the Spin-Off. See "The Merger Agreement--Tax Matters."
(f) To record the redemption of all outstanding stock options, whether or not
vested, at the time of the Merger. See "The Merger Agreement--Pulitzer
Stock Option Plans." The cash-out value (the "Cash-out Value") will be
equal to the difference between the option exercise price and the average
daily closing price of Pulitzer Common Stock for the 10 trading days
immediately prior to the Closing Date (the
43
<PAGE>
"Cash-Out Measurement Period"). The pro forma adjustment was computed using
data as of December 31, 1998 including 876,873 options outstanding, a
weighted average exercise price of $35.07 and a closing price of $86.63 for
Pulitzer Common Stock. Payment of approximately $4.8 million of the
approximate total $45.2 million cash-out value will be deferred and has been
recorded in "Other Long-term Liabilities." Based upon the number of options
outstanding on December 31, 1998, for every $1.00 change in the Cash-out
Value, the total cash-out value of all outstanding stock options will change
by approximately $877,000. The actual cash-out value may be higher or lower
depending on the closing price of Pulitzer Common Stock over the Cash-Out
Measurement Period and the number of shares of Pulitzer Common Stock
underlying stock options then outstanding.
(g) To record management bonuses related to the Merger. The pro forma
adjustment includes both fixed payments (approximately $10.2 million) that
are contractually due upon the closing of the Merger and discretionary
payments (approximately $2.7 million) that may be awarded by the
Compensation Committee of the Pulitzer Board. Payment of approximately
$4.8 million of the total $12.9 million pro forma adjustment will be
deferred and has been recorded in "Other Long-term Liabilities."
(h) To record changes in deferred tax assets, assuming a U.S. federal and
state income tax rate of 39%, due to the impact of the following
adjustments:
<TABLE>
<CAPTION>
Prepayment penalty (note (b))................................... $21,800
<S> <C>
Stock option cash-out (note (f))................................ 45,207
Management bonuses (note (g))................................... 12,900
</TABLE>
(i) To record the elimination of Pulitzer Common Stock and Pulitzer Class B
Common Stock held in treasury, as such shares will be cancelled without
the payment of consideration therefor in connection with the Spin-Off. See
"The Merger Agreement--Pre-Merger Transactions."
(j) To record the divestiture of the net liabilities of the Pulitzer
Broadcasting Business, including the New Debt of $700 million which will
be assumed by Hearst-Argyle and the working capital adjustment related to
the Merger (see note (k) below).
(k) To record the estimated working capital adjustment related to the Merger.
Pursuant to the Merger Agreement, a cash payment is required by either
Hearst-Argyle or Pulitzer for the difference between $41 million and the
working capital balance of the Pulitzer Broadcasting Business on the date
of the Merger. See "The Merger Agreement--Working Capital Adjustment."
Based upon Pulitzer Broadcasting Business' working capital balance of
approximately $33.4 million as of September 30, 1998, a payment of
approximately $7.6 million would be due Hearst-Argyle from Pulitzer. The
actual working capital adjustment may be higher or lower depending on
Pulitzer Broadcasting Business' working capital balance on the date of the
Merger. For tax purposes, a payment by either Pulitzer or Hearst-Argyle to
the other will be treated as having been made immediately prior to the
Spin-Off and thus may reduce or increase Pulitzer's taxable gain upon the
Spin-Off (see note (e) above).
(l) In connection with the September 1986 purchase of Pulitzer Class B Common
Stock from certain selling stockholders (the "1986 Selling Stockholders"),
Pulitzer agreed, under certain circumstances, to make an additional
payment to the 1986 Selling Stockholders in the event of a Gross-Up
Transaction (as defined herein). A "Gross-Up Transaction" was defined to
mean, among other transactions, (i) any merger, in any transaction or
series of related transactions, of more than 85% of the voting securities
or equity of Pulitzer pursuant to which holders of Pulitzer Common Stock
receive securities other than Pulitzer Common Stock and (ii) any
recapitalization, dividend or distribution, or series of related
recapitalizations, dividends or distributions, in which holders of
Pulitzer Common Stock receive securities (other than Pulitzer Common
Stock) having a Fair Market Value (as defined herein) of not less than 33
1/3% of the Fair Market Value of the shares of Pulitzer Common Stock
immediately prior to such transaction. The amount of the additional
payment, if any, would equal (x) the product of (i) the amount by which
the Transaction Proceeds (as defined herein) exceeds the Imputed Value (as
defined herein) multiplied by (ii) the applicable percentage (i.e., 50%
for the period from May 13, 1996 through May 12, 2001) multiplied by (iii)
the number of shares of Pulitzer Common Stock issuable upon conversion of
the shares of Pulitzer Class B Common Stock owned by the 1986 Selling
Stockholders, adjusted for, among other things, stock dividends and stock
splits; less (y) the sum of any additional payments previously received by
the 1986 Selling Stockholders; provided, however, that in the event of any
recapitalization, dividend or distribution, the amount by which the
Transaction Proceeds exceed the Imputed Value shall not exceed the amount
paid or distributed pursuant to such recapitalization, dividend or
distribution in respect of one share of Pulitzer Common Stock. The term
"Transaction Proceeds" was defined to mean, in the case of a merger, the
aggregate Fair Market Value (as defined herein) of the consideration
received pursuant thereto by the holder of one share of Pulitzer Common
Stock, and, in the case of a recapitalization, dividend or distribution,
the aggregate Fair Market Value of the amounts paid or distributed in
respect of one share of Pulitzer Common Stock plus the aggregate Fair
Market Value of one share of Pulitzer Common Stock following such
transaction. The "Imputed Value" for one share of Pulitzer Common Stock on
a given date was defined to mean an amount equal to $28.82 compounded
annually from May 12, 1986 to such given date at the rate of 15% per
annum, the result of which is $154.19 at May 12, 1998. There was no
specific provision for adjustment of the $28.82 amount, but if it were
adjusted to reflect all stock dividends and stock splits of Pulitzer since
September 30, 1986, it would now equal $15.72, which if compounded
annually from May 12, 1986 at the rate of 15% per annum would now equal
$84.11. "Fair Market Value," in the case of any consideration other than
cash received in a Gross-Up Transaction, was defined to mean the fair
market value thereof as agreed to by a valuation firm selected by Pulitzer
and a valuation firm selected by the 1986 Selling Stockholders, or, if the
two valuation firms do not agree on the fair market value, the fair market
value of such consideration as determined by a third valuation firm chosen
by the two previously selected valuation firms. Any such agreement or
determination shall be final and binding on the parties. As a result of
the foregoing, the amount of additional payments, if any, that may be
payable by New Pulitzer with respect to the Merger and the Distribution
cannot be determined at this time. However, if the Distribution were
determined to be a Gross-Up Transaction and if the Fair Market Value of
the Transaction Proceeds with respect to
44
<PAGE>
the Merger and the Distribution were determined to exceed the Imputed Value,
then the additional payments to the 1986 Selling Stockholders would equal
approximately $5.9 million for each $1.00 by which the Transaction Proceeds
exceed the Imputed Value. Accordingly, depending on the ultimate resolution
of the meaning and application of various provisions of the Gross-Up
Transaction agreements, including the determination of Imputed Value and
Fair Market Value of the Transaction Proceeds, in the opinion of Pulitzer's
management, the amount of an additional payment, if any, could be material
to the consolidated financial statements of Pulitzer. The additional
payment, if any, to the 1986 Selling Stockholders will be recorded directly
to additional paid-in capital as the payment of this contingent amount is a
direct cost of the disposal of the Pulitzer Broadcasting Business.
The following table illustrates the calculation of potential additional
payments under the Gross-up Transaction agreements, assuming, among other
things, a determination of a Gross-up Transaction, an Imputed Value of
$84.11 and a Fair Market Value of Transaction Proceeds of various amounts
above and below $84.11.
<TABLE>
<CAPTION>
For the Period May 25,
1998 (date of Merger
For the Month Ended press release) through
December 31, 1998 December 31, 1998
------------------------ ------------------------
High Low High Low
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fair Market Value of
Transaction Proceeds
(using high and low
closing prices of
Pulitzer Common
Stock)................. $ 86.63 $ 76.63 $ 89.25 $ 64.94
Less Imputed Value
(assumes adjustment to
reflect stock dividends
and stock splits since
1986).................. $ 84.11 $ 84.11 $ 84.11 $ 84.11
----------- ----------- ----------- -----------
Transaction Proceeds in
excess of Imputed
Value.................. $ 2.52 n/a $ 5.14 n/a
Multiply by applicable
percentage............. 50% 50% 50% 50%
Multiply by the number
of shares of Pulitzer
Common Stock issuable
upon Conversion of the
shares of Pulitzer
Class B Common Stock
owned by the 1986
Selling Stockholders,
adjusted for stock
dividends and stock
splits since 1986...... 11,700,850 11,700,850 11,700,850 11,700,850
----------- ----------- ----------- -----------
Additional payment to
the 1986 Selling
Stockholders........... $14,743,071 $ 0 $30,071,185 $ 0
=========== =========== =========== ===========
</TABLE>
If the Imputed Value is determined to be $154.19 instead of $84.11, no
additional payment to the 1986 Selling Stockholders would be required under
any of the above calculations.
In the opinion of Pulitzer's management, the amount of additional payment,
if any, is not likely to have a material adverse effect on the existing day-
to-day newspaper publishing and related new media properties now operated by
Pulitzer and, following the Spin-Off, to be operated by New Pulitzer. The
amount of additional payment, if any, will reduce, however, the amount of
cash available to New Pulitzer to finance potential acquisition
opportunities in the future.
45
<PAGE>
Pulitzer Publishing Company and Subsidiaries
Unaudited Pro Forma Condensed Statement of Consolidated Income
Year Ended December 31, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------------------------------------------- ---------------------------
Discontinued Operations (a)
-----------------------------------
Pulitzer Additions Pulitzer Additions
Pulitzer Broadcasting (Deductions) Subtotal As Adjusted (Deductions) New Pulitzer
-------- ------------ ------------ -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues--
net.................... $584,985 $227,016 $227,016 $357,969 $357,969
Operating expenses:
Operations............. 214,935 69,205 69,205 145,730 145,730
Selling, general and
administrative........ 190,429 55,885 (3,701)(b) 52,184 138,245 45,207 (c) 196,352
12,900 (d)
St. Louis Agency
adjustment............ 19,450 -- -- 19,450 19,450
Depreciation and
amortization.......... 36,454 23,447 23,447 13,007 13,007
-------- -------- ------ -------- -------- -------- --------
Total operating
expenses............ 461,268 148,537 (3,701) 144,836 316,432 58,107 374,539
-------- -------- ------ -------- -------- -------- --------
Operating income........ 123,717 78,479 3,701 82,180 41,537 (58,107) (16,570)
Interest income......... 4,652 10 10 4,642 4,642
Interest expense........ (16,081) (16,081) (16,081) -- --
Net other expense....... (1,203) -- (1,203) (1,203)
-------- -------- ------ -------- -------- -------- --------
Income from continuing
operations before
provision for income
taxes.................. 111,085 62,408 3,701 66,109 44,976 (58,107) (13,131)
Provision for income
taxes (benefits)....... 45,057 24,387 1,444 (e) 25,831 19,226 (22,662)(e) (3,436)
-------- -------- ------ -------- -------- -------- --------
Income from continuing
operations............. 66,028 38,021 2,257 40,278 25,750 (35,445) (9,695)
Income from discontinued
operations............. -- 40,278 (40,278) --
-------- -------- -------- --------
Net income (loss)....... $ 66,028 $ 66,028 $(75,723) $ (9,695)
======== ======== ======== ========
Basic earnings per share
of stock:
Income from continuing
operations............ $ 2.99 $ 1.17 $ (0.44)
Income from
discontinued
operations............ -- 1.82 --
-------- -------- --------
Earnings (loss) per
share............... $ 2.99 $ 2.99 $ (0.44)
======== ======== ========
Weighted average number
of shares outstanding.. 22,110 22,110 22,110
======== ======== ========
Diluted earnings per
share of stock:
Income from continuing
operations............ $ 2.94 $ 1.15 $ (0.43)
Income from
discontinued
operations............ -- 1.79 --
-------- -------- --------
Earnings (loss) per
share............... $ 2.94 $ 2.94 $ (0.43)
======== ======== ========
Weighted average number
of shares outstanding.. 22,452 22,452 22,452
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Statements of Consolidated Income on
the following pages.
46
<PAGE>
Pulitzer Publishing Company and Subsidiaries
Unaudited Pro Forma Condensed Statement of Consolidated Income
Nine Months Ended September 30, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------------------- -----------------------
Discontinued Operations(a)
----------------------------------- ---
Pulitzer
Pulitzer Additions As Additions New
Pulitzer Broadcasting (Deductions) Subtotal Adjusted (Deductions) Pulitzer
-------- ------------ ------------ -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues--
net.................... $448,888 $173,681 $173,681 $275,207 $275,207
Operating expenses:
Operations............. 165,980 54,313 54,313 111,667 111,667
Selling, general and
administrative........ 144,720 41,633 (2,863)(b) 38,770 105,950 45,207 (c) 164,057
12,900 (d)
St. Louis Agency
adjustment............ 15,926 -- -- 15,926 15,926
Depreciation and
amortization.......... 26,750 16,512 16,512 10,238 10,238
-------- -------- ------ -------- -------- -------- --------
Total operating
expenses............ 353,376 112,458 (2,863) 109,595 243,781 58,107 301,888
-------- -------- ------ -------- -------- -------- --------
Operating income........ 95,512 61,223 2,863 64,086 31,426 (58,107) (26,681)
Interest income......... 3,541 11 11 3,530 3,530
Interest expense........ (10,255) (10,255) (10,255) -- --
Net other expense....... (1,303) -- -- (1,303) (1,303)
-------- -------- ------ -------- -------- -------- --------
Income from continuing
operations before
provision for income
taxes.................. 87,495 50,979 2,863 53,842 33,653 (58,107) (24,454)
Provision for income
taxes (benefits) 35,422 19,918 1,117 (e) 21,035 14,387 (22,662)(e) (8,275)
-------- -------- ------ -------- -------- -------- --------
Income from continuing
operations............. 52,073 31,061 1,746 32,807 19,266 (35,445) (16,179)
Income from discontinued
operations............. -- 32,807 (32,807) --
-------- -------- -------- --------
Net income (loss)....... $ 52,073 $ 52,073 $(68,252) $(16,179)
======== ======== ======== ========
Basic earnings per share
of stock:
Income from continuing
operations............ $ 2.33 $ 0.86 $ (0.72)
Income from
discontinued
operations............ -- 1.47 --
-------- -------- --------
Earnings (loss) per
share............... $ 2.33 $ 2.33 $ (0.72)
======== ======== ========
Weighted average number
of shares outstanding.. 22,343 22,343 22,343
======== ======== ========
Diluted earnings per
share of stock:
Income from continuing
operations............ $ 2.29 $ 0.85 $ (0.71)
Income from
discontinued
operations............ -- 1.44 --
-------- -------- --------
Earnings (loss) per
share............... $ 2.29 $ 2.29 $ (0.71)
======== ======== ========
Weighted average number
of shares outstanding.. 22,726 22,726 22,726
======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Statements of Consolidated Income on
the following pages.
47
<PAGE>
Notes to Unaudited Pro Forma Condensed Statements of Consolidated Income of New
Pulitzer:
(a) The "Discontinued Operations" columns in the unaudited pro forma condensed
statements of consolidated income represent the historical results of
operations of the Pulitzer Broadcasting Business and the effects of certain
adjustments, which are reasonable in the opinion of Pulitzer's management,
to properly present such results as discontinued operations. See "Summary--
Selected Historical Consolidated and Unaudited Pro Forma Combined Condensed
Financial Information--Selected Historical Financial Data of Pulitzer
Broadcasting Business."
(b) To reverse the historical allocation of Pulitzer general corporate expenses
because such amounts will no longer be allocated after the Spin-Off and
Merger. For purposes of the historical Pulitzer Broadcasting Business
financial statements, the allocation was computed using a formula that
considered revenues, payroll expense and operating profits of the Pulitzer
Broadcasting Business.
(c) To record the redemption of all outstanding stock options, whether or not
vested, at the time of the Merger. See "The Merger Agreement--Pulitzer
Stock Option Plans." The Cash-out Value will be equal to the difference
between the option exercise price and the average daily closing price of
Pulitzer Common Stock during the Cash-Out Measurement Period. The pro forma
adjustment was computed using data as of December 31, 1998 including
876,873 options outstanding, a weighted average exercise price of $35.07
and a closing price of $86.63 for Pulitzer Common Stock. Based upon the
number of options outstanding on December 31, 1998, for every $1.00 change
in the Cash-out Value, the total cash-out value of all outstanding stock
options will change by approximately $877,000. The actual cash-out value
may be higher or lower depending on the closing price of Pulitzer Common
Stock during the Cash-Out Measurement Period and the number of shares of
Pulitzer Common Stock underlying stock options then outstanding.
(d) To record management bonuses related to the Merger. The pro forma
adjustment includes both fixed payments (approximately $10.2 million) that
are contractually due upon the closing of the Merger and discretionary
payments (approximately $2.7 million) that may be awarded by the
Compensation Committee of the Pulitzer Board.
(e) To record the income tax provision (benefit), assuming a U.S. federal and
state income tax rate of 39%, due to the impact of the adjustments included
herein.
48
<PAGE>
Hearst-Argyle Unaudited Pro Forma Combined Condensed Financial Statements
(giving effect to the Merger)
The following unaudited pro forma combined condensed financial statements of
Hearst-Argyle (the "Pro Forma Statements") give effect to the Merger, pursuant
to which Hearst-Argyle will issue to Pulitzer stockholders 37,096,774 shares of
Hearst-Argyle Series A Common Stock and will assume the New Debt ($700
million). The Pro Forma Statements assume the market price of Hearst-Argyle
Series A Common Stock on the Closing Date is $31.00 per share. See "The Merger
Agreement--Pre-Merger Transactions" and "--The Merger--Merger Consideration."
The Merger will be accounted for by Hearst-Argyle using the purchase method
with Hearst-Argyle as the acquiror of the Pulitzer Broadcasting Business.
Accordingly, the Pulitzer Broadcasting Business assets and liabilities have
been adjusted to their estimated fair values based upon preliminary purchase
price allocations which have been made solely for the purposes of developing
the unaudited pro forma combined condensed financial statements. Any subsequent
adjustments and any uncertainties affecting the pro forma presentation based
upon such allocations are not expected to be significant. The results of
operations of the Pulitzer Broadcasting Business will be included in the
consolidated financial statements of Hearst-Argyle subsequent to its date of
acquisition.
The unaudited pro forma combined condensed statements of operations for the
nine-months ended September 30, 1997 and 1998 and for the year ended December
31, 1997 give effect to the Merger as if the transaction had been completed at
the beginning of each period presented. The unaudited pro forma combined
condensed statements of operations of Hearst-Argyle, including the estimated
impact of the Merger, have been prepared based upon the unaudited pro forma
combined condensed statements of operations of Hearst-Argyle, excluding the
estimated impact of the Merger and the historical statements of operations of
the Pulitzer Broadcasting Business. The unaudited pro forma combined condensed
statements of operations of Hearst-Argyle for the year ended December 31, 1997
and for the nine-months ended September 30, 1997, excluding the estimated
impact of the Merger, give effect to the Gannett Swap, the Hearst Transaction,
the STC Swap and the Kelly Transaction as if all such transactions had occurred
at the beginning of 1997 and for the nine-months ended September 30, 1998
excluding the estimated impact of the Merger gives effect to the STC Swap and
the Kelly Transaction as if such transactions had occurred at the beginning of
1998.
The unaudited pro forma combined condensed balance sheet at September 30,
1998 gives effect to the Kelly Transaction and the Merger as if the Kelly
Transaction and the Merger, assuming the market price of Hearst-Argyle Series A
Common Stock on the Closing Date is $31.00 per share, had occurred on September
30, 1998 and is based upon the historical consolidated balance sheets of
Hearst-Argyle, Kelly Broadcasting and the Pulitzer Broadcasting Business.
The Pro Forma Statements should be read in conjunction with the Hearst-Argyle
historical consolidated and unaudited pro forma combined condensed financial
statements and the Kelly Broadcasting and the Pulitzer Broadcasting Business
historical consolidated financial statements either included herein or
incorporated by reference elsewhere in this document. The Pro Forma Statements
are not necessarily indicative of the actual results of operations or financial
position of Hearst-Argyle that would have occurred had the Merger, the Hearst
Transaction, the Gannett Swap, the STC Swap and the Kelly Transaction occurred
on the dates indicated nor are they necessarily indicative of future operating
results or financial position.
49
<PAGE>
For purposes of the Pro Forma Statements, the estimated purchase price of the
Pulitzer Broadcasting Business was determined as follows assuming the market
price of Hearst-Argyle Series A Common Stock on the Closing Date is $31.00 (in
thousands, except share data):
<TABLE>
<CAPTION>
Purchase
Price Shares Issued
---------- -------------
<S> <C> <C>
Value of Series A Common Stock issued to Pulitzer
stockholders........................................ $1,150,000 37,096,774
New Debt assumed..................................... 700,000
Estimated transaction costs.......................... 20,000
----------
Total estimated purchase price....................... $1,870,000
==========
For purposes of the Pro Forma Statements, the total estimated purchase price
of the Pulitzer Broadcasting Business is allocated as follows (in thousands):
Fair value of the Pulitzer Broadcasting Business net
assets.............................................. $ 116,385
Intangible assets.................................... 1,753,615
----------
Total estimated purchase price....................... $1,870,000
==========
</TABLE>
The estimated purchase price and the resulting allocations are based on
management's preliminary estimations and have been made solely for purposes of
developing the Pro Forma Statements. Any subsequent adjustments and any
uncertainties affecting the pro forma presentation based upon such allocations
are not expected to be significant. As the purchase price is dependent upon the
market price of the Hearst-Argyle Series A Common Stock on the Closing Date,
the accounting values assigned to the consideration exchanged on the Closing
Date may fluctuate from the values assigned in the unaudited pro forma combined
condensed financial statements. On the Closing Date, the fair value of the
consideration exchanged will be valued based upon the market price times the
37,096,774 shares issued in the Merger.
The variance in the market price of the Hearst-Argyle Series A Common Stock
on the Closing Date impacts the total estimated purchase price and therefore
impacts amortization of intangible assets, income taxes, net income and pro
forma basic and diluted earnings per share. The following table sets forth the
impact on net income and pro forma basic and diluted earnings per share
(including the Merger) given a range of market prices of the Hearst-Argyle
Series A Common Stock on the Closing Date:
<TABLE>
<CAPTION>
Value of
Market Price Hearst- Impact on
of Hearst-Argyle Argyle Incremental Pro Forma
Series A Common Series A Annual Basic and Diluted
Stock on the Common Stock Impact on Earnings per
Closing Date Issued(a) Net Income Share(b)
---------------- ------------ ----------- -----------------
(In thousands, except share prices)
<S> <C> <C> <C>
$42.50 $1,576,613 $(15,038) $(0.17)
$40.25 $1,493,145 $(12,096) $(0.13)
$38.75 $1,437,500 $(10,134) $(0.11)
$35.25 $1,307,661 $ (5,558) $(0.06)
$32.75 $1,214,919 $ (2,288) $(0.03)
$31.00 $1,150,000 $ -- $ --
$30.25 $1,122,177 $ 981 $ 0.01
$30.00
$1,112,903 $ 1,308 $ 0.01
$27.75
$1,029,435 $ 4,250 $ 0.05
$26.25
$ 973,790 $ 6,211 $ 0.07
</TABLE>
- --------
(a)Does not include the New Debt assumed of $700 million and estimated
transaction costs of $20 million.
(b) Calculated as the Incremental Annual Impact on Net Income divided by the
sum of the Hearst-Argyle Merger Stock plus the historical Hearst-Argyle
basic and diluted number of shares outstanding as of September 30, 1998.
50
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Balance Sheet
as of September 30, 1998
(In thousands)
<TABLE>
<CAPTION>
Pulitzer
Kelly Kelly Broadcasting
Hearst-Argyle Broadcasting Transaction Pro Forma Business Merger Pro Forma
Historical Historical Adjustments Hearst-Argyle Historical Adjustments Merger
------------- ------------ ----------- ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.... $ 51,254 $ 2,028 $ 53,282 $ 53,282
Accounts
receivable,
net............ 76,820 9,121 $ 1,460 (c) 87,401 $ 41,770 $ 7,625 (f) 136,796
Program rights.. 45,614 9,458 55,072 10,283 65,355
Deferred tax
asset.......... 4,172 4,172 4,172
Other........... 7,984 384 8,368 1,405 9,773
---------- -------- -------- ---------- -------- ---------- ----------
Total current
assets......... 185,844 20,991 1,460 208,295 53,458 7,625 269,378
Property, plant
and equipment,
net............. 125,351 14,704 140,055 82,806 222,861
Intangible
assets, net..... 712,115 76,819 (76,819)(a) 1,218,779 96,744 (96,744)(d) 3,650,737
506,664 (a) 1,753,615 (d)
678,343 (d)
Other:
Deferred
acquisition and
financing
costs, net..... 29,144 29,144 29,144
Program rights,
noncurrent..... 4,993 6,447 11,440 11,440
Other assets.... 27,057 1,664 (739)(a) 27,982 9,100 (6,000)(d) 36,082
5,000 (g)
---------- -------- -------- ---------- -------- ---------- ----------
Total assets.... $1,084,504 $120,625 $430,566 $1,635,695 $242,108 $2,341,839 $4,219,642
========== ======== ======== ========== ======== ========== ==========
Liabilities and
Stockholders'
Equity
Current
liabilities:
Accounts payable
and accrued
liabilities.... $ 40,058 $ 4,738 $ 2,000 (b) $ 45,978 $ 11,062 $ 22,912 (d)(g) $ 79,952
(818)(a)
Current portion
of long-term
debt........... 12,705 (12,705)(d) --
Program rights
payable........ 45,890 7,530 53,420 9,846 63,266
Other current
liabilities.... 185 185 1,263 1,448
---------- -------- -------- ---------- -------- ---------- ----------
Total current
liabilities.... 86,133 12,268 1,182 99,583 34,876 10,207 144,666
Deferred tax
liability....... 157,588 157,588 678,343 (d) 836,409
478 (h)
Program rights
payable,
noncurrent...... 5,028 7,633 12,661 12,661
Other
liabilities..... 814 108 922 3,888 (867)(d) 3,465
(478)(h)
Pension
obligations..... 6,590 (1,801)(d) 4,789
Post-retirement
benefit
obligations..... 2,711 2,711
Credit facility.. 80,000 (b) 80,000 700,000 (e) 780,000
Senior notes..... 500,000 500,000 500,000
Senior
subordinated
notes........... 2,596 2,596 2,596
Long-term debt... 86,948 363,052 (a)(b) 450,000 160,000 (160,000)(d) 450,000
---------- -------- -------- ---------- -------- ---------- ----------
Total
liabilities..... 752,159 106,957 444,234 1,303,350 208,065 1,225,882 2,737,297
---------- -------- -------- ---------- -------- ---------- ----------
Partners'
Capital......... 13,668 (13,668)(a)
Stockholders'
equity
Preferred stock
series A....... 1 1 1
Preferred stock
series B....... 1 1 1
Series A common
stock.......... 125 125 371 (e) 496
Series B common
stock.......... 413 413 413
Common stock.... 10 (10)(d) --
Additional paid-
in capital..... 201,889 201,889 11,924 (11,924)(d) 1,351,518
1,149,629 (e)
Intercompany
balance........ (90,561) 90,561 (d) --
Retained
earnings
(deficit)...... 151,138 151,138 112,670 (112,670)(d) 151,138
Treasury stock.. (21,222) (21,222) (21,222)
---------- -------- -------- ---------- -------- ---------- ----------
Total
stockholders'
equity.......... 332,345 -- -- 332,345 34,043 1,115,957 1,482,345
---------- -------- -------- ---------- -------- ---------- ----------
Total liability
and
stockholders'
equity.......... $1,084,504 $120,625 $430,566 $1,635,695 $242,108 $2,341,839 $4,219,642
========== ======== ======== ========== ======== ========== ==========
<CAPTION>
Divestiture Pro Forma
WGAL(i) Divestiture
----------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.... $ 53,282
Accounts
receivable,
net............ $ (4,468) 132,328
Program rights.. (1,701) 63,654
Deferred tax
asset.......... 4,172
Other........... (128) 9,645
----------- ------------
Total current
assets......... (6,297) 263,081
Property, plant
and equipment,
net............. (5,765) 217,096
Intangible
assets, net..... (10,378) 3,640,359
Other:
Deferred
acquisition and
financing
costs, net..... 29,144
Program rights,
noncurrent..... 11,440
Other assets.... 36,082
----------- ------------
Total assets.... $(22,440) $4,197,202
=========== ============
Liabilities and
Stockholders'
Equity
Current
liabilities:
Accounts payable
and accrued
liabilities.... $ (846) $ 79,106
Current portion
of long-term
debt........... --
Program rights
payable........ (2,532) 60,734
Other current
liabilities.... (312) 1,136
----------- ------------
Total current
liabilities.... (3,690) 140,976
Deferred tax
liability....... (2,467) 833,942
Program rights
payable,
noncurrent...... 12,661
Other
liabilities..... 3,465
Pension
obligations..... (663) 4,126
Post-retirement
benefit
obligations..... (929) 1,782
Credit facility.. (14,691) 765,309
Senior notes..... 500,000
Senior
subordinated
notes........... 2,596
Long-term debt... 450,000
----------- ------------
Total
liabilities..... (22,440) 2,714,857
----------- ------------
Partners'
Capital.........
Stockholders'
equity
Preferred stock
series A....... 1
Preferred stock
series B....... 1
Series A common
stock.......... 496
Series B common
stock.......... 413
Common stock.... --
Additional paid-
in capital..... 1,351,518
Intercompany
balance........ --
Retained
earnings
(deficit)...... 151,138
Treasury stock.. (21,222)
----------- ------------
Total
stockholders'
equity.......... -- 1,482,345
----------- ------------
Total liability
and
stockholders'
equity.......... $(22,440) $4,197,202
=========== ============
</TABLE>
See notes on the following pages.
51
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Balance Sheets Adjustments:
(a) To reflect the Kelly Transaction and the adjustment of the Kelly
Broadcasting net assets to their estimated fair values of the net assets
acquired, elimination of existing long-term debt and partners' capital.
(b) To record the issuance of long-term debt to be incurred in connection with
the purchase price paid for Kelly Broadcasting and related transaction
costs. Hearst-Argyle has used: (i) amounts available under its Credit
Facility and (ii) the proceeds from the issuance of $450 million of 7.18%
Private Placement Debt having a maturity of 12 years and an average life of
ten years, to finance the Kelly Transaction.
(c) To record the amount Kelly Broadcasting will owe Hearst-Argyle to the
extent the estimated working capital is less than $11 million
(approximately $1.5 million) which is based upon the working capital of
Kelly Broadcasting as of September 30, 1998.
(d) To reflect the Merger and the adjustment of the Pulitzer Broadcasting
Business net assets to their estimated fair values of the net assets
acquired, elimination of existing long-term debt and stockholders' equity
and to record the tax effect of the differences between book and tax basis
of the net assets acquired.
(e) Issuance of 37,096,774 shares of Hearst-Argyle Merger Stock, assuming the
market price of Hearst-Argyle Series A Common Stock on the Closing Date is
31.00 per share, to the Pulitzer stockholders and the assumption of the New
Debt ($700 million) for the net assets of the Pulitzer Broadcasting
Business.
(f) To record the amount New Pulitzer will owe Hearst-Argyle to the extent the
Estimated Working Capital is less than $41 million (approximately $7.6
million) which is based upon the working capital of the Pulitzer
Broadcasting Business as of September 30, 1998. See "Working Capital
Adjustment."
(g) To record the purchase of the investment in the Arizona Diamondbacks. See
"The Merger Agreement--Ancillary Agreements--Arizona Diamondbacks Letter
Agreement."
(h) Reclassification of Pulitzer Broadcasting Business account balances to
conform with Hearst-Argyle presentation.
(i) Upon consummation of the Merger, Hearst-Argyle will own two television
stations in an area (WGAL in Lancaster, PA and WBAL in Baltimore, MD) with
overlapping service contours in violation of the FCC's current local
ownership rules. The FCC's current rules prohibit the ownership of two
stations in the same geographic area whose service contours overlap.
Accordingly, the FCC, as part of its consent to the Merger, required
Hearst-Argyle to file an application to divest one of the aforementioned
stations (or propose such other action that would result in compliance with
such FCC rules) within six months following consummation of the Merger. If
WGAL is sold for cash, the proceeds of such sale will be used to reduce
indebtedness under Hearst-Argyle's Credit Agreement, dated August 29, 1997,
with The Chase Manhattan Bank and certain lenders party thereto (the "Chase
Credit Facility"), and therefore the pro forma balance sheet reflects the
effect of a reduction in Credit Facility by an amount equal to $14.7
million, the net book value of WGAL. The net book value has been used in
the unaudited pro forma combined condensed financial statements for the
divestiture of WGAL because no other valuation currently can be based on an
independent third party offer. The divestiture of WGAL at net book value
would be equivalent to selling WGAL at a price equal to less than two times
WGAL's 1997 broadcast cash flow. Given the valuations of broadcasting
properties in recent transactions, including the valuation of the Pulitzer
Broadcasting Business implied by the Hearst-Argyle Merger Stock, Hearst-
Argyle management believes that any divestiture of WGAL would occur at a
valuation significantly higher than its net book value. See "The Merger
Agreement--Regulatory Approvals."
52
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement Of Operations
Year Ended December 31, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pulitzer
Pro Forma Broadcasting
Hearst- Business Merger Pro Forma Divestiture Pro Forma
Argyle(a) Historical Adjustments Merger WGAL(g) Divestiture
--------- ------------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... $453,708 $227,016 $ 9,038 (i) $689,762 $(29,772) $659,990
Station operating
expenses............... 202,318 125,090 600 (b) 317,692 (9,876) 307,816
(10,316)(i)
Amortization of program
rights................. 46,816 12,490 (i) 59,306 (1,748) 57,558
Depreciation and
amortization........... 57,169 23,447 50,446 (c) 131,062 (1,367) 129,695
-------- -------- -------- -------- -------- --------
Station operating
income................. 147,405 78,479 (44,182) 181,702 (16,781) 164,921
Corporate general and
administrative
expenses............... 12,635 (3,689)(d) 15,800 15,800
6,854 (i)
-------- -------- -------- -------- -------- --------
Operating income........ 134,770 78,479 (47,347) 165,902 (16,781) 149,121
Interest expense, net... (75,138) (16,081) (32,919)(e) (124,138) 1,028 (123,110)
Other income, net....... 10 (10)(i)
-------- -------- -------- -------- -------- --------
Income before income
taxes.................. 59,632 62,408 (80,276) 41,764 (15,753) 26,011
Income taxes............ 25,045 24,387 (29,385)(f) 20,047 (7,562) 12,485
-------- -------- -------- -------- -------- --------
Income from continuing
operations............. 34,587 $ 38,021 $(50,891) 21,717 $ (8,191) 13,526
======== ======== ========
Less: preferred stock
dividends.............. (1,422) (1,422) (1,422)
-------- -------- --------
Income applicable to
common stock........... $ 33,165 $ 20,295 $ 12,104
======== ======== ========
Basic
Income per common
share................. $ 0.62 $ 0.22 $ 0.13
======== ======== ========
Number of shares used
in per share
calculation........... 53,828 90,925(h) 90,925(h)
Diluted:
Income per common
share................. $ 0.62 $ 0.22 $ 0.13
======== ======== ========
Number of shares used
in per share
calculation........... 53,873 90,970(h) 90,970(h)
</TABLE>
See notes on the following pages.
53
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pulitzer
Pro Forma Broadcasting
Hearst- Business Merger Pro Forma Divestiture Pro Forma
Argyle(a) Historical Adjustments Merger WGAL(g) Divestiture
--------- ------------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... $324,088 $165,002 $ 6,633(i) $495,723 $(21,483) $474,240
Station operating
expenses............... 147,237 93,016 (7,989)(i) 232,714 (7,474) 225,240
450 (b)
Amortization of program
rights................. 33,934 9,445 (i) 43,379 (1,330) 42,049
Depreciation and
amortization........... 37,177 17,622 39,804 (c) 94,603 (1,029) 93,574
-------- -------- -------- -------- -------- --------
Station operating
income................. 105,740 54,364 (35,077) 125,027 (11,650) 113,377
Corporate general and
administrative
expenses............... 9,619 (2,938)(d) 11,850 11,850
5,169 (i)
-------- -------- -------- -------- -------- --------
Operating income........ 96,121 54,364 (37,308) 113,177 (11,650) 101,527
Interest expense, net... (56,354) (12,553) (24,197)(e) (93,104) 771 (92,333)
Other income, net....... 8 (8)(i) -- --
-------- -------- -------- -------- -------- --------
Income before income
taxes.................. 39,767 41,819 (61,513) 20,073 (10,879) 9,194
Income taxes............ 16,702 16,344 (23,411)(f) 9,635 (5,222) 4,413
-------- -------- -------- -------- -------- --------
Income from continuing
operations............. 23,065 $ 25,475 $(38,102) 10,438 $ (5,657) 4,781
======== ======== ========
Less: preferred stock
dividends.............. (1,066) (1,066) (1,066)
-------- -------- --------
Income applicable to
common stock........... $ 21,999 $ 9,372 $ 3,715
======== ======== ========
Basic:
Income per common
share................. $ 0.41 $ 0.10 $ 0.04
======== ======== ========
Number of shares used
in per share
calculation........... 53,678 90,775(h) 90,775(h)
Diluted:
Income per common
share................. $ 0.41 $ 0.10 $ 0.04
======== ======== ========
Number of shares used
in per share
calculation........... 53,943 91,040(h) 91,040(h)
</TABLE>
See notes on the following pages.
54
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pulitzer
Pro Forma Broadcasting
Hearst- Business Merger Pro Forma Divestiture Pro Forma
Argyle(a) Historical Adjustments Merger WGAL(g) Divestiture
--------- ------------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... $344,714 $173,681 $ 6,197 (i) $524,592 $(21,659) $502,933
Station operating
expenses............... 150,772 95,946 (8,135)(i) 239,033 (7,452) 231,581
450 (b)
Amortization of program
rights................. 37,980 9,164 (i) 47,144 (1,285) 45,859
Depreciation and
amortization........... 39,462 16,512 39,787 (c) 95,761 (1,008) 94,753
-------- -------- -------- -------- -------- --------
Station operating
income................. 116,500 61,223 (35,069) 142,654 (11,914) 130,740
Corporate general and
administrative
expenses............... 9,619 (2,926)(d) 11,850 11,850
5,157 (i)
-------- -------- -------- -------- -------- --------
Operating income........ 106,881 61,223 (37,300) 130,804 (11,914) 118,890
Interest expense, net... (56,354) (10,255) (26,495)(e) (93,104) 771 (92,333)
Other income, net....... 11 (11)(i) -- --
-------- -------- -------- -------- -------- --------
Income before income
taxes.................. 50,527 50,979 (63,806) 37,700 (11,143) 26,557
Income taxes............ 21,221 19,918 (23,043)(f) 18,096 (5,349) 12,747
-------- -------- -------- -------- -------- --------
Income from continuing
operations............. 29,306 $ 31,061 $(40,763) 19,604 $ (5,794) 13,810
======== ======== ========
Less: preferred stock
dividends.............. (1,066) (1,066) (1,066)
-------- -------- --------
Income applicable to
common stock........... $ 28,240 $ 18,538 $ 12,744
======== ======== ========
Basic:
Income per common
share................. $ 0.53 $ 0.20 $ 0.14
======== ======== ========
Number of shares used
in per share
calculation........... 53,678 90,775 (h) 90,775 (h)
Diluted:
Income per common
share................. $ 0.52 $ 0.20 $ 0.14
======== ======== ========
Number of shares used
in per share
calculation........... 53,943 91,040 (h) 91,040 (h)
</TABLE>
See notes on the following pages.
55
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Statements of Operations
Adjustments:
(a) On a pro forma basis assuming the Gannett Swap, the Hearst Transaction, the
STC Swap and the Kelly Transaction had occurred as of January 1, 1997. See
"--Pro Forma Combined Condensed Statements of Operations of Hearst-Argyle."
(b) Estimated pension costs associated with the newly-established defined
benefit pension plan to be created for the transferred Pulitzer
Broadcasting Business employees, including the assets to be transferred to
Hearst-Argyle per the terms of the Merger Agreement, net of pension costs
recorded in the historical consolidated financial statements.
(c) Amortization of intangible assets resulting from purchase accounting
adjustments, net of amortization recorded in the historical consolidated
financial statements of Pulitzer Broadcasting Business. The estimated
useful lives for these intangible assets were as follows: Goodwill--40
years; FCC licenses--40 years; network affiliation agreements--40 years and
other intangible assets 2 to 5 years.
(d) Change in corporate general and administrative expenses due to the Merger
as a result of certain contractual agreements expected to be entered into
upon consummation of the Merger, including the Services Agreement with
Hearst (which includes certain administrative services such as accounting,
financial, legal, tax, insurance, data processing and employee benefits)
which will be amended upon consummation of the Merger, net of corporate
general and administrative expenses recorded in the historical financial
statements of Pulitzer Broadcasting Business.
(e) Interest expense relating to the New Debt ($700 million) assumed in the
Merger at an assumed interest rate of 7.1% which approximates the rate
Hearst-Argyle pays for debt, net of interest expense recorded in the
historical consolidated financial statements of Pulitzer Broadcasting
Business. If the interest rate were to increase or decrease 1/8%, the
difference in interest expense would equal $875,000.
(f) Estimated income tax effect of the above adjustments, giving effect to the
Merger.
(g) Upon consummation of the Merger, Hearst-Argyle will own two television
stations in an area (WGAL in Lancaster, PA and WBAL in Baltimore, MD) with
overlapping service contours in violation of the FCC's current local
ownership rules. The FCC's current rules prohibit the ownership of two
stations in the same geographic area whose service contours overlap.
Accordingly, the FCC, as part of its consent to the Merger, required
Hearst-Argyle to file an application to divest one of the aforementioned
stations (or propose such other action that would result in compliance with
such FCC rules) within six months following consummation of the Merger. If
WGAL is sold for cash, the proceeds of such sale will be used to reduce
indebtedness under the Credit Facility and therefore the Pro Forma
Statements of operations reflects the effects of a reduction in the Credit
Facility by an amount equal to $14.7 million, the net book value of WGAL.
The net book value has been used in the unaudited pro forma combined
condensed financial statements for the divestiture of WGAL because no other
valuation currently can be based on an independent third party offer. The
divestiture of WGAL at net book value would be equivalent to selling WGAL
at a price equal to less than two times WGAL's 1997 broadcast cash flow.
Given the valuations of broadcasting properties in recent transactions,
including the valuation of the Pulitzer Broadcasting Business implied by
the Hearst-Argyle Merger Stock, Hearst-Argyle management believes that any
divestiture of WGAL would occur at a valuation significantly higher than
its net book value. See "The Merger Agreement--Regulatory Approvals."
(h) Includes the issuance of Hearst-Argyle Series A Common Stock to the New
Pulitzer Stockholders.
(i) Reclassification of Pulitzer Broadcasting Business account balances to
conform with Hearst-Argyle presentation.
56
<PAGE>
Pro Forma Combined Condensed Statements of Operations of Hearst-Argyle
The Unaudited Pro Forma Combined Condensed Statements of Operations of
Hearst-Argyle for the year ended December 31, 1997 and the nine-months ended
September 30, 1997 and 1998 have been prepared as if the Gannett Swap, the
Hearst Transaction, the STC Swap and the Kelly Transaction had been completed
as of the beginning of the periods presented. The Gannett Swap, the Hearst
Transaction, the STC Swap and the Kelly Transaction are accounted for using the
purchase method of accounting. Any subsequent adjustments and any uncertainties
affecting the pro forma presentation are not expected to be significant. The
pro forma statements of operations presented herein are not necessarily
indicative of Hearst-Argyle's results of operations that might have occurred
had such transactions been completed at the beginning of the periods indicated
and do not purport to represent Hearst-Argyle's consolidated results of
operations for any future period.
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Year Ended December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Gannett Hearst STC Swap Kelly Kelly
Hearst-Argyle(a) Historical Swap Transaction Adjustments Broadcasting Transaction
Historical Argyle(b) Adjustments Adjustments and Other Historical Adjustments
---------------- ---------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues.. $333,661 $ 51,826 $975(h) $ 1,320 (c) $ 615 (i) $65,311
Station
operating
expenses....... 142,096 27,610 681(d)(h) (1,944)(o) 995 (i)(j) 39,499 $ (6,619)(q)
Amortization of
program
rights......... 40,129 2,833 16(h) (1,461)(i) 5,299 (q)
Depreciation and
amortization... 22,924 16,955 138(e)(f) (3,777)(f) 3,704 (e)(f) 4,483 12,742 (f)
-------- -------- ---- ------- ------- ------- --------
Station
operating
income......... 128,512 4,428 140 7,041 (2,623) 21,329 (11,422)
Corporate
general and
administrative expenses.. 9,527 2,700 (227)(l) 1,320 (q)
(685)(l)
Non-cash
compensation
expense........ 3,518 (3,518)(k)
-------- -------- ---- ------- ------- ------- --------
Operating income
(loss)......... 118,985 (1,790) 140 10,786 (2,623) 21,329 (12,057)
Interest
expense, net... (32,484) (12,749) 8,005 (m) (1,203) (36,707)(m)
-------- -------- ---- ------- ------- ------- --------
Income (loss)
before income
taxes.......... 86,501 (14,539) 140 18,791 (2,623) 20,126 (48,764)
Income taxes.... 35,363 2,430 (g) (1,093)(g) (11,655)(g)
-------- -------- ---- ------- ------- ------- --------
Income (loss)
from
continuing operations.. $ 51,138 $(14,539) $140 $16,361 $(1,530) $20,126 $(37,109)
======== ======== ==== ======= ======= ======= ========
<CAPTION>
Pro Forma
Hearst-Argyle
-------------
<S> <C>
Total revenues.. $453,708
Station
operating
expenses....... 202,318
Amortization of
program
rights......... 46,816
Depreciation and
amortization... 57,169
-------------
Station
operating
income......... 147,405
Corporate
general and
administrative expenses.. 12,635
Non-cash
compensation
expense........ --
-------------
Operating income
(loss)......... 134,770
Interest
expense, net... (75,138)
-------------
Income (loss)
before income
taxes.......... 59,632
Income taxes.... 25,045
-------------
Income (loss)
from
continuing operations.. $ 34,587
=============
</TABLE>
See notes on the following pages.
57
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
Hearst STC Swap Kelly Kelly
Hearst-Argyle Argyle Gannett Swap Transaction Adjustments Broadcasting Transaction
Historical(p) Historical(b) Adjustments Adjustments and Other Historical Adjustments
------------- ------------- ------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues.... $221,296 $ 51,826 $975(h) $ 1,320 (c) $ 362 (i) $48,309
Station operating
expenses......... 96,919 27,610 681(d)(h) (1,944)(o) 211 (i)(j) 27,660 $(3,900)(q)
Amortization of
program rights... 29,201 2,833 16(h) (1,209)(i) 3,093 (q)
Depreciation and
amortization..... 13,694 16,955 138(e)(f) (7,151)(f) 1,965 (e)(f) 1,938 9,638 (f)
-------- -------- ---- ------- ------- ------- --------
Station operating
income........... 81,482 4,428 140 10,415 (605) 18,711 (8,831)
Corporate general
and
administrative
expenses......... 6,546 2,700 373 (l) (807)(l)
807 (q)
Non-cash
compensation
expense.......... 3,518 (3,518)(k)
-------- -------- ---- ------- ------- ------- --------
Operating income.. 74,936 (1,790) 140 13,560 (605) 18,711 (8,831)
Interest expense,
net.............. (20,524) (12,749) 5,352 (m) (139) (28,294)(m)
-------- -------- ---- ------- ------- ------- --------
Income (loss)
before income
taxes............ 54,412 (14,539) 140 18,912 (605) 18,572 (37,125)
Income taxes...... 22,362 2,675 (g) (251) (8,084)(g)
-------- -------- ---- ------- ------- ------- --------
Income (loss) from
continuing
operations....... $ 32,050 $(14,539) $140 $16,237 $ (354) $18,572 $(29,041)
======== ======== ==== ======= ======= ======= ========
<CAPTION>
Pro Forma
Hearst-
Argyle
----------
<S> <C>
Total revenues.... $324,088
Station operating
expenses......... 147,237
Amortization of
program rights... 33,934
Depreciation and
amortization..... 37,177
----------
Station operating
income........... 105,740
Corporate general
and
administrative
expenses......... 9,619
Non-cash
compensation
expense..........
----------
Operating income.. 96,121
Interest expense,
net.............. (56,354)
----------
Income (loss)
before income
taxes............ 39,767
Income taxes...... 16,702
----------
Income (loss) from
continuing
operations....... $ 23,065
==========
</TABLE>
See notes on the following pages.
58
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1998
(In thousands)
<TABLE>
<CAPTION>
STC Swap Kelly Kelly
Hearst-Argyle(n) Adjustments Broadcasting Transaction Pro Forma
Historical and Other Historical Adjustments Hearst-Argyle
---------------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Total revenues.......... $292,010 $ 51 (i) $52,653 $344,714
Station operating ex-
penses................. 127,595 903 (i)(j) 30,341 $ (8,067)(q) 150,772
Amortization of program
rights................. 32,027 (643) (i) 6,596 (q) 37,980
Depreciation and
amortization........... 26,678 1,179 (e)(f) 6,716 4,889 (f)(q) 39,462
-------- ------ ------- -------- --------
Station operating in-
come................... 105,710 (1,388) 15,596 (3,418) 116,500
Corporate general and
administrative
expenses............... 9,619 (1,091)(l) 9,619
1,091 (q)
-------- ------ ------- -------- --------
Operating income........ 96,091 (1,388) 15,596 (3,418) 106,881
Interest expense, net... (29,978) 2,057 (m) (5,504) (22,929)(m) (56,354)
-------- ------ ------- -------- --------
Income before income
taxes.................. 66,113 669 10,092 (26,347) 50,527
Income taxes............ 28,111 271 (g) (7,161)(g) 21,221
-------- ------ ------- -------- --------
Income from continuing
operations............. $ 38,002 $ 398 $10,092 $(19,186) $ 29,306
======== ====== ======= ======== ========
</TABLE>
See notes on the following pages.
59
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Statements of Operations of
Hearst-Argyle:
(a) The Hearst Transaction was consummated on August 29, 1997. The historical
financial data includes Argyle for the four months ended December 31, 1997.
Includes results from (i) WCVB, WTAE, WBAL, WISN, KMBC and WDTN for the
entire period presented; (ii) WAPT, KITV, the Arkansas Stations, WLWT, KOCO
and Hearst-Argyle's shares of the Clear Channel Venture from September 1
through December 31, 1997; and, (iii) the management fees derived by
Hearst-Argyle from WWWB, WPBF, KCWE and WBAL-radio (the "Managed Stations")
from September 1 through December 31, 1997.
(b) Includes the results of operations of Argyle, which includes: (i) WAPT,
KITV, the Arkansas Stations, Argyle's share of broadcast cash flows from
the Clear Channel Venture for January 1 to August 31, 1997; (ii) WZZM and
WGRZ for January 1997 only; and, (iii) WLWT and KOCO from February 1
through August 31, 1997.
(c) Management fees derived by Hearst-Argyle from the Managed Stations from the
beginning of each period presented.
(d) Elimination of certain expenses which would not have been incurred under
Hearst-Argyle's management.
(e) Change in depreciation expense due to purchase accounting adjustments to
equipment and buildings, net of depreciation recorded in the historical
financial statements. The estimated useful lives used for equipment range
from 5 to 25 years and the estimated useful life used for buildings range
from 25 to 39 years.
(f) Amortization of intangible assets resulting from purchase accounting
adjustments, net of amortization recorded in the historical financial
statements. The estimated useful lives used for these intangible assets
were as follows: FCC licenses, network affiliation agreements and
goodwill--40 years; other intangibles--2 to 5 years.
(g) Estimated income tax effect of the pro forma adjustments.
(h) The inclusion of WLWT and KOCO and the exclusion of WZZM and WGRZ results
of operations from the beginning of the period presented.
(i) The inclusion of WPTZ/WNNE and KSBW and the exclusion of WDTN and WNAC
results of operations from the beginning of the periods presented.
(j) Additional expenses which would have been incurred under Hearst-Argyle's
management.
(k) Conforming the accounting policies related to stock based compensation.
(l) Change in corporate expenses associated with Hearst-Argyle's new
organizational structure as a result of contractual agreements for
administrative services, such as accounting, financial, legal, tax,
insurance, data processing and employee benefits and other applicable
contractual agreements that were entered into upon the close of the Hearst
Transaction and the Kelly Transaction.
(m) Interest expense on the pro forma debt as follows (in thousands):
<TABLE>
<CAPTION>
Pro Forma
--------------------------
12/31/97 9/30/97 9/30/98
-------- ------- -------
<S> <C> <C> <C>
Senior Notes due 2007 at an interest rate of
7.0%.......................................... $ 8,752 $ 6,564 $ 6,564
Senior Notes due 2018 at an interest rate of
7.0%.......................................... 14,000 10,500 10,500
Senior Notes due 2027 at an interest rate of
7.5%.......................................... 13,124 9,843 9,843
Senior Subordinated Notes due 2005 at an inter-
est rate of 9.75%............................. 252 189 189
Private Placement Debt at an interest rate of
7.18%......................................... 32,310 24,233 24,233
Credit Facility at an interest rate of 7.0%.... 5,600 4,200 4,200
Commitment fees for the unused Credit Facili-
ty............................................ 1,252 939 939
Non-cash interest charges...................... 2,248 1,686 1,686
Interest income................................ (2,400) (1,800) (1,800)
------- ------- -------
Total Interest Expense, net.................... $75,138 $56,354 $56,354
======= ======= =======
</TABLE>
(n) Includes the results of operations of Hearst-Argyle, which includes: (i)
WLWT, KOCO, WAPT, KITV and the Arkansas Stations; (ii) WCVB, WTAE, WISN,
WBAL and KMBC; (iii) the management fee derived by Hearst-Argyle from the
Managed Stations for the full-period presented; (iv) Hearst-Argyle's share
of the Clear Channel Venture and WDTN from January 1 through May 31, 1998;
and, (iv) KSBW and WPTZ/WNNE from June 1 through September 30, 1998.
(o) Reduction of pension expense resulting from the actuarial valuation of the
newly-established qualified defined benefit pension plan.
(p) The historical financial data includes Argyle for the month of September
1997 only. Includes results from (i) WCVB, WTAE, WBAL, WISN, KMBC and WDTN
for the entire period presented; (ii) WAPT, KITV, the Arkansas Stations,
WLWT, KOCO, and Hearst-Argyle's share of the Clear Channel Venture for the
month September 1997 only; and, (iii) management fees derived by Hearst-
Argyle from the Managed Stations for the month of September 1997 only.
(q) Reclassification of Kelly Broadcasting account balances to conform with
Hearst-Argyle presentation.
60
<PAGE>
RISK FACTORS
In considering whether to vote in favor of the Hearst-Argyle Proposals and
the Pulitzer Proposals, holders of Hearst-Argyle Stock, and holders of
Pulitzer Stock, respectively, should consider the following matters.
Risk Factors Related to the Hearst-Argyle Merger Stock
Reliance on Network Affiliation Agreements; Television Programming. Each of
the television stations owned by Hearst-Argyle (including the television
stations that will be owned by Hearst-Argyle upon consummation of the Merger)
is a party to a network affiliation agreement giving such station the right to
rebroadcast programs transmitted by the network. Following the consummation of
the Merger, 10 of the stations will be parties to affiliation agreements with
ABC, 10 with NBC and two with CBS. The television viewership levels for each
station are materially dependent upon network programming. There can be no
assurance that such programming will achieve or maintain satisfactory
viewership levels in the future. In addition, although Hearst-Argyle expects
to continue to be able to renew the network affiliation agreements, no
assurance can be given that such renewals will be obtained on as favorable
terms or at all. The termination or non-renewal, or renewal at less favorable
terms, of the affiliation agreements could have an adverse effect on the
operations of Hearst-Argyle.
Television programming is one of Hearst-Argyle's most significant operating
cost components. There can be no assurance that Hearst-Argyle will not be
exposed in the future to increased programming costs. Should such an increase
occur, it could have an adverse effect on Hearst-Argyle's results from
operations. In addition, television networks recently have been seeking
agreements from their affiliates to share the network's programming costs and
to change the structure of network compensation. Hearst-Argyle cannot predict
the nature or scope of any such potential compensation arrangements or the
effect, if any, on Hearst-Argyle's operations. Acquisitions of program rights
are usually made two or three years in advance and may require multi-year
commitments, making it difficult to predict accurately how a program will
perform. In some instances, programs must be replaced before their costs have
been fully amortized, resulting in write-offs that increase station operating
costs.
Dependence on Advertising; Effect of Economic Conditions. Hearst-Argyle
relies to a significant extent upon sales of advertising for its revenues. On
a pro forma basis after giving effect to the Hearst Transaction, advertising
revenue accounted for 92.3% of the total revenues of Hearst-Argyle for the
year ended December 31, 1997. The stations compete for advertising revenues
with other television stations in their respective markets, as well as with
other advertising media, such as newspapers, radio stations, magazines,
outdoor advertising, transit advertising, yellow page directories, direct
mail, the Internet and local cable systems. The stations are located in highly
competitive markets. Hearst-Argyle's results of operations are and will
continue to be dependent upon the ability of each of its stations to compete
successfully for advertising revenues in its respective market.
In addition to the activities of its direct competitors and of competing
advertising media, Hearst-Argyle's ability to generate advertising revenues is
and will continue to be heavily dependent on the relative popularity of its
programming and cyclical changes in the national economy, as well as on
regional economic conditions in each of the markets in which its stations
operate, particularly as such conditions may affect advertising expenditures.
Hearst-Argyle's revenues could therefore be adversely affected by a future
local, regional or national recessionary environment. The advertising revenues
of the stations generally are highest in the second and fourth quarters of
each year, due in part to increases in consumer advertising in the spring and
retail advertising in the period leading up to and including the holiday
season. In addition, advertising revenues in even-numbered years benefit from
advertising placed by candidates for political offices and demand for
advertising time in Olympic broadcasts. Proposals have been advanced in the
U.S. Congress to require television broadcast stations to provide advertising
time to political candidates at no charge, which would eliminate in whole or
in part advertising revenues from political candidates.
61
<PAGE>
Control by Majority Stockholder; Conflicts of Interest. Through Hearst
Broadcasting, its wholly owned subsidiary, Hearst currently owns approximately
88.8% of the outstanding shares of Hearst-Argyle Common Stock as of February
9, 1999, and, by virtue of its ownership of 100% of the Hearst-Argyle Series B
Common Stock, is entitled to elect as a class all but two members of the
Hearst-Argyle Board. Currently, Hearst Broadcasting elects nine of the 11
directors of Hearst-Argyle (the "Hearst-Argyle Directors"). As a result,
Hearst is able to control substantially all actions to be taken by Hearst-
Argyle stockholders, and is able to maintain control over the operations and
business of Hearst-Argyle. This control, as well as certain provisions of the
Hearst-Argyle Charter and of the DGCL, may make Hearst-Argyle a less
attractive target for a takeover than it otherwise might be, or render more
difficult or discourage a merger proposal, tender offer or other transaction
involving an actual or potential change of control of Hearst-Argyle. Based on
the 37,096,774 shares of Hearst-Argyle Merger Stock being delivered to
Pulitzer stockholders in the Merger, if the Merger were consummated as of
February 9, 1999, Hearst Broadcasting would own approximately 51.8% of the
outstanding shares of Hearst-Argyle Common Stock.
In addition, the interests of Hearst, which owns or has significant
investments in other businesses, including cable television networks,
newspapers, magazines and electronic media, may from time to time be
competitive with, or otherwise diverge from, the interests of Hearst-Argyle,
particularly with respect to new business opportunities and future
acquisitions. Under the Amended and Restated Merger Agreement dated as of
March 26, 1997, among Hearst, Argyle and certain wholly owned subsidiaries of
Hearst (the "Hearst-Argyle Merger Agreement"), entered into in connection with
the Hearst Transaction, Hearst and Hearst-Argyle have agreed that, without the
prior written consent of the other, neither Hearst-Argyle, on the one hand,
nor Hearst, on the other hand, will make any acquisition or purchase any
assets if such an acquisition or purchase by one party would require the other
party to divest or otherwise dispose of any of its assets because of
regulatory or other legal prohibitions. As a result, under current law and
given newspaper properties Hearst currently owns, Hearst-Argyle would be
precluded, without Hearst's consent (and even with Hearst's consent, only if
Hearst were to agree to sell newspapers in the corresponding markets), from
acquiring television broadcast stations in Albany--Schenectady--Troy, New
York; Flint--Saginaw--Bay City, Michigan; Beaumont--Port Arthur, Texas;
Houston, Texas; Laredo, Texas; Lubbock, Texas; Odessa-Midland, Texas; San
Antonio, Texas; San Francisco--Oakland--San Jose, California; Seattle--Tacoma,
Washington; and, St. Louis, Missouri. Proposals to eliminate the rule banning
newspaper-television cross-ownership in the same market have been introduced
in the U.S. Congress. The FCC separately has asked for comment as to whether
it should alter the cross-ownership rule. Whether these proposals will be
enacted into law or whether the FCC proceeding ultimately will lead to a
change in the rule is unknown at this time. Additionally, Hearst is not
precluded from purchasing television stations, newspapers or other assets in
other markets, the ownership of which assets by Hearst could preclude, under
FCC rules, Hearst-Argyle from owning television stations in such markets in
the future.
Hearst and Hearst-Argyle also have ongoing relationships that may create
situations where the interests of the two parties could conflict. Hearst and
Hearst-Argyle are parties to a series of agreements with each other, including
a Management Agreement (whereby Hearst-Argyle provides certain management
services, such as sales, news, programming and financial and accounting
management services with respect to certain Hearst owned or operated
television and radio stations); an Option Agreement (whereby Hearst has
granted Hearst-Argyle an option to acquire certain Hearst owned or operated
television stations, as well as a right of first refusal with respect to
another television station if Hearst proposes to sell such station within 36
months of its acquisition); a Studio Lease Agreement (whereby Hearst leases
from Hearst-Argyle certain premises for Hearst's radio broadcast stations); a
Tax Sharing Agreement (whereby Hearst and Hearst-Argyle have established the
sharing of federal, state and local taxes after Hearst-Argyle became part of
the consolidated tax returns of Hearst); a Name License Agreement (whereby
Hearst permits Hearst-Argyle to use the Hearst name in connection with the
Hearst-Argyle name and operation of its business); and a Services Agreement
(whereby Hearst provides Hearst-Argyle certain administrative services, such
as accounting, financial, legal, tax, insurance, data processing and employee
benefits). Hearst-Argyle believes that the terms of these agreements are
reasonable to both sides; there can be no assurance, however, that more
favorable terms would not be available from third parties.
62
<PAGE>
Television Industry Competition and Technology. The television broadcast
industry is highly competitive. Some of the stations that compete with Hearst-
Argyle's stations are owned and operated by large national or regional
companies that may have greater resources, including financial resources, than
Hearst-Argyle. Hearst-Argyle's stations face strong competition in their
respective markets for audience share and, as discussed above, advertising
revenues. There can be no assurance that any one of these stations will be
able to maintain or increase its current audience share or revenue share. To
the extent that certain of Hearst-Argyle's competitors have, or may in the
future obtain, greater resources than Hearst-Argyle, Hearst-Argyle's ability
to compete successfully in its broadcasting markets may be impeded.
Technological innovation, and the resulting proliferation of programming
alternatives such as cable, direct satellite-to-home services, pay-per-view
and home video and entertainment systems have fractionalized television
viewing audiences and subjected television broadcast stations to new types of
competition. Over the past decade, cable television has captured an increasing
market share, while the aggregate viewership of the major television networks
has declined. In addition, the expansion of cable television and other
industry changes have increased, and may continue to increase, competitive
demand for programming. Such increased demand, together with rising production
costs, may in the future increase Hearst-Argyle's programming costs or impair
its ability to acquire programming. In addition, new television networks such
as UPN and the WB Network have created additional competition. The FCC has
adopted rules for implementing digital (including high-definition) television
("DTV") service in the United States. Implementation of DTV is expected to
improve the technical quality of television. Under certain circumstances,
however, conversion to DTV operations may reduce a station's geographical
coverage area or provide a competitive advantage to one or more competing
stations in the market. Implementation of DTV is expected to impose additional
costs that are higher than normal on television stations providing the new
service, due to increased equipment costs and possible spectrum-related fees.
While Hearst-Argyle is unable to predict the implementation costs of DTV,
these costs are expected to be significant. Hearst-Argyle cannot predict the
effect the authorization of DTV service will have on the business of Hearst-
Argyle.
Regulatory Matters.
FCC Consent to Transfer Control of Pulitzer. The television operations of
Hearst-Argyle are subject to significant regulation by the FCC under the
Communications Act of 1934, as amended (the "Communications Act"), most
recently amended further by the Telecommunications Act of 1996 (the
"Telecommunications Act"). Approval of the FCC is required for the issuance,
renewal and transfer or assignment of television station operating licenses.
Hearst-Argyle is dependent upon its continuing ability to maintain
broadcasting licenses from the FCC. License renewals filed after 1996
customarily will be granted for terms of eight years. While broadcast licenses
are typically renewed by the FCC, there can be no assurance that the licenses
for Hearst-Argyle's stations will be renewed at their expiration dates or, if
renewed, that the renewal terms will be for eight-year periods. The non-
renewal or revocation of one or more of the FCC licenses held by Hearst-Argyle
could have a material adverse effect on the operations of Hearst-Argyle.
The rules of the FCC also include restrictions on the common ownership or
control of interests in television stations and certain other media interests
in the same market, including television and radio broadcast stations, as well
as cable television systems and English language daily newspapers. In
addition, no person is permitted to hold an attributable interest in
television stations collectively reaching more than 35% of all U.S. television
households, subject to a 50% discount for UHF television stations. If an
acquisition results in an acquiror having holdings that conflict with the
common ownership rules, divestiture of one or more of the common interests is
generally required. The FCC, in certain cases, may grant permanent waivers of
such common ownership. The FCC, however, generally only grants temporary
waivers of common ownership in order to afford the acquiror a reasonable
period of time following the consummation of the acquisition to comply with
the applicable law and regulations through disposition of one or more of the
common interests.
Request for Waiver of FCC Rules. On November 24, 1998, the Mass Media Bureau
(the "Bureau") of the FCC, acting pursuant to delegated authority, granted the
application for consent to the transfer of control of
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the Pulitzer stations to Hearst-Argyle (the "Transfer Application"). As a
result of prohibitions by the FCC's "television duopoly" and "one-to-a-market"
rules on certain combinations created as a result of the Merger, the FCC's
consent to the Transfer Application included the following waivers of the
FCC's rules: (i) a temporary, six-month waiver of the television duopoly rule
to permit the common ownership of WBAL-TV, Baltimore, Maryland, and WGAL(TV),
Lancaster, Pennsylvania for a brief period of time following consummation of
the Merger; (ii) a conditional waiver of the television duopoly rule to permit
the common ownership of WWWB(TV), Lakeland, Florida, and WESH(TV), Daytona
Beach, Florida; (iii) a conditional waiver of the television duopoly rule to
permit the common ownership of WLWT(TV), Cincinnati, Ohio, and WLKY-TV,
Louisville, Kentucky; (iv) a continued permanent waiver of the television
duopoly rule to permit the common ownership of KCCI(TV), Des Moines, Iowa, and
KETV(TV), Omaha, Nebraska; (v) a continued waiver of the one-to-a-market rule
to permit the common ownership of WXII-TV, Winston-Salem, North Carolina, and
WXII(AM), Kernersville, North Carolina; and, (vi) a continued waiver of the
one-to-a-market rule to permit the common ownership of WLKY-TV, Louisville,
Kentucky, and WLKY(AM), Louisville, Kentucky. The conditional waivers are
based on an ongoing FCC rulemaking which, among other things, is considering
changes to the FCC's television duopoly rule. The FCC has proposed to allow
common ownership of stations with overlapping Grade B contours as long as
there is no overlap of the stations' Grade A signal contours and the stations
are located in separate Designated Market Areas (defined by A.C. Nielsen Co.
as geographic markets for the sale of national "spot" and local advertising
time) (each, a "DMA"). The FCC has stated that it will grant temporary waivers
of the rule in circumstances in which these criteria are met, although such
waivers will be conditioned on the outcome of the rulemaking. Some
commentators have urged the FCC to eliminate the rule entirely, or to allow
common ownership of stations licensed to communities in separate DMA's
regardless of the amount of signal overlap.
Although the Bureau granted the conditional waivers requested in the
Transfer Application, there can be no guarantee that the duopoly rule
ultimately will be changed in a manner that would allow permanent common
ownership of the stations subject to the conditional waivers. If the rule is
not changed in such a manner, the Bureau's order requires the licensees
subject to such a conditional waiver to come into compliance with the rule
within six-months of completion of the rulemaking proceeding.
Petition to Deny Transfer Applications. On July 20, 1998, WLOS Licensee,
Inc. ("WLOS"), licensee of WLOS(TV), Asheville, North Carolina, filed with the
FCC a petition to deny the FCC transfer application with respect to WYFF(TV),
claiming that Pulitzer lacked the requisite qualifications to be a FCC
licensee as the result of certain pleadings Pulitzer filed with the FCC
opposing WLOS' application to acquire WLOS(TV) and a separate but related
application to assign WFBC-TV, Anderson, South Carolina, to a third party with
which WLOS intended to enter into a local marketing agreement. On August 13,
1998, Pulitzer Broadcasting filed an opposition to WLOS's petition to deny the
FCC transfer application. Pulitzer Broadcasting subsequently filed a
supplement to its opposition on August 14, 1998. WLOS submitted a reply to the
Pulitzer Broadcasting opposition on August 20, 1998. In granting the Transfer
Application, the Bureau considered the merits of the WLOS petition and denied
it. Under FCC rules, WLOS or, under certain circumstances, other interested
parties, had until December 28, 1998 to ask the Bureau to reconsider its grant
of the Transfer Application, or ask the full FCC to review the Bureau's
action. No such request for reconsideration or review was filed.
Acquisition of KCRA-TV. An application seeking the consent of the FCC to the
Kelly Transaction was filed on August 28, 1998. Currently, the Grade A contour
of KCRA-TV overlaps with the Grade A contour of KSBW(TV), Salinas, California.
The FCC's television duopoly rule prohibits the common ownership of two
television stations with overlapping Grade A or Grade B contours. Pursuant to
an ongoing rulemaking proceeding considering changes to the television duopoly
rule, however, the FCC has adopted a policy of granting waivers conditioned on
the outcome of the rulemaking proceeding in situations where the two
television stations have no overlap of their Grade A contours and the stations
are located in separate DMAs. An application seeking the modification of the
facilities of KSBW(TV) in a manner that would eliminate the Grade A (but not
the Grade B) contour overlap between KSBW(TV) and KCRA-TV (the "KSBW(TV)
Modification Application") has been granted by the FCC. On December 11, 1998,
the FCC granted its consent to the Kelly Transaction. Because of
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the signal contour overlap between KCRA and Hearst-Argyle's KSBW(TV), the
FCC's grant was conditioned on (i) Hearst-Argyle completing the modification
of the KSBW facilities that will eliminate the Grade A signal contour overlap
between the stations within nine months of the consummation of the Kelly
Transaction; and (ii) the outcome of the pending FCC rulemaking considering
changes to the duopoly rule that would, if adopted, allow the common ownership
of certain stations, including KCRA and the modified KSBW, with overlapping
Grade B signal contours. As noted above, the FCC requires that licensees
subject to duopoly waivers conditioned on the outcome of the pending
rulemaking proceeding to come into compliance with the duopoly rule if the
rule is not changed to allow permanent common ownership of the stations. The
Kelly Transaction was consummated on January 5, 1999.
In addition, the U.S. Congress and the FCC currently have under
consideration, and may in the future adopt, new laws, regulations and policies
regarding a wide variety of matters that could, directly or indirectly,
materially adversely affect the operation and ownership of Hearst-Argyle.
Among other things, the FCC is considering whether, and under what
circumstances, to subject television local marketing agreements or time
brokerage agreements to various multiple ownership rules of the FCC. Depending
on the outcome of those considerations, Hearst-Argyle may be required to
modify or terminate its local marketing or time brokerage arrangements. The
FCC has not yet fully implemented the Telecommunications Act. Hearst-Argyle is
unable to predict the outcome of future federal legislation or the impact of
any such laws or regulations on Hearst-Argyle's operations.
Risks Associated with Integration of the Combined Operations and Possible
Expansion. As a result of the Hearst Transaction, the Kelly Transaction and
the Merger, Hearst-Argyle has and will continue to experience significant
expansion, including expansion into markets in which Hearst-Argyle has not
previously operated. As a result, Hearst-Argyle's management is now and will
continue to be required to manage a substantially larger number of television
stations than historically has been the case. There can be no assurance that
Hearst-Argyle will be able to implement effectively the organizational and
operational systems necessary for optimal management and integration of its
newly expanded group of television stations, the television stations to be
acquired pursuant to the Merger or any television stations to be acquired in
the future, or that Hearst-Argyle will be able to manage its growth
successfully. In addition, the management of Hearst-Argyle is evaluating, and
will continue to evaluate, the nature and scope of its operations and various
short-term and long-term strategic considerations, and will assess to what
extent integration, consolidation or other modification of its businesses is
appropriate. Some operational and strategic decisions with respect to the
combined company have not yet been made. Some uncertainties and risks relating
to the integration of the combined operations may exist and, therefore, it is
difficult to predict or quantify the impact of such decisions on the results
of operations and financial condition of Hearst-Argyle.
As part of its business strategy, Hearst-Argyle intends to pursue further
expansion through the acquisition of additional television stations or
television station groups, and intends to continue to evaluate acquisition
opportunities. Such acquisition opportunities, however, may become more
limited as a consequence of the consolidation of ownership occurring in the
television broadcast industry. Hearst-Argyle competes and will continue to
compete for the acquisition of television stations with other prospective
purchasers, some of whom have greater financial resources than Hearst-Argyle.
In addition, any such acquisitions will be subject to FCC approval, FCC
limitations on the number and location of broadcasting properties that any one
person or entity may own, and FCC rules restricting the ownership of
television stations and newspapers in the same market. As a result of these
and other factors, there can be no assurance that future acquisitions will be
available on attractive terms, if at all.
While management expects to realize certain operating synergies and cost
savings as a result of the Merger and any future acquisitions, there can be no
assurance that such synergies and savings will be achieved, that the
integration of Hearst-Argyle and newly acquired stations can be accomplished
successfully or on a timely basis, or that Hearst-Argyle's business strategy
can be implemented. As a result, the Merger and any future acquisitions may
have an adverse effect on Hearst-Argyle's financial position and results of
operations.
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Shares Eligible for Future Sale; Dilution; Share Repurchase Program. As of
the Hearst-Argyle Record Date, Hearst-Argyle has outstanding 10,752,457 shares
of Hearst-Argyle Series A Common Stock and 41,298,648 shares of Hearst-Argyle
Series B Common Stock. Hearst-Argyle also has outstanding 10,938 shares of
Hearst-Argyle Series A Preferred Stock and 10,938 shares of Hearst-Argyle
Series B Preferred Stock. Hearst-Argyle Series A Preferred Stock is
convertible at any time, prior to December 31, 2000, into an aggregate of
312,514 shares of Hearst-Argyle Series A Common Stock (based on a $35
conversion price), and for each year after December 31, 2000, into shares of
Hearst-Argyle Series A Common Stock at a conversion price equal to 1.1 times
the preceding year's conversion price. Hearst-Argyle Series B Preferred Stock
is convertible at any time after July 11, 2001, into shares of Hearst-Argyle
Series A Common Stock at a conversion price equal to the average of the
current market price of the Hearst-Argyle Series A Common Stock for the 10
trading days preceding the conversion date. In addition, as of the Hearst-
Argyle Record Date, Hearst-Argyle has outstanding options to purchase
2,103,761 shares of Hearst-Argyle Series A Common Stock, of which options are
currently exercisable for 677,137 shares. All of the shares of Hearst-Argyle
Series A Common Stock, Hearst-Argyle Series A Preferred Stock and Hearst-
Argyle Series B Preferred Stock generally will be freely tradeable without
restriction or further registration under the Securities Act, except that any
shares held by persons who are "affiliates" of Hearst-Argyle, as that term is
defined in Rule 144 under the Securities Act, may generally be sold only
subject to certain restrictions as to timing, manner, volume, notice and
current public information regarding Hearst-Argyle, and any shares held by
persons who were affiliates of Argyle at the time of Argyle's shareholder vote
on the Hearst Transaction, may generally be sold only subject to certain
restrictions as to current public information regarding Hearst-Argyle. In this
regard, Hearst-Argyle has in effect a registration statement covering the
resale from time to time of 4,599,260 shares of Hearst-Argyle Series A Common
Stock received in the Hearst Transaction by certain former limited partners of
partnerships that prior to the Hearst Transaction owned shares of Argyle
common stock in order to permit such persons to sell their shares without
regard to the restrictions discussed in the preceding sentence. The holders of
approximately 4,443,406 shares of Hearst-Argyle Series A Common Stock covered
by such registration statement have additional rights under a Registration
Rights Agreement dated as of August 29, 1997. The Hearst-Argyle Series B
Common Stock held by Hearst Broadcasting and the Hearst-Argyle Series A Common
Stock into which the Hearst-Argyle Series B Common Stock is convertible may
not be sold in the absence of registration under the Securities Act or unless
an exemption from registration is available, including the exemption afforded
by Rule 144 under the Securities Act.
No prediction can be made as to the effect, if any, that sales of shares of
Hearst-Argyle Series A Common Stock, or the availability of shares for future
sale, will have on the market price of the Hearst-Argyle Series A Common Stock
prevailing from time to time following the Merger. Sales of substantial
amounts of Hearst-Argyle Series A Common Stock (including shares owned upon
the exercise of options) in the public market, or the perception that such
sales could occur, could depress the prevailing market price for the Hearst-
Argyle Series A Common Stock. Such sales may also make it more difficult for
Hearst-Argyle to sell equity securities or equity-related securities in the
future at a time and price that it deems appropriate. In addition, the Hearst-
Argyle Board has authorized a share repurchase program, pursuant to which
Hearst-Argyle may repurchase up to $300 million of Hearst-Argyle Series A
Common Stock from time to time, in the open market or in private transactions,
subject to market conditions. In addition, Hearst Broadcasting has notified
Hearst-Argyle of its intention to purchase up to 10 million shares of Hearst-
Argyle Series A Common Stock from time to time in the open market, in private
transactions or otherwise. Such repurchases and purchases may affect the
market price of the Hearst-Argyle Series A Common Stock.
Dividend Policy; Limitation on Dividends. Hearst-Argyle has not paid any
dividends on the Hearst-Argyle Series A Common Stock since its inception, and
does not anticipate that it will pay any dividends on the Hearst-Argyle Series
A Common Stock in the foreseeable future. Hearst-Argyle's senior credit
facility limits the ability of Hearst-Argyle to pay dividends on the Hearst-
Argyle Series A Common Stock under certain conditions.
Impact on Net Income. Hearst-Argyle's pro forma net income from continuing
operations for the year ended December 31, 1997 (excluding the Merger) was
$35.4 million. Pro forma income from continuing operations for the year ended
December 31, 1997 (including the Merger) is $25.9 million. The Merger,
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therefore, will result in a decline in pro forma (for the transactions) net
income of Hearst-Argyle. The decline in net income is attributable to the
increase in depreciation and amortization resulting from the write-up of the
assets of the properties acquired in the Merger to an amount equal to the
respective purchase prices.
Uncertainty as to Market Price of Hearst-Argyle Series A Common Stock. On
February 9, 1999, the market price of Hearst-Argyle Series A Common Stock was
$27.875. Based on this price, the aggregate value of the Hearst-Argyle Merger
Stock to be delivered in the Merger is $1.034 billion. Because the number of
shares of Hearst-Argyle Merger Stock being delivered to Pulitzer stockholders
in the Merger is fixed and because the market price of the Hearst-Argyle
Series A Common Stock is subject to fluctuation, the actual aggregate market
value of the Hearst-Argyle Merger Stock may be greater or less than this
amount. There can be no assurance that at or after the Effective Time the
shares of the Hearst-Argyle Series A Common Stock will trade at or near the
market price on February 9, 1999. The prices at which shares of the Hearst-
Argyle Series A Common Stock trade may be influenced by many factors,
including, without limitation, the liquidity of the Hearst-Argyle Series A
Common Stock, any dilutive effect of the issuance of the Hearst-Argyle Merger
Stock, investor perceptions of Hearst-Argyle and the television and radio
broadcasting industries, Hearst-Argyle's operating results, Hearst-Argyle's
dividend policy, possible future changes in regulation of the television and
radio broadcasting industries and general economic and market conditions.
Federal Income Tax Risks Relating to the Spin-Off and the Merger
Federal Income Tax Risks Relating to the Spin-Off. Pulitzer has received the
IRS Ruling that the Spin-Off will qualify as a reorganization within the
meaning of Section 368(a)(1)(D) of the Code and as a tax-free distribution to
Pulitzer stockholders under Section 355(a) of the Code. A ruling from the IRS,
while generally binding on the IRS, may under certain circumstances be revoked
or modified by the IRS retroactively. If the Spin-Off did not qualify as a
tax-free distribution to Pulitzer stockholders under Section 355(a) of the
Code, each Pulitzer stockholder would be treated as having received a taxable
dividend in an amount equal to the fair market value of the New Pulitzer Stock
received to the extent of such stockholder's pro rata share of Pulitzer's
current and accumulated earnings and profits (including any earnings and
profits attributable to any gain that Pulitzer recognizes for federal income
tax purposes in connection with the Spin-Off). In addition, the adjusted tax
basis of the Pulitzer Stock held by such Pulitzer stockholder would be reduced
to the extent that the amount received by such Pulitzer stockholder exceeded
his or her pro rata share of Pulitzer's current and accumulated earnings and
profits, and such Pulitzer stockholder would be required to recognize taxable
gain to the extent that the amount received by such Pulitzer stockholder
exceeded the sum of his or her pro rata share of Pulitzer's current and
accumulated earnings and profits and the adjusted tax basis of the Pulitzer
Stock held by such Pulitzer stockholder.
Pulitzer will be required under Section 355(e) of the Code to recognize
taxable gain in an amount equal to the excess, if any, of the fair market
value of the New Pulitzer Stock distributed to Pulitzer's stockholders in the
Distribution over Pulitzer's adjusted tax basis in such New Pulitzer Stock
immediately prior to the Distribution. There can be no assurance that the IRS
will agree with Pulitzer's determination of the fair market value of the New
Pulitzer Stock distributed to Pulitzer's stockholders in the Distribution or
Pulitzer's resulting tax liability. Under the Merger Agreement, New Pulitzer
will be liable and will indemnify Hearst-Argyle and its subsidiaries, on an
after-tax basis, for any unpaid tax liabilities of Pulitzer or any Pulitzer
subsidiaries arising by reason of the application of Section 355(e) of the
Code to the Spin-Off. See "The Merger Agreement--Tax Matters" and "Federal
Income Tax Consequences of the Spin-Off, the Merger and Related Transactions--
The Spin-Off."
Federal Income Tax Risks Relating to the Merger. Each of Pulitzer and
Hearst-Argyle has received an opinion of its tax counsel that the Merger will
qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code. Such opinions are based on various assumptions and conditioned upon
certain representations made by Pulitzer and Hearst-Argyle as to factual
matters. Opinions of counsel, however, are not binding on the IRS or the
courts, and there can be no assurance that the IRS will agree with the
conclusions set forth in such opinions. No ruling from the IRS has been or
will be requested with respect to the federal income tax consequences of the
Merger. If the Merger did not qualify as a reorganization within the meaning
of Section
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368(a)(1)(A) of the Code, each Pulitzer stockholder would be required to
recognize gain or loss equal to the difference between (i) the sum of the fair
market value of the Hearst-Argyle Merger Stock received by such Pulitzer
stockholder plus any cash received by such Pulitzer stockholder in lieu of a
fractional share of Hearst-Argyle Merger Stock and (ii) the adjusted tax basis
of the Pulitzer Stock held by such Pulitzer stockholder immediately before the
Merger, and Pulitzer would be required to recognize taxable gain in an amount
equal to the excess of (x) the sum of the aggregate fair market value of the
Hearst-Argyle Merger Stock received, any cash received in lieu of fractional
shares of Hearst-Argyle Merger Stock and the amount of the New Debt and other
liabilities of Pulitzer assumed by Hearst-Argyle in the Merger, over (y) the
aggregate adjusted tax basis of Pulitzer's assets. Under the Merger Agreement,
New Pulitzer will be liable and will indemnify Hearst-Argyle and its
subsidiaries, on an after-tax basis, against any tax liability of Pulitzer or
any Pulitzer subsidiaries attributable to any tax period (or portion thereof)
prior to the consummation of the Merger (including any taxable gain to
Pulitzer as described above), except for any tax liability of Pulitzer
resulting from the Merger not qualifying as a reorganization by reason of
actions taken by Hearst-Argyle after consummation of the Merger. In addition,
if the Merger did not qualify as a reorganization under Section 368(a)(1)(A)
of the Code, the Spin-Off would likely not qualify as a tax-free distribution
to Pulitzer stockholders under Section 355(a) of the Code. See "The Merger
Agreement--Tax Matters" and "Federal Income Tax Consequences of the Spin-Off,
the Merger and Related Transactions--The Merger."
Pulitzer stockholders are urged to consult with their respective tax advisors
regarding the particular tax consequences of the Spin-Off and the Merger to
them and to review the discussion under "Federal Income Tax Consequences of
the Spin-Off, the Merger and Related Transactions."
Risk Factors Related to the New Pulitzer Stock
Stand-Alone Company. New Pulitzer was recently formed for purposes of
effecting the Spin-Off and the Merger and does not have any operating history.
Although Pulitzer has a substantial operating history with respect to the
newspaper publishing business and related new media operations to be
contributed to New Pulitzer, there can be no assurance that, upon consummation
of the Contribution, New Pulitzer will be able to continue or improve such
operating history.
Competition. The Pulitzer publications that will be contributed to New
Pulitzer compete for readership and advertising revenues in varying degrees
with other newspapers and other publications as well as with television,
radio, cable, Internet, online services and other new media technologies,
direct mail, yellow page directories, billboards and other news and
advertising media. Competition for advertising is based upon circulation
levels, readership demographics, price and advertiser results, while
competition for circulation is generally based upon the content, journalistic
quality and price of the publication. In St. Louis and its surrounding
suburban communities, the Post-Dispatch's print competition for circulation
and advertising revenues includes paid suburban daily newspapers as well as a
chain of community newspapers and shoppers. These community newspapers and
shoppers target selected geographic markets throughout the St. Louis
metropolitan area.
Certain of Pulitzer's competitors in print media are larger and have greater
financial resources than will New Pulitzer. The extent and nature of such
competition are, in large part, determined by the location and demographics of
the market and the number of media alternatives in those markets. There can be
no assurance that New Pulitzer will be able to compete effectively in its
markets in the future or that alternative technologies may not in the future
replace newspapers as a preferred form of media.
Dependence on Local Economies; Importance of the St. Louis Post-Dispatch;
Importance of the Arizona Daily Star. New Pulitzer's advertising revenues and,
to a lesser extent, circulation revenues, will be dependent on a variety of
factors specific to the communities that Pulitzer's newspapers serve. These
factors include, among others, the size and demographic characteristics of the
local population, local economic conditions in general, and the related retail
segments in particular. If the local economy or prevailing retail environment
of the
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communities that New Pulitzer's newspapers serve were to be adversely
affected, there could be no assurance that New Pulitzer's financial condition
or results of operations would not be adversely affected.
The St. Louis Post-Dispatch (the "Post-Dispatch") has historically
represented a significant portion of Pulitzer's revenue and operating cash
flow, and New Pulitzer expects that the Post-Dispatch will continue to
represent a significant portion of its revenues and operating cash flow for
the foreseeable future. The Post-Dispatch accounted for approximately 73% and
66%, respectively, and 37% and 35%, respectively, of Pulitzer's newspaper
revenue and operating cash flow for its 1996 and 1997 fiscal years. In
addition, Pulitzer's newspaper operations derived 71% and 65%, respectively,
of its advertising revenue from the Post-Dispatch during the same periods. A
significant decline in the performance of the Post-Dispatch or in general
advertising spending could have a material adverse effect on New Pulitzer's
business, financial condition and results of operations.
The Arizona Daily Star (the "Star") has historically represented a
significant portion of Pulitzer's newspaper operations, and New Pulitzer
expects that the Star will continue to represent a significant portion of its
revenues and operating cash flow for the foreseeable future. The Star
accounted for approximately 16% and 15%, respectively, and 43% and 33%,
respectively, of Pulitzer's newspaper revenue and operating cash flow for its
1996 and 1997 fiscal years. In addition, Pulitzer's newspaper operations
derived 17% and 15%, respectively, of its advertising revenue from the Star
during the same periods. A significant decline in the performance of the Star
or in general advertising spending could have a material adverse effect on New
Pulitzer's business, financial condition and results of operations.
Fluctuation of Quarterly Results. Newspaper companies tend to follow a
distinct and recurring seasonal pattern. The first quarter of the year
(January-March) tends to be the weakest quarter because advertising volume is
then at its lowest level. Correspondingly, the fourth quarter (October-
December) tends to be the strongest quarter, as it includes heavy holiday
season advertising. New Pulitzer expects that seasonal fluctuations will
continue to affect its results of operations in future periods. Results of
operations in any period should not be considered indicative of the results to
be expected for any future periods.
Acquisition Strategy. Pulitzer has grown through, and New Pulitzer
anticipates that it will continue to grow through, acquisitions of daily and
non-daily newspapers and similar publications. Acquisitions may expose New
Pulitzer to particular risks, including, without limitation, diversion of
management's attention, assumption of liabilities and amortization of goodwill
and other acquired intangible assets, some or all of which could have a
material adverse effect on the financial condition or results of operations of
New Pulitzer. Depending on the value and nature of the consideration paid by
New Pulitzer for acquisitions, such acquisitions may have a dilutive impact on
New Pulitzer's earnings per share. In making acquisitions, New Pulitzer will
compete for acquisition targets with other companies, many of which are larger
and have greater financial resources than New Pulitzer. There can be no
assurance that New Pulitzer will be successful in identifying acquisition
opportunities, assessing the value, strengths and weaknesses of such
opportunities, consummating such opportunities on terms favorable to New
Pulitzer or managing the publications it acquires and improving their
operating efficiency. Historically, Pulitzer has financed acquisitions through
cash on hand and borrowings. New Pulitzer anticipates that it will finance any
future acquisitions through cash on hand (including the net proceeds of the
New Debt to be received by New Pulitzer as a result of the Contribution)
borrowings and, under certain circumstances, issuances of capital stock. See
"--Gross-Up Matters."
Price and Availability of Newsprint. The basic raw material for newspapers
is newsprint. Newsprint expense represents the single largest raw material
expense of Pulitzer and, after wages and employee benefits expense, accounted
for approximately 20% of total 1997 newspaper operating expenses. During 1997,
Pulitzer used approximately 100,900 metric tons of newsprint in its production
process at a total cost of approximately $56.8 million. Consumption at the
Post-Dispatch represented approximately 72,600 metric tons of Pulitzer's total
newsprint usage in 1997. In the last five years, Pulitzer's average cost per
ton of newsprint has varied from a low of $452 per metric ton in 1994 to a
high of $675 per metric ton in 1995. For the first nine months of 1998,
Pulitzer's average cost for newsprint was approximately $590 per metric ton,
compared to approximately $555 per metric ton in 1997. A price increase to
$615 per metric ton on September 1, 1998 was subsequently rescinded
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by all of Pulitzer's newsprint suppliers. As a result, Pulitzer expects its
cost of newsprint for the fourth quarter of 1998 to be in the range of $580 to
$590 per metric ton. In the fourth quarter of 1997, Pulitzer's average cost of
newsprint was approximately $585 per metric ton.
The Post-Dispatch obtains the newsprint necessary for its operations from
five separate mills, three of which are located in Canada and two in the
United States. The Post-Dispatch has guaranteed the future supply of certain
volume levels through long-term agreements with two of its newsprint
suppliers. New Pulitzer believes that the absence of long-term agreements with
the remaining three newsprint suppliers will not affect New Pulitzer's ability
to obtain newsprint at competitive prices.
Pulitzer acquired five newsprint contracts with the purchase of the Pulitzer
Community Newspaper group ("PCN Group") in 1996. Combined with the tonnage
purchased for the Post-Dispatch, Pulitzer has been able to leverage its
pricing power to obtain the best price available for the PCN Group, and to
assure adequate supplies for all locations. There can be no assurance,
however, that New Pulitzer will be able to enter into similar contractual
arrangements with respect to its other newsprint requirements or upon the
expiration of these arrangements. Significant increases in newsprint prices
could have a material adverse effect on New Pulitzer's business, financial
condition and results of operations. New Pulitzer will seek to manage the
effects of any increase in prices of newsprint through a combination of, among
other things, technology improvements, including web width reductions,
inventory management and advertising and circulation price increases.
Environmental Matters. New Pulitzer's operations will be subject to federal,
state and local environmental laws and regulations pertaining to air and water
quality, storage tanks and the management and disposal of wastes at its
facilities. Neither Pulitzer nor New Pulitzer can predict with any certainty
whether future events, such as changes in existing laws and regulations or the
discovery of conditions not currently known to them, may give rise to
additional costs that could be material. Furthermore, actions by federal,
state and local governments concerning environmental matters could result in
laws or regulations that could have a material adverse effect on the financial
condition or results of operations of New Pulitzer.
Potential Litigation Exposure. Pulitzer has been involved, from time to
time, in various claims and lawsuits incidental to the ordinary course of its
business, including such matters as libel, slander and defamation actions and
complaints alleging discrimination. While the results of litigation cannot be
predicted, management of Pulitzer and New Pulitzer believe the ultimate
outcome of such existing litigation will not have a material adverse effect on
the consolidated financial statements of New Pulitzer and its subsidiaries.
Gross-Up Matters. The Merger Agreement provides that New Pulitzer shall be
liable for, shall pay and shall indemnify and hold Hearst-Argyle, its
subsidiaries, their affiliates and their respective directors, officers and
employees harmless against any liabilities and/or expenses arising from any
claim or dispute relating to those certain Gross-Up Agreements (the "Gross-Up
Agreements") entered into by Pulitzer with certain former stockholders of
Pulitzer. In connection therewith, Pulitzer agreed under certain circumstances
to make additional payments (the "Additional Payments") to these former
stockholders in the event that a Gross-Up Transaction occurred prior to May
13, 2001. For the reasons discussed below in "The Merger Agreement--Certain
Covenants--Gross-Up Matters," the amount of the Additional Payments, if any,
that may be payable by New Pulitzer with respect to the Merger and the
Distribution cannot be determined at this time. Depending on the ultimate
resolution of the meaning and application of various provisions of the Gross-
Up Agreements, in the opinion of Pulitzer's management, the amount of the
Additional Payments, if any, could be material to the consolidated financial
statements of Pulitzer. The additional payment, if any, to these former
stockholders will be recorded directly to additional paid-in capital as the
payment of this contingent amount is a direct cost of the disposal of the
Pulitzer Broadcasting Business. See "The Merger--Certain Covenants--Gross-Up
Matters."
Control of New Pulitzer. Following consummation of the Spin-Off and the
Merger and subject to the terms of the New Pulitzer Voting Trust Agreement (as
defined below), the Pulitzer Principal Stockholders will have the power to
vote or direct the vote of an aggregate of approximately 94.0% of the
outstanding shares of New Pulitzer Class B Common Stock, each share of which
shall be entitled to ten votes, representing approximately 88.7% of the total
outstanding voting power of New Pulitzer (in each case, assuming the sale of
all shares
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proposed to be sold by the Pulitzer Principal Stockholders, as disclosed in
the registration statement filed with the SEC). See "The Hearst-Argyle Merger
Proposal and the Pulitzer Merger Proposal--Interests of Officers, Directors
and Principal Stockholders in the Transactions."
In connection with the consummation of the Spin-Off and the Merger, the
Pulitzer Principal Stockholders will deposit their shares of Pulitzer Class B
Common Stock into a voting trust (the "New Pulitzer Trust"), pursuant to a
voting trust agreement (the "New Pulitzer Voting Trust Agreement"). The
trustees of the New Pulitzer Trust will include each of the Pulitzer Parties.
Except in certain circumstances, the trustees of the New Pulitzer Trust will
have the power to direct the vote of all of the shares of New Pulitzer Class B
Common Stock deposited in the New Pulitzer Trust. See "Description of New
Pulitzer Capital Stock--New Pulitzer Voting Trust Agreement."
Following consummation of the Spin-Off and the Merger and subject to the
terms of the New Pulitzer Voting Trust Agreement, the Pulitzer Principal
Stockholders, collectively, will control any stockholder vote of New Pulitzer
Stock (other than a separate class vote of the New Pulitzer Common Stock).
Such control and concentration of voting power may make New Pulitzer a less
attractive target for a takeover than it otherwise might be or render more
difficult or discourage a merger proposal, tender offer or other transaction
involving an actual or potential change of control of New Pulitzer and have
the effect of precluding holders of New Pulitzer Stock from receiving any
premium above market price for their New Pulitzer Stock that would otherwise
be offered in connection with any attempt to acquire control of New Pulitzer.
See "Description of New Pulitzer Capital Stock."
Anti-Takeover Effect of Certain Certificate of Incorporation and By-Laws
Provisions. Certain provisions of New Pulitzer's Certificate of Incorporation
and By-laws could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding capital stock of New Pulitzer.
These provisions include the disparate voting rights of New Pulitzer Class B
Common Stock and New Pulitzer Common Stock. See "Description of New Pulitzer
Capital Stock."
No Prior Public Market. Prior to the consummation of the Spin-Off and the
Merger, there will not have been any trading market for the New Pulitzer Class
B Common Stock or the New Pulitzer Common Stock. The NYSE has approved the
listing, subject to official notice of issuance, of the New Pulitzer Common
Stock to be distributed to the holders of Pulitzer Common Stock pursuant to
the Distribution. The New Pulitzer Common Stock will trade on the NYSE under
the symbol "PTZ." The New Pulitzer Class B Common Stock to be distributed to
holders of Pulitzer Class B Common Stock in the Spin-Off will not be listed on
any national securities exchange or quoted on any over-the-counter-market.
There can be no assurance as to the prices at which trading in the New
Pulitzer Common Stock will occur after the completion of the transactions
contemplated by the Merger Agreement. Prices for such shares will be
determined in the marketplace and may be influenced by many factors, including
the operating performance of New Pulitzer, the depth and liquidity of the
market for such shares and investor perception of such shares.
Rule 145 Restrictions
The shares of Hearst-Argyle Series A Common Stock that will be issued to
Pulitzer stockholders pursuant to the Merger will be freely transferable,
except that shares of Hearst-Argyle Series A Common Stock issued to persons
who are deemed to be "affiliates" (as such term is defined in Rule 144 under
the Securities Act) of Pulitzer at the time of the Pulitzer Meeting may be
resold by them only pursuant to an effective registration statement covering
such securities, in transactions permitted by the resale provisions of Rule
145 under the Securities Act (or Rule 144 in the case of such persons who
become affiliates of Hearst-Argyle after the Merger) or as otherwise permitted
under the Securities Act. Persons who may be deemed to be affiliates of
Pulitzer or Hearst-Argyle generally include individuals or entities that
control, are controlled by, or are under common control with, such person and
may include certain officers and directors of such person as well as principal
stockholders of such person. Based on the 37,096,774 shares of Hearst-Argyle
Merger Stock being delivered to
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Pulitzer stockholders in the Merger and the number of shares of Pulitzer Stock
outstanding on the Pulitzer Record Date, if the Merger were consummated as of
February 9, 1999 and assuming the sale prior to the Merger of all shares of
Pulitzer Common Stock proposed to be sold by the Pulitzer Principal
Stockholders, affiliates of Pulitzer will receive approximately 22.2 million
shares of Hearst-Argyle Series A Common Stock pursuant to the Merger. The
Merger Agreement requires Pulitzer to use reasonable efforts to deliver or
cause to be delivered to Hearst-Argyle, prior to the Closing Date, from each
person identified by Pulitzer as an affiliate, a letter agreement to the
effect that such person will not sell or otherwise dispose of any of the
shares of Hearst-Argyle Series A Common Stock issued to such person pursuant
to the Merger except (i) pursuant to an effective registration statement under
the Securities Act or (ii) in a transaction which, in the reasonable opinion
of Hearst-Argyle's counsel, is not required to be registered under the
Securities Act and is permissible under Rule 145. See "The Merger Agreement--
Conditions Precedent."
THE SPECIAL MEETINGS
Times and Places; Purposes
Hearst-Argyle. The Hearst-Argyle Meeting will be held at 959 Eighth Avenue,
New York, New York 10019, on March 17, 1999, beginning at 10:00 a.m. New York
time. At the Hearst-Argyle Meeting, holders of shares of Hearst-Argyle Series
A Common Stock, Hearst-Argyle Series B Common Stock, Hearst-Argyle Series A
Preferred Stock and Hearst-Argyle Series B Preferred Stock will be asked to
consider and vote upon (i) the Hearst-Argyle Merger Proposal and (ii) the
Hearst-Argyle Charter Amendment Proposal. Such stockholders also will consider
and vote upon such other matters as may properly be brought before the Hearst-
Argyle Meeting.
THE BOARD OF DIRECTORS OF HEARST-ARGYLE HAS UNANIMOUSLY (WITH ONE MEMBER
BEING ABSENT) APPROVED THE HEARST-ARGYLE PROPOSALS AND RECOMMENDS THAT HEARST-
ARGYLE STOCKHOLDERS VOTE "FOR" EACH HEARST-ARGYLE PROPOSAL.
Pulitzer. The Pulitzer Meeting will be held at the Hotel Plaza Athenee, Le
Trianon Room, 37 East 64th Street, New York, New York 10021, on March 17,
1999, beginning at 10:00 a.m. New York time. At the Pulitzer Meeting, holders
of Pulitzer Common Stock and Pulitzer Class B Common Stock will be asked to
consider and vote upon (i) the Pulitzer Charter Amendment Proposal and (ii)
the Pulitzer Merger Proposal. Such stockholders also will consider and vote
upon such other matters as may properly be brought before the Pulitzer
Meeting.
THE BOARD OF DIRECTORS OF PULITZER HAS UNANIMOUSLY APPROVED THE PULITZER
PROPOSALS AND RECOMMENDS THAT PULITZER STOCKHOLDERS VOTE "FOR" EACH PULITZER
PROPOSAL.
Record Dates; Stock Entitled to Vote; Quorum
Hearst-Argyle. The Hearst-Argyle Record Date is January 21, 1999.
Accordingly, holders of record of Hearst-Argyle Series A Common Stock, Hearst-
Argyle Series B Common Stock, Hearst-Argyle Series A Preferred Stock and
Hearst-Argyle Series B Preferred Stock as of the Hearst-Argyle Record Date
will be entitled to notice of and to vote at, the Hearst-Argyle Meeting. As of
the Hearst-Argyle Record Date, 10,752,457 shares of Hearst-Argyle Series A
Common Stock, 41,298,648 shares of Hearst-Argyle Series B Common Stock, 10,938
shares of Hearst-Argyle Series A Preferred Stock and 10,938 shares of Hearst-
Argyle Series B Preferred Stock were issued and outstanding and entitled to
vote at the Hearst-Argyle Meeting. Each share of Hearst-Argyle Series A Common
Stock and Hearst-Argyle Series B Common Stock is entitled to one vote per
share and each share of Hearst-Argyle Series A Preferred Stock and Hearst-
Argyle Series B Preferred Stock is entitled to 29 votes per share.
The representation in person or by proxy of holders of a majority of the
shares of Hearst-Argyle Stock issued, outstanding and entitled to vote as of
the Hearst-Argyle Record Date is required to constitute a quorum
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for the transaction of business at any meeting of stockholders. Abstentions
are included in the determination of the number of shares of Hearst-Argyle
Stock present for purposes of determining a quorum.
Pulitzer. The Pulitzer Record Date is January 21, 1999. Accordingly, holders
of record of Pulitzer Common Stock and Pulitzer Class B Common Stock as of the
Pulitzer Record Date will be entitled to notice of and to vote at, the
Pulitzer Meeting. As of the Pulitzer Record Date, 7,321,465 shares of Pulitzer
Common Stock and 15,297,449 shares of Pulitzer Class B Common Stock were
issued and outstanding and entitled to vote at the Pulitzer Meeting. Each
share of Pulitzer Common Stock is entitled to one vote per share, and each
share of Pulitzer Class B Common Stock is entitled to 10 votes per share.
The representation, in person or by proxy, of shares representing a majority
of the aggregate voting power of the outstanding shares of Pulitzer Stock as
of the Pulitzer Record Date is required to constitute a quorum for the
transaction of business at the Pulitzer Meeting with respect to the Pulitzer
Merger Proposal. In addition, the representation, in person or by proxy, of
shares representing a majority of the outstanding shares of Pulitzer Common
Stock as of the Pulitzer Record Date is required to constitute a quorum for
the transaction of business at the Pulitzer Meeting with respect to the
Pulitzer Charter Amendment Proposal. Abstentions and broker non-votes are
included in the determination of the number of shares of Pulitzer Stock
present for purposes of determining a quorum.
Required Votes
Hearst-Argyle. Under the Delaware General Corporation Law (the "DGCL"), the
affirmative vote of the holders of a majority of the outstanding shares of
Hearst-Argyle Series A Common Stock, Hearst-Argyle Series B Common Stock,
Hearst-Argyle Series A Preferred Stock and Hearst-Argyle Series B Preferred
Stock, voting together as a single class, is required for approval of the
Hearst-Argyle Merger Proposal. Stockholder approval of the Hearst-Argyle
Merger Proposal will also constitute approval of the issuance of the Hearst-
Argyle Merger Stock, which by the rules of the NYSE (the "NYSE Rules") must be
approved by a majority of the votes cast by the holders of the Hearst-Argyle
Series A Common Stock, Hearst-Argyle Series B Common Stock, Hearst-Argyle
Series A Preferred Stock and Hearst-Argyle Series B Preferred Stock, voting
together as a single class, provided that the total vote cast in respect of
the proposal represents a majority of all shares of Hearst-Argyle Stock
entitled to vote thereon. The NYSE Rules are applicable to the vote on the
Hearst-Argyle Merger Proposal since the Hearst-Argyle Series A Common Stock is
listed on the NYSE and the Hearst-Argyle Merger Stock constitutes over 20% of
the Hearst-Argyle Common Stock currently outstanding. The NYSE Rules require
shareholder approval prior to the issuance of shares of common stock in
connection with the acquisition of the stock of another company if the number
of shares to be issued equals or exceeds 20% of the common stock outstanding
prior to such issuance.
Under the DGCL, the Hearst-Argyle Charter and the Hearst-Argyle By-Laws,
approval of the Hearst-Argyle Charter Amendment Proposal requires the
affirmative vote of (i) the holders of a majority of the shares of Hearst-
Argyle Series A Common Stock, Hearst-Argyle Series B Common Stock, Hearst-
Argyle Series A Preferred Stock and Hearst-Argyle Series B Preferred Stock
represented in person or by proxy at the Hearst-Argyle Meeting and voting
together as a single class and (ii) the holders of a majority of the shares of
Hearst-Argyle Series A Common Stock and Hearst-Argyle Series B Common Stock
represented in person or by proxy at the Hearst-Argyle Meeting and voting
together as a single class. The actions contemplated by each of the Hearst-
Argyle Merger Proposal and the Hearst-Argyle Charter Amendment Proposal are
not conditioned upon the approval of the other proposal.
As of the Hearst-Argyle Record Date, directors and executive officers of
Hearst-Argyle as a group beneficially owned approximately 2.8% of the
outstanding shares of Hearst-Argyle Common Stock. As of the Hearst-Argyle
Record Date, Hearst Broadcasting owned 100% of the outstanding shares of
Hearst-Argyle Series B Common Stock and 4,036,725 shares of the issued and
outstanding shares of Hearst-Argyle Series A Common Stock representing in the
aggregate approximately 87.1% of the outstanding voting power of the Hearst-
Argyle Common Stock and 86.0% of the outstanding voting power of the Hearst-
Argyle Stock. Therefore, Hearst
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Broadcasting has sufficient voting power to approve the Hearst-Argyle
Proposals regardless of the vote of any other stockholders. Hearst
Broadcasting has entered into a voting agreement with Pulitzer pursuant to
which it has agreed to vote in favor of the Hearst-Argyle Merger Proposal. In
addition, Hearst Broadcasting has advised Hearst-Argyle that it intends to
vote in favor of the Hearst-Argyle Charter Amendment Proposal even though that
matter is not covered by the Hearst-Argyle Voting Agreement. The shares held
by executive officers and directors of Hearst-Argyle are not subject to any
voting agreements and such directors and executive officers have not indicated
any intention as to how they will vote. See "Ownership of Hearst-Argyle Stock
Before and After the Merger," and "The Merger Agreement--Ancillary
Agreements--Hearst-Argyle Voting Agreement."
Pulitzer. Under the DGCL, the affirmative vote of the holders of a majority
of the outstanding shares of the Pulitzer Common Stock and Pulitzer Class B
Common Stock, voting together as a single class, is required to approve the
Pulitzer Merger Proposal. Under the DGCL, the Pulitzer Charter and the
Pulitzer By-Laws, the affirmative vote of the holders of a majority of the
outstanding shares of Pulitzer Common Stock and Pulitzer Class B Common Stock
represented in person or by proxy at the Pulitzer Meeting and voting together
as a single class, and the affirmative vote of a majority of the outstanding
shares of Pulitzer Common Stock, represented in person or by proxy at the
Pulitzer Meeting and voting separately as a class, are required to approve the
Pulitzer Charter Amendment Proposal.
As of the Pulitzer Record Date, the Pulitzer Principal Stockholders,
collectively, had the power to direct the vote of 14,443,209 shares of
Pulitzer Class B Common Stock, representing in the aggregate (i) approximately
94.4% of the issued and outstanding shares of Pulitzer Class B Common Stock
and (ii) approximately 90.1% of the outstanding voting power of Pulitzer Stock
with respect to the Pulitzer Merger Proposal. As of the Pulitzer Record Date,
the Pulitzer Principal Stockholders did not own any shares of Pulitzer Common
Stock. Pursuant to the Pulitzer Voting Agreement, the Pulitzer Principal
Stockholders have agreed to direct the vote of all their shares of Pulitzer
Stock in favor of the Merger Agreement and the transactions contemplated by it
(including the Pulitzer Charter Amendment). See "The Hearst-Argyle Merger
Proposal and the Pulitzer Merger Proposal--Interests of Officers, Directors
and Principal Stockholders in the Transactions." Therefore, the Pulitzer
Principal Stockholders have sufficient voting power to approve the Pulitzer
Merger Proposal regardless of the vote of any other stockholders. The
consummation of the transactions contemplated by the Pulitzer Merger Proposal,
however, is conditioned upon the approval and adoption of the Pulitzer Charter
Amendment Proposal. Accordingly, the Spin-Off and the Merger and the related
transactions will not be consummated unless the Pulitzer Charter Amendment
Proposal is approved and adopted by the requisite vote of Pulitzer
stockholders. The Pulitzer Principal Stockholders have entered into a voting
agreement with Hearst-Argyle pursuant to which they have agreed to vote or
direct the vote of all their shares of Pulitzer Stock in favor of the Pulitzer
Proposals. See "The Merger Agreement--Ancillary Agreements--Pulitzer Voting
Agreement."
Each Pulitzer Proposal will be voted upon separately by the Pulitzer
stockholders entitled to vote at the Pulitzer Meeting. Failure of the Pulitzer
stockholders to approve both of the Pulitzer Proposals will result in the
abandonment by Pulitzer of the Pulitzer Charter Amendment and the Merger
Agreement and the related transactions, including the Spin-Off.
Solicitation and Voting of Proxies
Hearst-Argyle. Holders of record of Hearst-Argyle Series A Common Stock,
Hearst-Argyle Series B Common Stock, Hearst-Argyle Series A Preferred Stock
and Hearst-Argyle Series B Preferred Stock, on the Hearst-Argyle Record Date
are entitled to cast their votes, in person or by properly executed proxy, at
the Hearst-Argyle Meeting. All shares represented at the Hearst-Argyle Meeting
by properly executed proxies received prior to or at the Hearst-Argyle Meeting
and not properly revoked will be voted at the Hearst-Argyle Meeting in
accordance with the instructions indicated in such proxies. If no instructions
are indicated, such proxies will be voted "FOR" approval of the Hearst-Argyle
Proposals. A properly executed proxy marked "ABSTAIN," although counted for
purposes of determining whether there is a quorum, will not be voted.
Accordingly, since the affirmative vote of a majority of the shares of Hearst-
Argyle Stock outstanding on the Hearst-Argyle Record
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Date, voting together as a single class, is required for approval of the
Hearst-Argyle Merger Proposal and the affirmative vote of the majority of the
shares of Hearst-Argyle Stock, voting together as a single class, and of the
majority of the shares of Hearst-Argyle Common Stock, voting together as a
single class, and in each case represented in person or by proxy and entitled
to vote is required for approval of the Hearst-Argyle Charter Amendment
Proposal, a proxy marked "ABSTAIN" will have the effect of a vote "AGAINST"
the Hearst-Argyle Merger Proposal and the Hearst-Argyle Charter Amendment
Proposal. In accordance with the NYSE Rules, brokers and nominees are
precluded from exercising their voting discretion on the Hearst-Argyle Merger
Proposal and thus, absent specific instructions from the beneficial owner of
such shares, are not empowered to vote such shares with respect to the Hearst-
Argyle Merger Proposal. Therefore, because the affirmative vote of a majority
of the shares of Hearst-Argyle Stock outstanding on the Hearst-Argyle Record
Date is required for approval of the Hearst-Argyle Merger Proposal and the
affirmative vote of a majority of the shares of Hearst-Argyle Stock
represented in person or by proxy and entitled to vote on the Hearst-Argyle
Charter Amendment Proposal is required to approve the Hearst-Argyle Charter
Amendment Proposal, a broker non-vote (i.e., shares held by brokers or
nominees which are represented at a meeting but with respect to which the
broker or nominee is not empowered to vote on a particular proposal) with
respect to the Hearst-Argyle Merger Proposal will have the effect of a vote
"AGAINST" the Hearst-Argyle Merger Proposal but will not be counted with
respect to the Hearst-Argyle Charter Amendment Proposal. Shares of Hearst-
Argyle Stock represented by broker non-votes will, however, be counted for
purposes of determining whether there is a quorum at the Hearst-Argyle
Meeting. The Hearst-Argyle Board does not know of any matters, other than the
matters described in the Hearst-Argyle Notice of Special Meeting attached to
this Joint Proxy Statement/Prospectus, that will come before the Hearst-Argyle
Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted by: (i) filing with the Secretary of
Hearst-Argyle, at or before the Hearst-Argyle Meeting, a written notice of
revocation bearing a date later than the date of the proxy; (ii) duly
executing a subsequent proxy relating to the same shares, bearing a date later
than the previously executed proxy, and delivering it to the Secretary of
Hearst-Argyle at or before the Hearst-Argyle Meeting; or, (iii) attending the
Hearst-Argyle Meeting and voting in person (although attendance at the Hearst-
Argyle Meeting will not in and of itself constitute revocation of a proxy).
Any written notice revoking a proxy should be sent to: Secretary, Hearst-
Argyle Television, Inc., 888 Seventh Avenue, New York, New York 10106.
Proxies are being solicited by and on behalf of the Hearst-Argyle Board. All
expenses in connection with the solicitation of Hearst-Argyle shareholders,
including the cost of preparing and mailing this Joint Proxy
Statement/Prospectus (except for printing and certain other costs, which will
be shared with Pulitzer), will be borne by Hearst-Argyle. In addition to
solicitation by use of the mails, proxies may be solicited by directors,
officers and employees of Hearst-Argyle in person or by telephone, telegram or
other means of communication. Such directors, officers and employees will not
be additionally compensated, but may be reimbursed for out-of-pocket expenses
in connection with such solicitation. Arrangements will be made with
custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of Hearst-Argyle Stock held of record by such
persons, and Hearst-Argyle may reimburse such custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith.
AS OF THE HEARST-ARGYLE RECORD DATE, HEARST BROADCASTING OWNED SHARES OF
HEARST-ARGYLE COMMON STOCK REPRESENTING APPROXIMATELY 87.1% OF THE OUTSTANDING
VOTING POWER OF THE HEARST-ARGYLE COMMON STOCK AND 86.0% OF THE OUTSTANDING
VOTING POWER OF THE HEARST-ARGYLE STOCK. THEREFORE, HEARST BROADCASTING HAS
SUFFICIENT VOTING POWER TO APPROVE THE HEARST-ARGYLE PROPOSALS REGARDLESS OF
THE VOTE OF ANY OTHER STOCKHOLDERS.
Pulitzer. Stockholders of record on the Pulitzer Record Date are entitled to
cast their votes, in person or by properly executed proxy, at the Pulitzer
Meeting. All shares represented at the Pulitzer Meeting by properly executed
proxies received prior to or at the Pulitzer Meeting and not properly revoked
will be voted at the Pulitzer Meeting in accordance with the instructions
indicated in such proxies. If no instructions are indicated,
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such proxies will be voted "FOR" approval of the Pulitzer Proposals. The
Pulitzer Board does not know of any matters, other than the matters described
in the Pulitzer Notice of Special Meeting attached to this Joint Proxy
Statement/Prospectus, that will come before the Pulitzer Meeting.
Since the affirmative vote of a majority of the shares of Pulitzer Stock
outstanding on the Pulitzer Record Date, voting together as a single class, is
required for approval of the Pulitzer Merger Proposal, and since the
affirmative votes of the majority of the outstanding shares of Pulitzer Common
Stock, voting as a separate class, and of the majority of the outstanding
shares of Pulitzer Stock, voting as a single class, is required for approval
of the Pulitzer Charter Amendment Proposal, each proxy marked "ABSTAIN" will
have the effect of a vote "AGAINST" each of the Pulitzer Proposals. In
accordance with the NYSE Rules, brokers and nominees are precluded from
exercising their voting discretion on the Pulitzer Proposals and thus, absent
specific instructions from the beneficial owner of such shares, are not
empowered to vote such shares with respect to the Pulitzer Proposals.
Therefore, because the affirmative vote of the holders of a majority of the
outstanding shares of Pulitzer Common Stock and Pulitzer Class B Common Stock,
voting together as a single class, is required to approve the Pulitzer Merger
Proposal, and the affirmative vote of the holders of a majority of the
outstanding shares of Pulitzer Common Stock and Pulitzer Class B Common Stock
represented in person or by proxy at the Pulitzer Meeting and voting together
as a single class, and the affirmative vote of a majority of the outstanding
shares of Pulitzer Common Stock, represented in person or by proxy at the
Pulitzer Meeting and voting separately as a class, are required to approve the
Pulitzer Charter Amendment Proposal, a broker non-vote (i.e., shares held by
brokers or nominees which are represented at a meeting but with respect to
which the broker or nominee is not empowered to vote on a particular proposal)
with respect to the Pulitzer Proposals will have the effect of a vote
"AGAINST" the Pulitzer Proposals. The Pulitzer Board does not know of any
matters, other than the matters described in the Pulitzer Notice of Special
Meeting attached to this Joint Proxy Statement/Prospectus, that will come
before the Pulitzer Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted by: (i) filing with the Secretary of
Pulitzer, at or before the Pulitzer Meeting, a written notice of revocation
bearing a date later than the date of the proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the
Secretary of Pulitzer at or before the Pulitzer Meeting; or, (iii) attending
the Pulitzer Meeting and voting in person (although attendance at the Pulitzer
Meeting will not in and of itself constitute revocation of a proxy). Any
written notice revoking a proxy should be sent to: Secretary, Pulitzer
Publishing Company, 900 North Tucker Boulevard, St. Louis, Missouri 63101.
Proxies are being solicited by and on behalf of the Pulitzer Board. All
expenses in connection with the solicitation of Pulitzer stockholders,
including the cost of preparing and mailing this Joint Proxy
Statement/Prospectus (except for printing and certain other costs, which will
be shared with Hearst-Argyle), will be borne by Pulitzer. Pulitzer has
retained MacKenzie Partners, Inc., a professional proxy solicitation firm, to
assist in the solicitation of proxies for the Pulitzer Meeting. MacKenzie
Partners, Inc. will be paid a fee of approximately $10,000, plus reimbursement
for reasonable out-of-pocket expenses. In addition to solicitation by use of
the mails, proxies may be solicited by directors, officers and employees of
Pulitzer in person or by telephone, telegram or other means of communication.
Such directors, officers and employees will not be additionally compensated
but may be reimbursed for out-of-pocket expenses in connection with such
solicitation. Arrangements will be made with custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of Pulitzer Common Stock held of record by such persons and to the
beneficial owners of Pulitzer Class B Common Stock held of record by the
voting trustees of the Pulitzer Voting Trust. Pulitzer may reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
AS OF THE PULITZER RECORD DATE, THE PULITZER PRINCIPAL STOCKHOLDERS,
COLLECTIVELY, HAD THE POWER TO DIRECT THE VOTE OF 14,443,209 SHARES OF
PULITZER CLASS B COMMON STOCK REPRESENTING IN THE AGGREGATE (I) APPROXIMATELY
94.4% OF THE ISSUED AND OUTSTANDING SHARES OF PULITZER CLASS B COMMON STOCK
AND (II) APPROXIMATELY 90.1% OF THE OUTSTANDING VOTING
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POWER OF PULITZER STOCK WITH RESPECT TO THE PULITZER MERGER PROPOSAL. AS OF
THE PULITZER RECORD DATE, THE PULITZER PRINCIPAL STOCKHOLDERS DID NOT OWN ANY
SHARES OF PULITZER COMMON STOCK. PURSUANT TO THE PULITZER VOTING AGREEMENT,
THE PULITZER PRINCIPAL STOCKHOLDERS HAVE AGREED TO DIRECT THE VOTE OF ALL
THEIR SHARES OF PULITZER STOCK IN FAVOR OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY IT (INCLUDING THE PULITZER CHARTER AMENDMENT).
THEREFORE, THE PULITZER PRINCIPAL STOCKHOLDERS HAVE SUFFICIENT VOTING POWER TO
APPROVE THE PULITZER MERGER PROPOSAL REGARDLESS OF THE VOTE OF ANY OTHER
HOLDERS OF PULITZER STOCK. THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
BY THE PULITZER MERGER PROPOSAL, HOWEVER, IS CONDITIONED UPON THE APPROVAL AND
ADOPTION OF THE PULITZER CHARTER AMENDMENT PROPOSAL. ACCORDINGLY, THE SPIN-OFF
AND THE MERGER AND THE RELATED TRANSACTIONS WILL NOT BE CONSUMMATED UNLESS THE
PULITZER CHARTER AMENDMENT PROPOSAL IS APPROVED AND ADOPTED BY THE REQUISITE
VOTE OF PULITZER STOCKHOLDERS.
THE HEARST-ARGYLE MERGER PROPOSAL AND THE PULITZER MERGER PROPOSAL
Transaction Overview
General. Hearst-Argyle, Pulitzer and New Pulitzer entered into the Merger
Agreement, which is dated as of May 25, 1998, and which provides for, among
other things, (i) the contribution by Pulitzer to New Pulitzer of all its
assets (other than broadcasting assets) and the net proceeds of the New Debt
after the satisfaction of certain liabilities, subject to all liabilities of
Pulitzer (other than broadcasting liabilities, the New Debt and certain other
obligations) and the distribution of shares of capital stock of New Pulitzer
to Pulitzer's stockholders and (ii) the Merger with and into Hearst-Argyle of
Pulitzer with its remaining television and radio broadcast assets and
liabilities, the New Debt and certain other obligations.
The Spin-Off. Prior to the Merger, Pulitzer will contribute (the
"Contribution") to New Pulitzer (i) all of its assets other than (A) the
issued and outstanding capital stock of Pulitzer Broadcasting Company, a
wholly owned subsidiary of Pulitzer ("Pulitzer Broadcasting"), and of WESH
Television, Inc., KCCI Television, Inc., and WDSU Television, Inc., each an
indirect wholly owned subsidiary of Pulitzer (collectively, the "Broadcasting
Subsidiaries") and (B) any of the assets of Pulitzer Broadcasting or the
Broadcasting Subsidiaries or other assets related primarily to Pulitzer's
broadcasting businesses (collectively, the "Broadcasting Assets," and together
with Pulitzer Broadcasting and the Broadcasting Subsidiaries, the "Pulitzer
Broadcasting Business"); (ii) the net proceeds of $700 million in new
financing (the "New Debt") after paying or providing for all of Pulitzer's
existing indebtedness (the "Existing Debt") and any fees and expenses incurred
by Pulitzer in connection with the transactions contemplated by the Merger
Agreement (the "Deal Expenses"); and, (iii) any other remaining cash and cash
equivalents then owned by Pulitzer. As part of the Contribution, New Pulitzer
will assume all liabilities of Pulitzer except liabilities associated with the
Pulitzer Broadcasting Business, the New Debt and certain other obligations.
Following the Contribution and prior to the Merger, Pulitzer will distribute
one share of New Pulitzer Common Stock for each outstanding share of Pulitzer
Common Stock and one share of New Pulitzer Class B Common Stock for each
outstanding share of Pulitzer Class B Common Stock (the "Distribution," and
together with the Contribution, the "Spin-Off"). In order to effect the
Distribution, it will be necessary for Pulitzer to amend its Restated
Certificate of Incorporation immediately prior thereto as described herein.
The NYSE has approved the listing, subject to official notice of issuance,
of the shares of New Pulitzer Common Stock that will be distributed to holders
of Pulitzer Common Stock in the Distribution under the symbol "PTZ". The
shares of New Pulitzer Class B Common Stock to be distributed to holders of
Pulitzer Class B Common Stock in the Distribution will not be listed on any
national securities exchange or any over-the-counter market.
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The Merger. Following the Spin-Off, Pulitzer, with its remaining television
and radio broadcast assets and liabilities, the New Debt and certain other
obligations, will be merged with and into Hearst-Argyle with Hearst-Argyle
being the surviving corporation in the Merger, in exchange for the issuance to
Pulitzer stockholders of 37,096,774 shares of Hearst-Argyle Series A Common
Stock and on the terms and subject to the conditions contained in the Merger
Agreement. As a result of the Merger, Hearst-Argyle will assume Pulitzer's
indebtedness under the $700 million New Debt financing. The New Debt financing
initially will be secured by the cash proceeds of the loan and, upon payment
of the Existing Debt and the occurrence of the Spin-Off, the lien on the cash
will be released and replaced by a pledge of all of the issued and outstanding
shares of capital stock of Pulitzer Broadcasting and the Broadcasting
Subsidiaries. The net proceeds of the New Debt will be contributed to New
Pulitzer prior to the Merger pursuant to the Contribution in order to
capitalize New Pulitzer. In addition, pursuant to a working capital adjustment
mechanism in the Merger Agreement, Hearst-Argyle will pay to New Pulitzer or
New Pulitzer will pay to Hearst-Argyle, respectively, the amount by which
Pulitzer's working capital as of the consummation of the Merger is greater or
less than $41 million.
The NYSE has approved the listing of the shares of Hearst-Argyle Series A
Common Stock that will be issued to holders of Pulitzer Stock in the Merger on
the NYSE, subject to official notice of issuance.
Background of and Pulitzer's Reasons for the Spin-Off and the Merger
The following is a summary of the background of, and Pulitzer's reasons for,
the Spin-Off and the Merger.
The Radio and Television Broadcasting Industry. The radio and television
broadcasting industry has undergone significant changes in recent years as a
result of several factors, including industry consolidation, technological
advances, regulatory developments and increased competition. The
Telecommunications Act effected sweeping changes in the established regulatory
landscape by, among other things, substantially liberalizing the FCC
regulations governing the multiple, common and cross ownership of broadcast
stations, eliminating the cap, subject to certain national audience reach
limitations, on the number of TV stations a party may own nationwide, and
repealing certain statutory prohibitions against a cable television system
from carrying the signal of a television broadcast station if such system
owns, operates, controls or has an interest in a broadcast television station
that serves substantially the same area being served by the cable television
system (although the FCC rule containing such restrictions currently remains
in effect). The Telecommunications Act also ratified the FCC's policy to rely
increasingly upon the interplay of marketplace forces in lieu of direct
government regulation and to encourage increasing competition among different
electronic communication media.
In response to these factors, many radio and television broadcasting
operators have been taking steps to increase their operating scales. Increased
scale offers several benefits including the ability to consolidate programming
purchases and the likelihood of lower programming costs, an improved ability
to develop and deploy new technologies and services that require a substantial
capital commitment, reduction of the cost of sales as a result of station
representative consolidation, and decreased susceptibility to new competitive
forces. In order to capitalize on new technology and increase operating
scales, radio and television broadcasting companies must commit substantial
capital to acquire additional radio and television broadcasting stations and
to build new or upgrade existing physical facilities.
Pulitzer. Although Pulitzer has been a pioneer in both the radio and
television broadcasting businesses, prior to 1976 it was principally engaged
in the newspaper publishing business. In 1976, Pulitzer acquired its third
television station, and by 1979 had acquired its fourth and fifth television
stations and two radio stations in Phoenix, Arizona. During the 1980s,
Pulitzer acquired five and sold three television stations because FCC
regulations then limited Pulitzer to owning seven television stations.
Pulitzer acquired two more television stations in 1993, a third Phoenix,
Arizona radio station in 1996 and two additional radio stations in 1997 in
Louisville, Kentucky and Kernersville, North Carolina, respectively.
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Beginning in the mid-1990s, the growing trend of consolidation in the
broadcasting industry, the development and introduction of new technologies
and the emergence of new competitors affected strategic planning regarding the
Pulitzer Broadcasting Business. These and other developments increased
Pulitzer's awareness of the growing challenges facing traditional radio and
television broadcasting companies and raised the prospect that the continued
success of the Pulitzer Broadcasting Business might be dependent upon
increased scale of operations. In light of the various challenges, costs and
risks associated with increased scale of operations and the market for
broadcasting businesses generally in the current industry climate, and for the
other reasons described in this Joint Proxy Statement/Prospectus, the Pulitzer
Board has determined that it is in the best interests of its stockholders to
sell the Pulitzer Broadcasting Business at this time and, as New Pulitzer, to
retain and focus on the newspaper publishing and related new media operations.
In May 1997, Michael E. Pulitzer, Pulitzer's Chairman, President and Chief
Executive Officer, initiated discussions with Pulitzer directors Emily Rauh
Pulitzer and David E. Moore (together with Michael E. Pulitzer, the "Pulitzer
Parties") and James M. Snowden, Jr., a director of Pulitzer and an executive
vice president and then director of Huntleigh Securities Corporation
("Huntleigh"), William Bush, a director of Pulitzer and a partner in Fulbright
& Jaworski L.L.P., counsel to Pulitzer, and Peter J. Repetti, a then director-
emeritus of Pulitzer and retired partner of Fulbright & Jaworski L.L.P. These
discussions continued over several months, between May and early December
1997, and also involved the participation of Goldman, Sachs & Co. ("Goldman").
These discussions led to the formulation of a preliminary proposal (the
"Preliminary Proposal"), which Michael E. Pulitzer, on behalf of the Pulitzer
Parties, introduced and presented formally to the Pulitzer Board at a special
meeting held on December 11, 1997.
Presentation of Preliminary Proposal to Pulitzer's Board of Directors. At
the special meeting of the Pulitzer Board on December 11, 1997, Mr. Pulitzer
explained that the Preliminary Proposal consisted of two integrated parts and
that each part was expressly conditioned on the effectuation of the other. The
first part involved the possible distribution to Pulitzer's stockholders of
the shares of a newly formed company ("New Pulitzer"), which would own and
conduct Pulitzer's existing newspaper publishing and related new media
businesses. New Pulitzer would be publicly held and would have essentially the
same two-tier capital structure and voting rights as Pulitzer. New Pulitzer
also would have significant capitalization, providing it with sufficient
financial resources to potentially expand over time, through a series of
acquisitions, Pulitzer's present newspaper operations.
The second part of the Preliminary Proposal involved a possible merger or
sale, joint venture or other business combination involving all or
substantially all of the Pulitzer Broadcasting Business. Mr. Pulitzer advised
that the Preliminary Proposal did not contemplate the sale of Pulitzer as a
whole, but rather, in effect, the retention and future expansion of the
newspaper publishing and related new media businesses and the disposition only
of the Pulitzer Broadcasting Business. Mr. Pulitzer indicated that, in the
opinion of the Pulitzer Parties, it was the appropriate time to focus on
Pulitzer's future because Pulitzer was performing very well, the market value
of the Pulitzer Broadcasting Business was high and the prospects for the
newspaper operations appeared attractive.
Following Mr. Pulitzer's introduction, representatives of Goldman then made
a presentation to the Pulitzer Board relating to the Preliminary Proposal,
discussing, among other subjects, an equity market overview, a merger market
overview, the market for broadcasting properties, the market for newspaper
properties, a potential partner analysis, an analysis of potential newspaper
acquisition candidates and possible structures that might address various
objectives, including liquidity, continued operation and control of Pulitzer's
newspaper assets, value realization, investment diversification and income.
At this special meeting, the Pulitzer Board took no formal action regarding
the Preliminary Proposal other than to ratify Pulitzer's entry into formal
engagement letters with Goldman and Huntleigh and to approve the retention of
Fulbright & Jaworski L.L.P. and other legal advisors, accountants and
consultants to assist management of Pulitzer and the Pulitzer Board in their
consideration of the Preliminary Proposal.
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At the January 6, 1998 special meeting of the Pulitzer Board,
representatives of Goldman reported on their work relating to the Preliminary
Proposal since the Pulitzer Board's special meeting on December 11, 1997.
Prior to this special meeting of the Pulitzer Board, Alice B. Hayes, a
director, had met separately with Michael E. Pulitzer and a representative of
Goldman to further discuss the Preliminary Proposal.
Preliminary Authorization to Explore Advisability of Proposal. At the
regularly scheduled meeting of the Pulitzer Board on January 26, 1998, Goldman
made a presentation to the Board relating to the Preliminary Proposal. Goldman
discussed, among other things, potential transaction structures and their tax
implications, valuation, a potential partner analysis (including a summary of
pro forma merger plans), a preliminary timetable, a comparable company
analysis, examples of comparable transactions and a current stock market
environment analysis.
At this January 26, 1998 special meeting, the Pulitzer Board unanimously
adopted resolutions authorizing: (i) Pulitzer's management, in conjunction
with Goldman, Huntleigh and counsel for Pulitzer, to (A) continue exploring
the viability and advisability of the Preliminary Proposal and (B) complete
preparation of a detailed confidential information memorandum with respect to
the Pulitzer Broadcasting Business (the "Confidential Information Memorandum")
and (ii) Goldman to distribute the Confidential Information Memorandum (once
approved by the Chairman of the Pulitzer Board) to potentially interested
parties on a confidential basis.
Distribution of Confidential Information Memorandum. In March 1998, Goldman
distributed the Confidential Information Memorandum to 29 parties, including
Hearst-Argyle, that had entered into confidentiality agreements with Pulitzer.
Goldman, on behalf of Pulitzer, invited those parties to submit preliminary
non-binding proposals for the acquisition of the Pulitzer Broadcasting
Business. Goldman informed those parties that Pulitzer proposed to structure
the disposition of the Pulitzer Broadcasting Business through a Spin-Off of
Pulitzer's newspaper publishing and related new media businesses to its
stockholders and a subsequent merger of Pulitzer (which would contain at that
time only the Pulitzer Broadcasting Business) into the acquiring corporation.
Goldman also informed these parties that Pulitzer was proposing this structure
in order to effect a transaction that would be tax-free to the stockholders of
Pulitzer. Goldman indicated that the Spin-Off, however, could result in a
taxable gain to Pulitzer. Goldman also indicated that Pulitzer would consider
alternative structures.
Receipt by Pulitzer of Non-Binding Indications of Interest. Interested
parties were asked to submit their written, preliminary proposals by April 2,
1998, and to include in their proposals, among other things, information
regarding the aggregate consideration they would be willing to pay for the
Pulitzer Broadcasting Business and the amount of debt they would be willing to
assume as part of the proposed transaction. In early April 1998, Goldman
received, on behalf of Pulitzer, preliminary, written, non-binding proposals
to acquire the Pulitzer Broadcasting Business from five parties in the
television industry, including Hearst-Argyle. In addition, one additional
party expressed an interest in being invited to participate in the next phase,
and following April 2, 1998, Goldman had a series of discussions with another
party that, on an oral basis, had indicated potential valuation ranges. Three
additional parties also expressed interest in acquiring certain specific
Pulitzer television stations, and four parties expressed an interest in
acquiring certain Pulitzer radio stations.
At a special meeting of the Pulitzer Board on April 8, 1998, representatives
of Goldman discussed with the directors certain matters with respect to the
parties interested in acquiring all or portions of the Pulitzer Broadcasting
Business. Goldman discussed a summary of the financial terms of each of the
non-binding preliminary proposals, including the range of values proposed and
the structure of the transactions proposed, and discussed the relative
advantages and disadvantages of a transaction with each of the interested
parties.
The Pulitzer directors then discussed the merits of each interested company
and its specific proposal. The discussion focused on, among other things, each
interested party's broadcasting operations, leverage, management structure,
capital structure, dividend policy and diversification of asset mix.
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Following this discussion, the Pulitzer Board unanimously decided to
continue to explore the viability and advisability of the Preliminary Proposal
and to authorize Goldman to pursue discussions with each of the interested
parties recommended by Goldman. Pulitzer then invited four interested parties
to conduct extensive due diligence of Pulitzer and the Pulitzer Broadcasting
Business with a view to their making a definitive acquisition proposal.
Shortly thereafter and after further valuation discussions with Goldman, one
party elected not to proceed with the process.
Pulitzer prepared a data room in St. Louis, Missouri, and provided the three
remaining interested parties with an opportunity to review business, financial
and legal information with respect to Pulitzer and the Pulitzer Broadcasting
Business. In the course of each interested party's visit to the data room,
senior executives of Pulitzer, Pulitzer Broadcasting and the general managers
of the Pulitzer broadcasting stations made a detailed presentation, and
provided an opportunity to ask questions, about the Pulitzer Broadcasting
Business.
Request by Pulitzer for Final Proposals. Goldman invited the three
interested parties to submit final proposals and marked-up copies of a
previously provided draft merger agreement and related documents. The final
proposals were to include a detailed description of the aggregate amount and
form of consideration (including descriptions of alternative equity
securities, if applicable, and levels of debt assumed) to be paid for the
Pulitzer Broadcasting Business. In addition, bidders were requested to
separately state the additional amount offered for Pulitzer's approximately
3.5% interest in the Arizona Diamondbacks Limited Partnership, which was to be
sold in a separate transaction to the same acquiror. Bidders were requested to
discuss their ability to enter into the merger agreement and to consummate the
contemplated transaction, including the anticipated need for consents and
approvals not referred to in the draft merger agreement, as well as any other
material conditions to signing and closing. They were also requested to list
any markets where they had potential overlaps and to indicate key issues or
assumptions made regarding the deal structure that had a significant impact on
the value of their proposals. It was indicated that while Pulitzer would
consider all factors in selecting a final proposal, it would give great weight
to: (i) the enterprise value offered for the Pulitzer Broadcasting Business;
(ii) the quality of the equity securities offered as part of the
consideration; (iii) the extent and nature of any revisions to the draft
merger agreement; and, (iv) the timing and conditions of a closing.
Prior to the submission of final proposals, Michael E. Pulitzer met with one
or more senior executives of each of the interested parties. Representatives
of Goldman and a representative of Huntleigh also participated in certain of
those meetings. The purposes of these meetings were twofold: (i) to enable
Pulitzer to learn more about the interested party and its plans with respect
to the Pulitzer Broadcasting Business, including the implications of a
transaction for employees of the Pulitzer Broadcasting Business and (ii) to
enable the interested party to gain more information about Pulitzer's
objectives with respect to the final proposals.
Receipt by Pulitzer of Final Proposals; Negotiation of Terms of the
Merger. Final proposals, including the draft merger agreement marked with
proposed revisions, were submitted to Pulitzer on May 20, 1998, by Hearst-
Argyle and the two other interested parties. Various Pulitzer directors worked
with Goldman and Pulitzer's legal advisors between May 20 and May 23, 1998,
analyzing the bids and comparing their relative strengths and weaknesses.
Hearst-Argyle offered to acquire the Pulitzer Broadcasting Business for
consideration consisting of a fixed dollar amount of shares of Hearst-Argyle
Series A Common Stock, subject to certain adjustments, and a fixed amount of
debt and other liabilities. Hearst-Argyle's proposal included a price
protection or "collar" mechanism that would adjust the number of shares of
Hearst-Argyle Series A Common Stock to be delivered based on the price of the
Hearst-Argyle Series A Common Stock within a range of specified prices. Such
proposal also included a right for Pulitzer to terminate the proposed merger
if the price of such Hearst-Argyle stock declined below a specified price.
A second bidder (the "Second Bidder") offered to acquire the Pulitzer
Broadcasting Business for an aggregate consideration less than that under the
Hearst-Argyle proposal, but indicated orally to Goldman that it could
potentially increase its bid within a specified range (the highest end of that
range might have exceeded the
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aggregate consideration offered by Hearst-Argyle). The consideration offered
by the Second Bidder consisted of shares of its common stock with a specified
aggregate "equity value," subject to certain adjustments, and a fixed amount
of debt and other liabilities to be assumed. The Second Bidder's proposal also
included a collar mechanism that was based on changes in the market price of
its common stock from a stipulated execution price. This proposal did not
include a right for Pulitzer to terminate the proposed merger if the price of
the Second Bidder's common stock declined more than a specified percentage.
Additionally, the Second Bidder's proposal contained no "fiduciary outs" for
the Pulitzer Board to accept an alternative transaction.
The proposal submitted by a third bidder (the "Third Bidder") involved an
offer to acquire not only the Pulitzer Broadcasting Business but also certain
newspaper assets of Pulitzer. The aggregate consideration, as well as the
equity value portion thereof, offered by the Third Bidder was less than under
the proposals submitted by Hearst-Argyle and the Second Bidder.
Between May 20 and May 22, 1998, representatives of Goldman conducted
discussions with representatives of Hearst-Argyle and the Second Bidder
regarding certain elements of their respective proposals, including, among
other things, the draft merger agreement, the form and amount of consideration
of such proposals, and the mechanics and terms of the proposed value
protection mechanisms. The proposal of the Third Bidder was deemed by Pulitzer
to be inadequate as to price and certain other factors relative to the
proposals of Hearst-Argyle and the Second Bidder as described above, and no
further discussions were initiated with the Third Bidder.
Following these discussions and prior to the May 22, 1998 Meeting (as
defined below), Hearst-Argyle submitted a revised written proposal increasing
the "equity value" of the consideration offered and decreasing the debt and
other liabilities to be assumed, thereby increasing the enterprise value of
its offer. Furthermore, Hearst-Argyle's revised proposal stipulated that it
would expire by its terms on May 26, 1998. In addition, the Second Bidder
modified its original proposal by, among other things, offering two
alternative enterprise value/collar structures. Under each alternative, the
enterprise value was less than under Hearst-Argyle's revised proposal.
The results of Goldman's discussions were then compiled for presentation to
a group of Pulitzer directors consisting of the Pulitzer Parties, James M.
Snowden, Jr., William Bush and Alice B. Hayes on Friday afternoon, May 22,
1998 (the "May 22, 1998 Meeting"). At that meeting, Goldman reviewed a
comparison of the final proposals of Hearst-Argyle and the Second Bidder (the
"Comparison"). Goldman presented an analysis of the financial terms of each
proposal and certain financial, ownership, stock price, trading and business
mix information for each of Hearst-Argyle and the Second Bidder and then
discussed the relative advantages and disadvantages of a transaction with
Hearst-Argyle and the Second Bidder. Following this presentation, the
participating directors engaged in a detailed discussion of the relative
merits of the Hearst-Argyle proposal and the alternative versions of the
Second Bidder's proposal. Goldman and Pulitzer's legal advisors responded to
questions from the participating directors regarding various aspects of the
proposals. Among the questions were several regarding the collars, the
business and acquisition strategies, and the relative values of the securities
being offered by Hearst-Argyle and the Second Bidder.
Pulitzer's legal advisors discussed the relevant provisions of Delaware law
relating to breakup fees and fiduciary responsibilities. Pulitzer's legal
advisors and Goldman also indicated that the Second Bidder had proposed more
revisions to the draft merger agreement than had Hearst-Argyle and that in
their view it could potentially take longer to conclude negotiations with the
Second Bidder.
At the conclusion of the discussion regarding the comparative proposals of
Hearst-Argyle and the Second Bidder, the participating directors preliminarily
concluded that the Hearst-Argyle proposal was preferable and agreed that
Pulitzer should conduct further discussions with Hearst-Argyle with a view to
reaching a final agreement and preparing definitive merger and related
documents for approval and execution by Monday, May 25, 1998. The
participating directors determined that senior executives of Hearst-Argyle and
the parent
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company of its controlling stockholder, Hearst, should be invited to make a
presentation to the Pulitzer directors immediately prior to their special
meeting on Monday, May 25, 1998.
Goldman and Pulitzer's legal advisors initiated discussions with Hearst-
Argyle on Friday evening, May 22, 1998, and on Saturday, May 23, 1998
Pulitzer's legal counsel provided Hearst-Argyle and its legal counsel a
revised draft of the merger agreement and certain related documents.
On May 23, 1998, Goldman participated by conference call in a meeting with
James M. Snowden, Jr. and the three management directors who did not
participate in the May 22, 1998 Meeting to review the discussions at that
meeting. Following that conference call, Goldman participated by a conference
call in a meeting (the "May 23, 1998 Meeting") with all the directors of
Pulitzer except Alice B. Hayes to review the preliminary conclusion reached at
the May 22, 1998 Meeting that the Hearst-Argyle proposal was preferable. At
the May 23, 1998 Meeting, Goldman discussed the Comparison and the information
considered at the May 22, 1998 Meeting. At the conclusion of the May 23, 1998
Meeting, the participating directors unanimously concluded that the revised
Hearst-Argyle proposal was the preferred proposal and that management, Goldman
and Pulitzer's counsel should continue to negotiate and attempt to finalize
the documentation for the sale of the Pulitzer Broadcasting Business to
Hearst-Argyle and to report back to the Pulitzer Board at a special meeting to
be held on Monday, May 25, 1998.
In accordance with the directors' conclusions at the May 22, 1998 Meeting
and the May 23, 1998 Meeting, Pulitzer's legal advisors and Goldman met in
person with representatives of Hearst-Argyle and its legal advisors on May 24
and 25, 1998. By early afternoon on May 25, 1998, Pulitzer's representatives
and Hearst-Argyle's representatives had negotiated a mutually satisfactory
definitive merger agreement, subject to approval by the Pulitzer Board.
At the invitation of Pulitzer, the senior executives of Hearst-Argyle, Frank
A. Bennack, Jr., the President and Chief Executive Officer of Hearst (who is
also a member of the Boards of Directors of Hearst and Hearst-Argyle) and
William R. Hearst III, a member of the Boards of Directors of Hearst and
Hearst-Argyle, made a presentation to the members of the Pulitzer Board, its
legal advisors and Goldman. During this presentation, the Hearst-Argyle
executives discussed, among other matters, the history of Hearst-Argyle, its
operating philosophy, its financial condition and its future goals. The
President and Chief Executive Officer of Hearst then described the growth and
operating philosophy of Hearst, its approval of the proposed transaction and
its support for the future goals of Hearst-Argyle. William R. Hearst III
discussed his various associations with Hearst and Hearst-Argyle. The
presentation concluded with remarks by Michael E. Pulitzer and responses by
representatives of Hearst-Argyle and Hearst to questions posed by various
Pulitzer directors.
Later that same afternoon, the Pulitzer Board met to formally consider the
Hearst-Argyle revised proposal. The Pulitzer Board first discussed the
presentation by representatives of Hearst-Argyle and Hearst. Pulitzer's
advisors then reviewed with the Pulitzer Board a presentation Goldman had
prepared relating to the bidding process, the merger transaction involving the
Pulitzer Broadcasting Business, and an overview of Hearst-Argyle and New
Pulitzer. Goldman reviewed the parties who participated in the bidding process
and any bids that were submitted. The materials pertaining to the bidding
process included a summary of the preliminary and final proposals, a
comparative analysis of the final proposals of Hearst-Argyle and the Second
Bidder and an analysis of the proceeds to be received based on the Hearst-
Argyle proposal. The materials relating to the proposed merger with Hearst-
Argyle included an analysis of the Hearst-Argyle final proposal, and Goldman
presented a summary of the analyses it performed in rendering its oral opinion
to the Pulitzer Board, including but not limited to a discussion of the
potential valuation of New Pulitzer and the potential for its growth through
acquisitions. The overview of Hearst-Argyle included information about, among
other things, Hearst-Argyle's markets, Hearst and its commitment to Hearst-
Argyle, its historical results, its stock price history, a comparative
valuation analysis with other broadcasters, its stock ownership and its
management.
Following a discussion of those materials, Pulitzer's legal advisors
reviewed the proposed definitive merger agreement for the sale of the Pulitzer
Broadcasting Business to Hearst-Argyle as well as related agreements,
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including the voting agreements to be executed by Hearst Broadcasting and
Pulitzer and Hearst-Argyle and the Pulitzer Principal Stockholders,
respectively.
In response to a query from the Chairman and Chief Executive Officer of
Pulitzer, Goldman expressed its view that the bidding process had been
extensive. Goldman then delivered its oral opinion (which was subsequently
confirmed in writing) that the consideration to be received by the holders of
Pulitzer Stock in the Merger and the Spin-Off, taken as a whole, is fair from
a financial point of view to the holders of Pulitzer Stock.
At the conclusion of the ensuing discussion, the Pulitzer Board was of the
unanimous opinion that the Hearst-Argyle proposal was preferable to the Second
Bidder's proposal. The Pulitzer Board based its view on a number of factors,
including (i) the higher "enterprise value" of the Hearst-Argyle proposal;
(ii) the structure of the Second Bidder's proposal; (iii) the more favorable
"fiduciary out" provision under the Hearst-Argyle proposal; (iv) the financial
strength of Hearst, its commitment to Hearst-Argyle and the financial
structure of Hearst-Argyle; and, (v) the business mix, strategic fit and
acquisition strategy of Hearst-Argyle compared to that of the Second Bidder,
including the complementary nature of the Hearst-Argyle and Pulitzer
television station markets and the increased geographic and network
diversification resulting from a transaction with Hearst-Argyle. The Pulitzer
Parties then confirmed that they were prepared to enter into a voting
agreement obligating them to vote in favor of, among other things, the merger
agreement, the Merger and the Spin-Off. At that point the Pulitzer Board
concluded its deliberations and, acting unanimously, accepted the final
proposal of Hearst-Argyle and approved the Spin-Off, the merger agreement, the
Merger and the relevant transaction documents.
Following this meeting, on May 25, 1998, Pulitzer, New Pulitzer and Hearst-
Argyle entered into the merger agreement (the "Original Merger Agreement");
Pulitzer and Hearst Broadcasting entered into the Hearst-Argyle Voting
Agreement; and Hearst-Argyle and the Pulitzer Principal Stockholders entered
into the Pulitzer Voting Agreement (in its form prior to amendment).
In early January 1999, Pulitzer, its legal advisors and Goldman and
Huntleigh, discussed the possibility of fixing the number of shares of Hearst-
Argyle Series A Common Stock to be delivered to Pulitzer stockholders in the
Merger and of eliminating the equity adjustment (i.e., "collar") mechanism
provided in the Original Merger Agreement. The collar mechanism had provided
for the Hearst-Argyle Series A Common Stock to be valued at a minimum of
$29.75 per share, subject to certain termination and "top-up" rights, and a
maximum of $38.50 per share. At the request of Pulitzer, William Bush, a
Director of Pulitzer and a partner of Fulbright & Jaworski L.L.P., counsel to
Pulitzer, discussed the possibility with Dean Blythe, Senior Vice President--
Corporate Development of Hearst-Argyle, by telephone on January 12, 1999.
On January 13, 1999, at the New York offices of Fulbright & Jaworski L.L.P.,
Mr. Bush and Mr. Blythe discussed the range of trading prices of the Hearst-
Argyle Series A Common Stock during various periods since May 25, 1998, the
execution date of the Original Merger Agreement, and various parameters for
establishing a fixed number of shares of Hearst-Argyle Series A Common Stock
to be delivered.
On January 14, 1999, in a telephone conversation with Mr. Blythe, Mr. Bush
indicated that Pulitzer would not submit to the Pulitzer Board a fixed number
of shares of Hearst-Argyle Series A Common Stock less than that number
determined by dividing $1.15 billion, the value of the equity consideration
provided for in the Original Merger Agreement, by $31.00 per share, or a total
of 37,096,774 shares. In the course of their conversation, Mr. Bush and Mr.
Blythe also discussed removing the collar mechanism, thereby eliminating
Pulitzer's right to terminate the Original Merger Agreement relative to
fluctuations in the price of Hearst-Argyle Series A Common Stock, and
extending the unilateral termination date under the Original Merger Agreement.
Later that afternoon, Mr. Blythe telephoned Mr. Bush and indicated that
Hearst-Argyle would be willing to fix the number of shares at 37,096,774,
subject to formal approval of that and other previously discussed changes to
the Original Merger Agreement by the Pulitzer Board and by the Hearst-Argyle
Board.
On January 15, 1999, the Pulitzer Board met by conference call to formally
consider a proposal (the "1999 Proposal") that would, among other things, (i)
fix the number of shares of Hearst-Argyle Series A Common Stock to be
delivered to Pulitzer stockholders in the Merger at 37,096,774 shares; (ii)
remove the collar mechanism; and (iii) extend the unilateral termination date
under the Original Merger Agreement from April 1,
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to May 1, 1999. William Bush presented a history of the 1999 Proposal and the
related discussions with Dean Blythe of Hearst-Argyle. Goldman then discussed
the 1999 Proposal, including valuation of the Broadcasting Business based upon
37,096,774 shares of Hearst-Argyle Series A Common Stock (the "Fixed Shares").
Goldman explained, among other things, that, based upon the Fixed Shares,
Pulitzer stockholders would be assured of receiving 37,096,774 shares of
Hearst-Argyle Merger Stock. Goldman further explained that while there might
be initial downward pressure on the share price of Hearst-Argyle Series A
Common Stock following announcement of the 1999 Proposal due to arbitrage
activity, fixing the number of shares would have the effect of protecting
Pulitzer stockholders against increases prior to the Closing in the price of
the Hearst-Argyle Series A Common Stock up to $38.50 per share, the maximum
collar price under the Original Merger Agreement. Goldman noted that the Fixed
Shares would be approximately 7.2 million more shares of Hearst-Argyle Series
A Common Stock than the Pulitzer stockholders would receive at the maximum
collar price, 3.5 million more shares than at the price of $34.25, the price
per share on May 25, 1998 (the execution date of the Original Merger
Agreement), and 2.0 million more shares than at the price of $32.76, the
volume weighted average of the Hearst-Argyle Series A Common Stock trading
price for the 15 trading days ended January 15, 1999. Goldman further noted
that, in exchange, Pulitzer stockholders would be giving up the potential to
receive an additional 1.6 million shares of Hearst-Argyle Merger Stock at
$29.75 per share, the minimum collar price under the Original Merger
Agreement, and Pulitzer's ability to terminate the Original Merger Agreement
if the price of Hearst-Argyle Series A Common Stock falls below the minimum
collar price. Goldman then indicated that, subject to satisfactorily
conducting updated due diligence of Pulitzer and Hearst-Argyle and to
reviewing the written documentation relating to the 1999 Proposal, Goldman
fully anticipated that it would be prepared to deliver a new written opinion
that the consideration to be received by the holders of Pulitzer Stock in the
Merger and the Spin-Off, taken as a whole, is fair from a financial point of
view to the holders of Pulitzer Stock.
At the conclusion of the ensuing discussion, the Pulitzer Board, acting
unanimously, approved the 1999 Proposal and authorized William Bush to so
notify Hearst-Argyle. The Pulitzer Board's decision was based upon a variety
of factors, including (i) the recent volatility in the stock market and in the
price of Hearst-Argyle Series A Common Stock in particular and Pulitzer's
ability to lock in a fixed number of shares of Hearst-Argyle Series A Common
Stock during such period of volatility; (ii) the valuation of the Pulitzer
Broadcasting Business based upon the Fixed Shares; and (iii) the elimination
of investor uncertainty regarding the consummation of the Spin-Off and Merger
attributable to fluctuations in the market price of the Hearst-Argyle Series A
Common Stock.
That afternoon, Mr. Bush advised Mr. Blythe that the Pulitzer Board had
approved the 1999 Proposal, and later that afternoon, Mr. Blythe informed Mr.
Bush that the Hearst-Argyle Board had approved the 1999 Proposal. On January
17, 1999, Pulitzer, New Pulitzer and Hearst-Argyle executed the Merger
Agreement, as amended and restated.
All of the members of the Pulitzer Board attended in person or via
conference call hookup the formal meetings held on December 11, 1997 and
January 6, January 26, February 24, March 12, April 8, May 25, 1998 and
January 15, 1999.
Throughout the course of the entire process described above, including the
negotiations with Hearst-Argyle and the approval and recommendation of the
Merger Agreement, the Merger and the Spin-Off, all the members of the Pulitzer
Board were aware of and considered the relationships of each of James M.
Snowden, Jr. and William Bush, two of Pulitzer's directors, with Huntleigh and
Fulbright & Jaworski L.L.P., respectively, and any potential conflicts of
interest that may exist as a result of such relationships. Each of Mr. Snowden
and Mr. Bush abstained from the vote of the Pulitzer Board to retain their
respective firms in connection with the transactions contemplated by the
Pulitzer Proposals. The Pulitzer Board unanimously approved all other matters
that it considered and approved, including the approval and recommendation of
the Merger Agreement, the Merger and the Spin-Off.
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Recommendation of the Pulitzer Board
THE PULITZER BOARD RECOMMENDS THAT HOLDERS OF PULITZER STOCK VOTE "FOR" THE
PROPOSAL TO APPROVE AND ADOPT THE PULITZER PROPOSALS.
At the special meeting of the Pulitzer Board held on May 25, 1998, by
unanimous vote of the directors, the Pulitzer Board determined that the Spin-
Off and the Merger are fair to, and in the best interests of, Pulitzer and all
its stockholders, approved and adopted the Original Merger Agreement and the
transactions contemplated thereby (including the Pulitzer Charter Amendment,
the Spin-Off and the Merger), and resolved to recommend that stockholders of
Pulitzer vote FOR approval and adoption of the Original Merger Agreement and
the transactions contemplated thereby (including the Pulitzer Charter
Amendment, the Spin-Off and the Merger).
In reaching its decision, the Pulitzer Board considered the following
factors, which were all of the material factors considered by the Pulitzer
Board in making its decision. The Pulitzer Board did not assign relative
weights to the following factors or determine that any factor was of
particular or controlling significance. The Pulitzer Board did consider each
such material factor in arriving at its decision, which was based on the
totality of the information presented to and considered by it. In addition, it
is possible that different members of the Pulitzer Board assigned different
weights to different factors.
The Pulitzer Board's familiarity with and review of the business operations,
financial condition, earnings and prospects of the Pulitzer Broadcasting
Business. The Pulitzer Board considered the importance of scale to the
continued participation in the radio and television broadcasting business and
the growing capital requirements of the broadcasting business in relation to
the financial condition and current and probable future earnings of, strategic
plans for and capital needs of its newspaper publishing and related new media
businesses. In light of these factors, the Pulitzer Board determined that the
Pulitzer Broadcasting Business could best be developed by a large television
broadcast company with greater scale.
The Pulitzer Board's review of the business, operations, financial
condition, earnings and prospects of Hearst-Argyle, and the enhanced
opportunities for growth that the Merger made possible. In choosing Hearst-
Argyle as its merger partner, the Pulitzer Board considered and viewed
favorably the excellent quality and reputation of Hearst-Argyle's management,
Hearst-Argyle's growth, Hearst's commitment to, and backing of, Hearst-Argyle
and the benefits to Hearst-Argyle of Hearst's size, media diversity and
related access to capital. The Pulitzer Board determined that the Pulitzer
stockholders would share in the benefits of the sizeable scale of the combined
Pulitzer Broadcasting Business and Hearst-Argyle's broadcasting operations and
the strategic fit of the Pulitzer Broadcasting Business with Hearst-Argyle's
broadcasting operations. In addition, the Pulitzer Board noted the
opportunities for increased profitability of the Pulitzer Broadcasting
Business resulting from potential synergies and efficiencies that might be
obtained through the Merger, including, without limitation, programming
discounts, geographic and network affiliation diversification, reduced sales
costs and increased purchasing power. The Pulitzer Board also considered the
risks and disadvantages associated with the Merger, including those risks
associated with the ownership of Hearst-Argyle Series A Common Stock, any
potential dilution and the incurrence of the New Debt.
The value of Hearst-Argyle Series A Common Stock to be received by Pulitzer
stockholders in the Merger. An integral part of the determination by the
Pulitzer Board that the Merger is in the best interests of, and fair to, the
Pulitzer stockholders was a determination of the value of the Hearst-Argyle
Series A Common Stock. As detailed above under "--Background of and Pulitzer's
Reasons for the Spin-Off and the Merger" the Pulitzer Board received detailed
presentations at several meetings with respect to the value and liquidity of
the Hearst-Argyle Series A Common Stock to be received by the Pulitzer
stockholders. During these presentations, members of the Pulitzer Board posed
various questions to the representatives of Goldman and Huntleigh, and the
ensuing responses and discussions enhanced the Pulitzer Board's understanding
of the Merger and related transactions. Finally, the Pulitzer Board noted that
the value of the consideration to be received in the Merger was the result of
an extensive process that resulted in proposals from three bidders and the
ultimate selection of Hearst-Argyle's proposal and that Goldman had rendered
its opinion that the consideration to be received by the holders of Pulitzer
Stock in the Merger and the Spin-Off pursuant to the Original Merger
Agreement, taken as a whole, is fair from a financial point of view to the
holders of Pulitzer Stock.
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Other possible transactions available to Pulitzer. As discussed above under
"--Background of and Pulitzer's Reasons for the Spin-Off and the Merger," the
Pulitzer Board carefully reviewed proposals submitted by three potential
merger partners. The Pulitzer Board was cognizant of the differences in the
consideration offered by Hearst-Argyle, the Second Bidder and the Third
Bidder, and concluded that the proposal of Hearst-Argyle was superior to those
of the Second Bidder and the Third Bidder in financial terms.
The terms of the Merger. The Pulitzer Board reviewed with its legal advisors
and Goldman the provisions of the Merger Agreement and determined that its
terms permitted Pulitzer to achieve the tax-free disposition of the Pulitzer
Broadcasting Business in a manner that is fair to, and in the best interest
of, Pulitzer and its stockholders.
At the special meeting of the Pulitzer Board held by conference call on
January 15, 1999, by unanimous vote of the directors, the Pulitzer Board
determined that the terms of the 1999 Proposal are fair to, and in the best
interests of, Pulitzer and all of its stockholders, approved and adopted the
1999 Proposal, and resolved to recommend that stockholders of Pulitzer vote
FOR approval and adoption of the Merger Agreement, as amended and restated,
and the transactions contemplated thereby (including the Pulitzer Charter
Amendment, the Spin-Off and the Merger).
In reaching its decision, the Pulitzer Board considered the following factor
as well as all the factors described above, which were all of the material
factors considered by the Pulitzer Board in making its decision. The Pulitzer
Board did not assign relative weights to these factors or determine that any
factor was of particular or controlling significance. The Pulitzer Board did
consider each such material factor in arriving at its decision, which was
based on the totality of the information presented to and considered by it. In
addition, it is possible that different members of the Pulitzer Board assigned
different weights to different factors.
The ability to "lock-in' a fixed number of shares during a time of
substantial market volatility. The Pulitzer Board recognized the volatility of
the equity markets during the later part of 1998 and early 1999. By
eliminating the collar mechanism and agreeing to the Fixed Shares, Pulitzer
would assure that the Pulitzer stockholders receive 37,096,774 shares of
Hearst-Argyle Merger Stock, in comparison to 29,870,130 shares based on the
maximum collar price of $38.50 per share, 33,576,642 shares based on $34.25,
the price per share on May 25, 1998 (the date of the Original Merger
Agreement), 35,103,785 shares based on $32.76, the volume weighted average of
the Hearst-Argyle Series A Common Stock trading price for the 15 trading days
ended January 15, 1999, and 38,655,462 shares based on the minimum collar
price of $29.75 per share. Finally, the Pulitzer Board noted that Goldman had
indicated that, subject to satisfactorily conducting updated due diligence of
Pulitzer and Hearst-Argyle and to reviewing the written documentation relating
to the 1999 Proposal, Goldman fully anticipated that it would be prepared to
deliver a new written opinion. Goldman subsequently delivered its written
opinion, dated February 11, 1999, to the effect that as of such date the
consideration to be received by the holders of Pulitzer Stock in the Merger
and Spin-Off pursuant to the Merger Agreement, taken as a whole, is fair from
a financial point of view to the holders of Pulitzer Stock.
The Pulitzer Board is recommending that holders of Pulitzer Common Stock and
Pulitzer Class B Common Stock, voting together as a single class, approve and
adopt the Merger Agreement and the Merger and that holders of Pulitzer Common
Stock and Pulitzer Class B Common Stock, voting together as a single class,
and the holders of Pulitzer Common Stock, voting separately as a class,
approve and adopt the Pulitzer Charter Amendment.
Opinion of Financial Advisor to Pulitzer
At the May 25, 1998 meeting of the Pulitzer Board, Goldman rendered its oral
opinion to the Pulitzer Board that as of such date, the consideration to be
received by the holders of Pulitzer Stock in the Merger and the Spin-Off
pursuant to the Original Merger Agreement, taken as a whole, is fair from a
financial point of view to the holders of Pulitzer Stock. Goldman subsequently
delivered to the Pulitzer Board a written opinion dated as of May 25, 1998
confirming its oral opinion. Goldman subsequently delivered its written
opinion, dated February 11, 1999, to the effect that as of such date the
consideration to be received by the holders of Pulitzer Stock in the Merger
and the Spin-Off pursuant to the Merger Agreement, taken as a whole, is fair
from a financial point of view to the holders of Pulitzer stock.
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The full text of the written opinion of Goldman dated as of February 11,
1999 (the "Goldman Opinion"), which sets forth assumptions made, matters
considered and limitations on the review undertaken in connection with the
opinion, is attached hereto as Annex IV to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. Stockholders of
Pulitzer are urged to, and should, read such opinion in its entirety. The
Goldman Opinion is addressed to the Pulitzer Board and does not constitute a
recommendation to any Pulitzer stockholder as to how such stockholder should
vote at the Pulitzer Meeting and should not be relied upon by any stockholder
as such. The summary of the Goldman Opinion set forth in this Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to the full
text of Goldman's written opinion attached hereto as Annex IV.
In connection with its opinion, Goldman reviewed, among other things, (i)
the Merger Agreement and the ancillary agreements thereto; (ii) the
Contribution Agreement; (iii) the Annual Reports to Stockholders and Annual
Reports on Form 10-K of Pulitzer for the five years ended December 31, 1997,
of Argyle, a predecessor of Hearst-Argyle for the two years ended December 31,
1996 and of Hearst-Argyle for the year ended December 31, 1997; (iv) certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of Pulitzer
and Hearst-Argyle; (v) certain other communications from Pulitzer and Hearst-
Argyle to their respective stockholders; and, (vi) certain internal financial
estimates, analyses and forecasts for Pulitzer and Hearst-Argyle prepared by
their respective managements. Goldman also held discussions with members of
the senior management of Pulitzer and Hearst-Argyle regarding the strategic
rationale for, and the potential benefits of, the transactions contemplated by
the Merger Agreement and the ancillary agreements thereto and the past and
current business operations, financial condition, and future prospects of
their respective companies. In addition, Goldman reviewed the reported price
and trading activity for Pulitzer Common Stock and Hearst-Argyle Series A
Common Stock, compared certain financial and stock market information for
Pulitzer and Hearst-Argyle with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the television broadcasting
industry specifically and performed such other studies and analyses as it
considered appropriate.
Goldman relied upon the accuracy and completeness of all of the financial
and other information it reviewed and has assumed such accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
assumed, with Pulitzer's consent, that the financial forecasts provided by the
respective managements of Pulitzer and Hearst-Argyle have been reasonably
prepared on a basis reflecting the best currently available judgments and
estimates of the managements of Pulitzer and Hearst-Argyle. In addition,
Goldman did not make an independent evaluation or appraisal of the assets and
liabilities of Pulitzer or Hearst-Argyle or any of their subsidiaries and
Goldman was not furnished with any such evaluation or appraisal. With
Pulitzer's consent, Goldman assumed that obtaining any necessary regulatory
and third-party consents and approvals will not have an adverse effect on
Pulitzer or Hearst-Argyle, as applicable. Goldman further assumed, with
Pulitzer's consent, that the Merger would be tax-free to Pulitzer and that the
receipt of shares of Hearst-Argyle Series A Common Stock and New Pulitzer
Stock by the holders of Pulitzer Stock will be tax-free to such holders.
Goldman further assumed, with Pulitzer's consent, that the level of income tax
incurred by Pulitzer as a result of the Spin-Off will be consistent with
levels described to Goldman. Goldman was not asked to solicit, and accordingly
did not solicit, third parties with respect to potential alternative
transactions, including the sale of all of Pulitzer. Goldman did not express
any opinion as to the prices at which New Pulitzer Common Stock or Hearst-
Argyle Series A Common Stock will trade if and when they are issued. Goldman's
advisory services and its opinion were provided for the information and
assistance of the Pulitzer Board in connection with its consideration of the
transactions contemplated by the Merger Agreement and the ancillary agreements
thereto and such opinion does not constitute a recommendation as to how any
holders of Pulitzer Stock should vote with respect to such transactions.
The following is a summary of the material financial analyses used by
Goldman in connection with providing its written opinions to the Pulitzer
Board, dated as of May 25, 1998 and February 11, 1999.
Pulitzer Common Stock Performance. Goldman reviewed the historical trading
prices for Pulitzer from May 1988 to May 1998 and compared such performance
during such period to that of (i) the S&P 500 Index;
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(ii) a group consisting of the following television broadcasting companies:
Ackerley Group Inc., A.H. Belo Corp, Granite Publishing, Gray Communications
Systems Inc., Sinclair Broadcasting Group Inc., and Young Broadcasting Inc.
(the "TV Broadcasting Comparables"); and, (iii) two groups consisting of the
following newspaper companies: Hollinger International Inc., Central
Newspapers Inc., McClatchy Newspapers Inc., Media General Inc., and Journal
Register Co. (the "Small Cap Newspaper Comparables"), and A.H. Belo Corp., Dow
Jones & Co. Inc., E.W. Scripps Co., Gannett Co. Inc., Knight-Ridder Inc., New
York Times Co., Tribune Co., Times Mirror Co. and the Washington Post Co. (the
"Large Cap Newspaper Comparables"), and, together with the Small Cap Newspaper
Comparables, the "Newspaper Comparables"). The indices of the TV Broadcasting
Comparables and the Newspaper Comparables were adjusted to reflect companies
that did not exist or were not publicly traded during certain periods between
May 1988 to May 1998. From May 23, 1988 to May 22, 1998, based on closing
prices on the NYSE, Pulitzer Common Stock achieved a high of $92.13 and a low
of $9.14. On February 25, 1998 (one trading day prior to Pulitzer's
announcement that it intended to explore strategic alternatives for the
Pulitzer Broadcasting Business), Pulitzer Common Stock closed at a price of
$66.19 and on May 22, 1998 Pulitzer Common Stock closed at a price of $90.00.
Treating closing stock prices on May 23, 1988 as representing a baseline price
index of 100, by February 25, 1998, Pulitzer Common Stock had grown to a price
index of 536 and by May 22, 1998, Pulitzer Common Stock had grown to a price
index of 579, the S&P 500 Index had grown to a price index of 443, the TV
Broadcasting Comparables had grown to a price index of 333, the Small Cap
Newspaper Comparables had grown to a price index of 367 and the Large Cap
Newspaper Comparables had grown to a price index of 384. Treating closing
stock prices on May 24, 1993 as representing a baseline price index of 100, by
May 22, 1998, Pulitzer Common Stock had grown to a price index of 513, the S&P
500 Index had grown to a price index of 248, the TV Broadcasting Comparables
had grown to a price index of 330, the Small Cap Newspaper Comparables had
grown to a price index of 343 and the Large Cap Newspaper Comparables had
grown to a price index of 262.
Hearst-Argyle Common Stock Performance. Goldman reviewed the historical
trading prices for Hearst-Argyle Series A Common Stock from September 1, 1997
to May 22, 1998 and compared such performance to that of the S&P 500 Index and
the TV Broadcasting Comparables. During this period, based on closing prices
on the Nasdaq National Market ("NASDAQ"), Hearst-Argyle Series A Common Stock
achieved a high of $38.00 and a low of $26.25. Hearst-Argyle Series A Common
Stock closed at a price of $34.25 on May 22, 1998. Treating closing prices on
September 1, 1997 as representing a baseline price index of 100, by May 22,
1998, Hearst-Argyle Series A Common Stock had grown to a price index of 121,
the S&P 500 Index had grown to a price index of 124 and the TV Broadcasting
Comparables had grown to a price index of 124.
Hearst-Argyle Comparable Companies Analysis. Goldman reviewed and compared
certain financial information relating to Hearst-Argyle to corresponding
financial information, ratios and public market multiples for a group
consisting of the following television broadcasting companies: A.H. Belo Corp,
Granite Publishing, Paxson Communications Corp., Sinclair Broadcasting Group
Inc., Young Broadcasting Inc., and Univision Communications Inc. (the "TV
Selected Companies"). The TV Selected Companies were chosen because they are
publicly traded companies with operations that for purposes of this analysis
may be considered similar to Hearst-Argyle. The multiples of Hearst-Argyle
were calculated using a price of $34.25 per share, the closing price of
Hearst-Argyle Common Stock on the NASDAQ on May 22, 1998 and the multiples for
the TV Selected Companies were calculated using their respective closing
prices on May 22, 1998. The multiples and ratios for Hearst-Argyle and the TV
Selected Companies were based on the most recent publicly available
information, including estimates from the Institutional Broker Estimate System
("IBES"), and from selected equity research reports. With respect to the TV
Selected Companies, Goldman considered (i) equity market value as a multiple
of after-tax cash flow ("ATCF"), which is net income plus depreciation,
amortization and deferred taxes, for the estimated calendar year 1998
("1998E") and the estimated calendar year 1999 ("1999E"); (ii) equity market
value as a multiple of free cash flow ("FCF"), which is net income plus
depreciation, amortization and deferred taxes, less capital expenditures for
1998E and 1999E; and, (iii) levered market capitalization (equity market value
plus total debt, less cash) as a multiple of broadcast cash flow ("BCF"),
which is earnings before interest, taxes, depreciation and amortization plus
certain corporate expenses for 1998E and 1999E. The TV Selected Companies'
multiples of (i) 1998E ATCF ranged from 12.1x to 35.0x, with a median of 16.8x
and 1999E ATCF
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ranged from 10.9x to 26.2x, with a median of 11.7x; (ii) 1998E FCF ranged from
13.6x to 64.7x, with a median of 19.7x and 1999E FCF ranged from 13.0x to
28.8x, with a median of 15.5x; and, (iii) 1998E BCF ranged from 9.6x to 53.3x,
with a median of 11.9x and 1999E BCF ranged from 8.8x to 17.1x, with a median
of 11.1x. Hearst-Argyle's multiple of (i) 1998E ATCF was 18.3x and 1999E ATCF
was 16.5x; (ii) 1998E FCF was 20.4x and 1999E FCF was 18.5x; and, (iii) 1998E
BCF was 11.7x and 1999E BCF was 11.1x. Goldman also considered the 3-5 year
estimated free cash flow growth rates ("Estimated FCF Growth Rates") of the TV
Selected Companies, which ranged from 14.5% to 37.0%, with a median of 18.0%,
and the latest twelve month ("LTM") BCF Margin, which ranged from 33.7% to
45.9%, with a median of 42.8%, compared to 18.0% and 45.1%, respectively, for
Hearst-Argyle.
Pulitzer Comparable Companies Analysis. Goldman reviewed and compared
certain financial information relating to Pulitzer to corresponding financial
information, ratios and public market multiples for the Newspaper Comparables.
The Newspaper Comparables were chosen because they are publicly traded
companies with operations that for purposes of analysis may be considered
similar to Pulitzer. The multiples of Pulitzer were calculated using a price
of $90.00 per share and $66.19 per share, the closing price of Pulitzer Common
Stock on the NYSE on May 22, 1998 and February 25, 1998, respectively, and the
multiples for the Newspaper Comparables were calculated using their respective
closing prices on May 22, 1998. The multiples and ratios for Pulitzer and the
Newspaper Comparables were based on the most recent publicly available
information, including estimates from IBES and from selected equity research
reports. With respect to the Newspaper Comparables, Goldman considered (i)
stock price as a multiple of earnings per share ("P/E") for LTM, 1998E and
1999E and (ii) levered market capitalization, which is equity market value
plus total debt, less cash, as a multiple of earnings before interest, taxes,
depreciation and amortization ("EBITDA") for LTM, 1998E and 1999E. The
Newspaper Comparables' multiples of (i)(A) LTM P/E ranged from 16.7x to 38.1x,
with a median of 22.4x for the Small Cap Newspaper Comparables and from 14.0x
to 37.1x, with a median of 27.3x for the Large Cap Newspaper Comparables, (B)
1998E P/E ranged from 16.9x to 28.6x, with a median of 21.6x for the Small Cap
Newspaper Comparables and from 21.5x to 30.5x, with a median of 25.2x for the
Large Cap Newspaper Comparables, (C) 1999E P/E ranged from 15.0x to 23.9x,
with a median of 19.3x for the Small Cap Newspaper Comparables, and from 19.3x
to 26.0x, with a median of 22.3x for the Large Cap Newspaper Comparables and
(ii) (A) LTM EBITDA ranged from 7.5x to 14.0x, with a median of 9.1x for the
Small Cap Newspaper Comparables and from 9.1x to 17.0x, with a median of 12.3x
for the Large Cap Newspaper Comparables, (B) 1998E EBITDA ranged from 7.6x to
10.5x, with a median of 8.4x for the Small Cap Newspaper Comparables and from
8.9x to 15.1x, with a median of 11.6x for the Large Cap Newspaper Comparables,
and, (C) 1999E EBITDA ranged from 6.8x to 9.7x, with a median of 7.7x for the
Small Cap Newspaper Comparables and from 8.2x to 12.9x, with a median of 10.9x
for the Large Cap Newspaper Comparables. As of February 25, 1998 (one trading
day prior to Pulitzer's announcement that it intended to sell the Pulitzer
Broadcasting Business), Pulitzer's multiple of (i) LTM P/E was 22.4x, 1998E
P/E was 20.1x, and 1999E P/E was 18.8x and (ii) LTM EBITDA was 10.0x and 1998E
EBITDA was 9.3x. As of May 22, 1998, Pulitzer's multiple of (i) LTM P/E was
29.8x, 1998E P/E was 27.8x, and 1999E P/E was 25.5x and (ii) LTM EBITDA was
13.1x, 1998E EBITDA was 12.3x and 1999E EBITDA was 11.8x. Goldman also
considered the 5-year estimated earnings per share growth rate based on
research estimates obtained by Goldman from IBES ("Estimated EPS Growth"),
which ranged from 11% to 20%, with a median of 15% for the Small Cap Newspaper
Comparables and from 8% to 15%, with a median of 12% for the Large Cap
Newspaper Comparables, and the ratio of the 1998E P/E to the Estimated EPS
Growth ("P/E to EPS Growth"), which ranged from 1.0x to 2.2x, with a median of
1.1x for the Small Cap Newspaper Comparables and from 1.5x to 2.9x, with a
median of 1.8x for the Large Cap Newspaper Comparables. As of February 25,
1998, the Estimated EPS Growth of Pulitzer was 12.5% and P/E to EPS Growth of
Pulitzer was 1.6x. As of May 22, 1998, the Estimated EPS Growth of Pulitzer
was 12.5% and P/E to EPS Growth of Pulitzer was 2.2x.
Selected Transactions Analysis. Goldman analyzed certain information
relating to selected transactions in the television broadcasting industry
since 1996, which, in the judgment of Goldman, were comparable to the Merger
for the purposes of this analysis (the "Selected Transactions"). The Selected
Transactions include (Buyer/Seller): (i) New York Times Co./Palmer
Communications Inc.; (ii) NBC/New World Communications Group Inc.; (iii)
Tribune Co./Renaissance; (iv) Ellis Communications/Federal Enterprises Inc.;
(v) Media General
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Inc./Park Broadcasting Inc.; (vi) News Corp Ltd./New World Communications
Group Inc.; (vii) Raycom Media/AFLAC Inc.; (viii) A.H. Belo Corp./Providence
Journal Co.; (ix) Meredith Corp./First Media Corporation; (x) Hearst
Corporation/Argyle Television Inc.; (xi) Sinclair Broadcast Group
Inc./Heritage Media Corp.; (xii) Hicks, Muse, Tate & Furst/LIN TV; (xiii)
Sinclair Broadcast Group/Sullivan Broadcasting Co. Inc.; and, (xiv) Emmis
Broadcasting Corp./S. F. Broadcasting; (xv) Chancellor Media Group/LIN
Television Corp.; (xvi) Meredith Corp./Kelly Broadcasting (certain assets);
(xvii) Hearst-Argyle Television, Inc./Kelly Broadcasting (certain assets);
and, (xviii) Sinclair Broadcast Group, Inc./Guy Gannett Communications Inc.
Such analysis indicated that for the Selected Transactions levered aggregate
consideration as a multiple of current year BCF ranged from 10.8x to 18.8x,
with a median of 12.7x, as compared to 15.7x (based on a closing sales price
of $31.00 per share of Hearst-Argyle Series A Common Stock) for the aggregate
consideration to be paid in the Merger. Goldman also analyzed certain
information relating to a larger group of 67 selected transactions in the
television broadcasting industry since 1995 (which included the Selected
Transactions) in which levered aggregate consideration as a multiple of BCF
ranged from 8.0x to 21.0x, with a median of 12.2x.
Pro Forma Merger Analysis on Hearst-Argyle. Goldman reviewed the pro forma
analysis of the financial impact of the Merger to Hearst-Argyle's ATCF per
share ("ATCFPS"). Based on projections for Hearst-Argyle and Pulitzer for the
two calendar years in the period ended December 31, 2000 provided by
management of Hearst-Argyle, Goldman calculated pro forma ATCF for Hearst-
Argyle and compared the estimated ATCFPS for status quo Hearst-Argyle (without
giving effect to the Merger) to the estimated ATCFPS of Hearst-Argyle after
giving effect to the Merger. As part of its analysis, Goldman assumed a 6.5%
cost of debt (and associated interest payable thereon), a 40% tax rate, and an
estimate of the likely pre-tax synergies that potentially would result from
the Merger in the calendar year ended December 31, 1999 and 2000. Based on
these assumptions and an assumed stock price for Hearst-Argyle Series A Common
Stock of $31.00 per share, the analysis indicated that the Merger would be
approximately (8.4)% and (8.3)% dilutive to Hearst-Argyle's ATCFPS in 1999 and
2000, respectively.
Fixed Share Analysis. In connection with the February 11, 1999 Goldman
Opinion, Goldman compared the Fixed Shares received of 37,096,774 (based on
the $31.00 per share price of Hearst-Argyle Series A Common Stock) implied
under the Merger Agreement with possible shares received of 38,655,462 shares,
37,025,113 shares, 33,576,642 shares, 29,870,130 shares (based on prices of
$29.75 (the minimum collar price), $31.06, $34.25, and $38.50 (the maximum
collar price) per share of Hearst-Argyle Series A Common Stock) implied under
the Original Merger Agreement.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying the Goldman Opinion. In arriving at its fairness
determination, Goldman considered the results of all such analyses, together
with the underlying strategic rationale, taken as a whole. Furthermore, in
arriving at its fairness opinion, Goldman did not attribute any particular
weight to any analysis or factor considered by it. No company or transaction
used in the above analyses as a comparison is identical to Pulitzer, the
television broadcasting business, the newspaper publishing business, Hearst-
Argyle, the Merger or the Spin-Off. The analyses were prepared solely for
purposes of Goldman providing its opinion to the Pulitzer Board as to the
fairness, from a financial point of view, to the holders of Pulitzer Stock of
the consideration to be received by the holders of Pulitzer Stock in the
Merger and the Spin-Off, taken as a whole, and do not purport to be appraisals
or necessarily reflect the prices at which businesses or securities actually
may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly
more or less favorable than suggested by such analyses. Because such analyses
are inherently subject to uncertainty, being based upon numerous factors or
events beyond the control of the parties or their respective advisors, none of
Pulitzer, Hearst-Argyle, Goldman or any other person assumes responsibility if
future results are materially different from those forecast.
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As described above, Goldman's presentation of its oral opinion to the
Pulitzer Board was one of many factors taken into consideration by the
Pulitzer Board in making its determination to approve the Merger Agreement.
The foregoing summary does not purport to be a complete description of the
analysis performed by Goldman and is qualified by reference to the Goldman
Opinion set forth in Annex IV hereto.
Goldman, as part of its investment banking business, is continually engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements, and
valuations for estate, corporate and other purposes. Pulitzer selected Goldman
as its financial advisor because it is a nationally recognized investment
banking firm that has substantial experience in transactions similar to the
Merger and the Distribution. Goldman is familiar with Pulitzer, having acted
as financial advisor in connection with, and having participated in certain of
the negotiations leading to, the Merger Agreement and the Contribution
Agreement.
Goldman provides a full range of financial, advisory and brokerage services
and in the course of its normal trading activities may from time to time
effect transactions and hold positions in the securities or options on
securities of Pulitzer and/or Hearst-Argyle for its own account and for the
account of customers. In addition, it is anticipated that Goldman will act as
the sole managing underwriter in a public offering of shares of Pulitzer Stock
by certain of the Pulitzer Principal Stockholders prior to the Effective Time.
It is anticipated that Goldman will receive customary fees and indemnification
against certain liabilities, including certain liabilities under the federal
securities laws, in connection with so acting.
Pursuant to a letter agreement, dated December 8, 1997 (the "Engagement
Letter"), Pulitzer engaged Goldman to act as its financial advisor in
connection with certain potential transactions. Pursuant to the terms of the
Engagement Letter, Pulitzer has agreed to pay Goldman (i) $500,000 in
financial advisory fees (previously paid); (ii) upon consummation of the Spin-
Off a fee of $3 million; and, (iii) a success fee if the Merger is consummated
based on the average of the last sales prices of Hearst-Argyle Series A Common
Stock on the five trading days ending five days prior to the Closing of the
Merger. Based on the closing price of Hearst-Argyle Series A Common Stock on
January 21, 1999, the success fee would be equal to approximately $15 million.
Pulitzer has agreed to reimburse Goldman, and its affiliates, partners,
directors, agents, employees and control persons for certain legal and other
expenses and to indemnify Goldman against certain liabilities, including
certain liabilities under the federal securities laws.
Background of and Hearst-Argyle's Reasons for the Merger
Hearst-Argyle continuously considers potential acquisitions of broadcast
television stations and companies and, from time to time, has made such
acquisitions on an opportunistic basis.
In January 1998 (prior to being contacted by Goldman regarding a potential
transaction with Pulitzer), Hearst-Argyle and its advisors commenced a review
of publicly available information regarding Pulitzer. In early February 1998,
Mr. Frank A. Bennack, Jr., a Hearst-Argyle Board member, contacted Mr. Michael
E. Pulitzer, Pulitzer's Chairman, President and Chief Executive Officer,
requesting a meeting among Mr. Bennack, Mr. Bob Marbut, Hearst-Argyle's
Chairman and Co-CEO, and Mr. Pulitzer. Mr. Bennack did not specify the purpose
of the meeting. Mr. Pulitzer agreed to meet with Messrs. Bennack and Marbut on
February 24, 1998.
On February 19, 1998, representatives of Goldman contacted Mr. Dean Blythe,
Hearst-Argyle's Senior Vice President--Corporate Development, to invite
Hearst-Argyle to consider a possible acquisition of the Pulitzer Broadcasting
Business. The Goldman representatives also suggested and Hearst-Argyle agreed
that the February 24 meeting be cancelled.
On February 24, 1998, Hearst-Argyle entered into a confidentiality agreement
with Pulitzer, and in early March 1998, Hearst-Argyle received a copy of a
confidential offering memorandum describing various aspects of the Pulitzer
Broadcasting Business. Hearst-Argyle and its advisors reviewed and analyzed
the information contained in the confidential offering memorandum. On March
19, 1998, on behalf of Pulitzer, Goldman invited
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Hearst-Argyle to submit a preliminary, non-binding written indication of
interest in a possible transaction involving the Pulitzer Broadcasting
Business. By letter dated April 2, 1998, Hearst-Argyle submitted to Goldman
and the Pulitzer Board a preliminary, non-binding indication of interest
regarding the acquisition of the Pulitzer Broadcasting Business. Shortly
thereafter, senior members of Hearst-Argyle management met with senior members
of Pulitzer's management and one or more of the Pulitzer Principal
Stockholders to discuss the indication of interest submitted by Hearst-Argyle.
At that time, Hearst-Argyle was invited to participate in the second phase of
the sale process.
In April 1998, Hearst-Argyle and its advisors began a due diligence review
of certain business, financial and legal information with respect to Pulitzer
and the Pulitzer Broadcasting Business. By letter dated May 6, 1998, Goldman
sent to Hearst-Argyle bid instructions with respect to the submission of
definitive proposals regarding a potential acquisition of the Pulitzer
Broadcasting Business. Shortly thereafter, Hearst-Argyle and its advisors
received and began their review of drafts of a proposed merger agreement and
related agreements.
On May 14, 1998, senior management of Hearst-Argyle met, together with
Hearst-Argyle's legal and financial advisors, to consider and, if appropriate,
to formulate a recommendation to the Hearst-Argyle Board regarding the
possible acquisition by Hearst-Argyle of the Pulitzer Broadcasting Business.
Hearst-Argyle evaluated the relative merits of the proposed transaction
structure, reviewed certain financial information relating to Pulitzer with
management and Credit Suisse First Boston Corporation ("CSFB"), financial
advisor to Hearst-Argyle, and certain transaction issues related to the
proposed structure. It was determined that the transaction with Pulitzer
presented an attractive opportunity that should be presented to the Hearst-
Argyle Board.
On May 15, 1998, members of the Hearst-Argyle Board were provided with
detailed information prepared by Hearst-Argyle management, which information
included an analysis of the Pulitzer Broadcasting Business, a summary of the
transaction structure and the agreements proposed by Pulitzer, management's
valuation of the business, a financial impact analysis and a management
summary of the proposed bid. Management's valuation was based on (i)
historical results of the Pulitzer Broadcasting Business; (ii) management's
projections of future results of the Pulitzer Broadcasting Business and the
future results of Hearst-Argyle pro forma for an acquisition of the Pulitzer
Broadcasting Business; (iii) the quality of the assets and markets comprising
the Pulitzer Broadcasting Business; (iv) the terms and conditions of the
proposed transaction and the related acquisition agreements; and, (v) the
financial presentation of CSFB as more fully described under "--Opinion of
Financial Advisor to Hearst-Argyle." The financial impact analysis included a
presentation on the impact of a transaction at various price levels on Hearst-
Argyle's ATCF per share, EBITDA per share, and ATCF per share and EBITDA
valuation multiples. On May 15, 1998, a special meeting of the Hearst-Argyle
Board was convened to consider the possible acquisition. All but one member of
the Hearst-Argyle Board participated in the meeting.
At the Hearst-Argyle Board meeting, management presented a review of the
Pulitzer Broadcasting Business, management's valuation of the business, the
transaction structure (including a review of the proposed form of merger
agreement) and the status and timing of a possible transaction. Bob Marbut,
Chairman and Co-Chief Executive Officer of Hearst-Argyle, informed the Hearst-
Argyle Board that management recommended the purchase of the Pulitzer
Broadcasting Business and suggested pricing and certain other terms and
conditions for the transaction. The pricing terms described by Mr. Marbut were
within the range of management's valuation of the Pulitzer Broadcasting
Business, with the upper limit of the pricing terms lower than the high end of
the range of this valuation. Representatives of CSFB reviewed with the Hearst-
Argyle Board the financial analyses performed by CSFB in connection with the
proposed Merger and advised the Hearst-Argyle Board that, based upon the
pricing terms suggested by Mr. Marbut and subject to certain customary
matters, including review of the definitive agreement for the proposed Merger,
CSFB would be prepared to deliver an opinion as to the fairness from a
financial point of view to Hearst-Argyle of the consideration to be paid by
Hearst-Argyle in the proposed Merger. Following extensive discussions
regarding the Pulitzer Broadcasting Business, the financial and legal aspects
of the proposed transaction and various other related matters, the Hearst-
Argyle Board unanimously (with one member being absent) approved the proposed
acquisition subject to the pricing limitations suggested by Mr. Marbut and
authorized management to negotiate and enter into a definitive merger
agreement and related agreements subject to the terms outlined by management.
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Hearst-Argyle submitted a final proposal, including transaction documents
marked with proposed revisions, to Goldman and Pulitzer by letter dated May
20, 1998. Hearst-Argyle's proposal offered to acquire the Pulitzer
Broadcasting Business for shares of Hearst-Argyle Series A Common Stock at a
fixed aggregate value subject to certain adjustments. Hearst-Argyle's proposal
included a price protection or "collar" mechanism that would adjust the number
of shares of Hearst-Argyle Series A Common Stock to be delivered based on the
price of the Hearst-Argyle Series A Common Stock within a range of specified
prices. The proposal also included a right for Pulitzer to terminate the
proposed merger if the price of the Hearst-Argyle Series A Common Stock
declined below the specified price.
Following discussions with Goldman between May 20 and 22, 1998, on May 22,
Hearst-Argyle submitted a revised proposal, increasing the aggregate value of
the Hearst-Argyle Series A Common Stock and adjusting the collar prices, and
otherwise containing terms and conditions ultimately incorporated into the
Merger Agreement. The valuation of the Pulitzer Broadcasting Business
contained in the May 22 proposal (equal to the value of the Hearst-Argyle
Series A Common Stock to be delivered plus the amount of the debt to be
assumed) was within the range of management's valuation of the Pulitzer
Broadcasting Business and the pricing terms approved at the May 15 meeting of
the Hearst-Argyle Board. Hearst-Argyle and its advisors continued negotiation
with Goldman and Pulitzer's legal advisors on May 23, 24 and 25, 1998. On May
25, 1998, Pulitzer, New Pulitzer and Hearst-Argyle entered into the Merger
Agreement, Pulitzer and Hearst Broadcasting entered into the Hearst-Argyle
Voting Agreement, and Hearst-Argyle and the Pulitzer Principal Stockholders
entered into the Pulitzer Voting Agreement.
On January 12, 1999, Mr. Blythe telephoned Mr. William Bush, a director of
Pulitzer and a partner in Fulbright & Jaworski L.L.P., counsel to Pulitzer, to
discuss comments from the SEC to the proxy materials that had been received
that day, and the probable timing of the stockholders' meetings and Closing of
the Merger. During the course of the call, Messrs. Blythe and Bush discussed
recent volatility in the financial markets and the fact that each of Pulitzer
and Hearst-Argyle initially had thought the transaction would be completed by
the end of 1998. The possibility of fixing the number of shares to be
delivered by Hearst-Argyle in the Merger was discussed, and Messrs. Blythe and
Bush agreed to meet the following day to continue the discussion.
On January 13, 1999, Mr. Blythe met Mr. Bush at Fulbright & Jaworski's New
York offices. They reviewed historical stock prices for Hearst-Argyle Series A
Common Stock for various periods since the Original Merger Agreement was
signed on May 25, 1998, and a range of stock prices on which to base the fixed
number of Hearst-Argyle shares to be delivered. They agreed to continue the
discussion on the following day.
On January 14, 1999, in a telephone conversation Mr. Bush proposed that the
fixed number of shares to be delivered by Hearst-Argyle in the Merger be
determined by dividing the original $1.15 billion of equity consideration
provided in the Original Merger Agreement by $31.00, for a total of 37,096,774
shares, and that the unilateral termination date thereof be extended from
April 1, to May 1, 1999. Mr. Blythe agreed to contact Mr. Bush later in the
day to provide Hearst-Argyle's response.
Between January 12 and January 14, Mr. Blythe and Mr. Marbut contacted each
of the members of the Hearst-Argyle Board to inform them of the discussions,
and to solicit input on the proposed amendment to the Original Merger
Agreement. In these conversations, the Hearst-Argyle Board members expressed
support for the amendment on the terms proposed in the January 14 call from
Mr. Bush.
On the afternoon of January 14, 1999, Mr. Blythe telephoned Mr. Bush and
informed him that Hearst-Argyle would be willing to enter into the amendment
as proposed. Mr. Bush indicated that the Pulitzer Board would consider the
proposal on January 15, and that Mr. Bush would contact Mr. Blythe after the
Pulitzer Board meeting.
On the afternoon of January 15, Mr. Bush informed Mr. Blythe that the
Pulitzer Board was willing to enter into the Merger Agreement amendment as
proposed. On January 15, 1999, the Hearst-Argyle Board considered the Merger
Agreement amendment, and CFSB rendered an oral opinion (which opinion was
subsequently
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confirmed by delivery of a written opinion dated such date) to the Hearst-
Argyle Board as to the fairness from a financial point of view to Hearst-
Argyle of the consideration to be paid by Hearst-Argyle in the Merger under
the terms of the proposed amendment to the Merger Agreement. By Unanimous
Written Consent dated January 15, 1999, the Hearst-Argyle Board approved the
Merger Agreement proposal. On January 17, 1999, Hearst-Argyle and Pulitzer
executed the Merger Agreement, as amended and restated.
Recommendation of the Hearst-Argyle Board
THE HEARST-ARGYLE BOARD RECOMMENDS THAT THE HOLDERS OF HEARST-ARGYLE STOCK
VOTE "FOR" THE HEARST-ARGYLE PROPOSALS.
The Hearst-Argyle Board has unanimously (with one member being absent)
approved and adopted the Merger Agreement and the transactions contemplated
thereby (including the Merger and the issuance of the Hearst-Argyle Merger
Stock) and has determined that such transactions are fair to, and in the best
interests of, Hearst-Argyle and its stockholders. The Hearst-Argyle Board also
has unanimously (with one member being absent) approved the Hearst-Argyle
Charter Amendment. The Hearst-Argyle Board recommends that holders of Hearst-
Argyle Stock vote "FOR" each of the Hearst-Argyle Proposals.
In reaching its determination with respect to the Hearst-Argyle Merger
Proposal, the Hearst-Argyle Board considered, among other things, the
following: (i) the judgment, advice and analyses of Hearst-Argyle's
management; (ii) regulatory, competitive, technological and other developments
affecting the broadcast television industry; (iii) the characteristics and
locations of the Pulitzer television stations; (iv) the financial condition,
results of operations and cash flows of the Pulitzer Broadcasting Business and
Hearst-Argyle, on a historical basis and a prospective basis; (v) the
strategic benefits of the proposed Merger; (vi) the financial terms of the
proposed transaction; (vii) the financial presentation of CSFB to the Hearst-
Argyle Board on May 15, 1998 (see "--Opinion of Financial Advisor to Hearst-
Argyle"); (viii) the terms and conditions of the Merger Agreement and related
documents; (ix) historical market prices of, trading information for and
expected market impact on Hearst-Argyle Series A Common Stock; and, (x) any
impact on existing Hearst-Argyle stockholders of the issuance of a significant
amount of Hearst-Argyle Series A Common Stock in the proposed Merger. The
foregoing factors were all of the material factors considered by the Board in
making its decision. The Hearst-Argyle Board did not assign relative weights
to the above factors or determine that any factor was of particular or
controlling significance. The Hearst-Argyle Board did consider each such
material factor in arriving at its decision, which was based on the totality
of the information presented to and considered by it. In addition, it is
possible that different members of the Hearst-Argyle Board assigned different
weights to different factors.
The Hearst-Argyle Board believes that the Merger would allow Hearst-Argyle
to move toward the fulfillment of the following key strategic goals: (i)
broadening the national household reach of Hearst-Argyle's television
stations; (ii) enhancing the diversity of the network affiliation of its
television stations among the three major networks; (iii) reducing Hearst-
Argyle's dependence on the performance of any one television station; (iv)
providing Hearst-Argyle with a larger presence in the Southeast and adding
several rapidly growing markets to the markets in which Hearst-Argyle
competes; (v) enhancing the scale of Hearst-Argyle's television broadcasting
operations; (vi) creating a stronger capital structure; and, (vii) providing a
broader array of career opportunities for Hearst-Argyle employees.
Opinion of Financial Advisor to Hearst-Argyle
CSFB has acted as financial advisor to Hearst-Argyle in connection with the
Merger. CSFB, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, underwritings, secondary distributions of listed and
unlisted securities, lending, private placements and valuations for estate,
corporate or other purposes. CSFB was selected by Hearst-Argyle as its
financial advisor because it is an internationally recognized investment
banking firm that has relevant and substantial expertise in transactions
similar to the Merger. CSFB is familiar with Hearst-Argyle and Hearst, having
participated in the merger of Argyle and the broadcast business of Hearst that
resulted in the formation of Hearst-Argyle as well as various financings for
Hearst-Argyle and its predecessors.
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In connection with CSFB's engagement, Hearst-Argyle requested that CSFB
evaluate the fairness of the consideration to be paid by Hearst-Argyle in the
Merger from a financial point of view to Hearst-Argyle. On May 15, 1998, at a
meeting of the Hearst-Argyle Board held to evaluate the proposed Merger, CSFB
reviewed with the Hearst-Argyle Board the financial analyses performed by CSFB
in connection with its evaluation of the proposed Merger, and on May 25, 1998,
the date on which the Merger Agreement was executed, CSFB rendered to the
Hearst-Argyle Board a written opinion to the effect that, as of May 25, 1998
and based upon and subject to certain matters stated in such opinion, the
consideration to be paid by Hearst-Argyle in the Merger was fair to Hearst-
Argyle from a financial point of view. On January 15, 1999 CSFB confirmed its
earlier opinion by delivery of an oral opinion (which opinion was confirmed by
delivery of a written opinion dated January 15, 1999). In connection with its
opinion dated January 15, 1999, CSFB updated certain of the analyses performed
in connection with its earlier opinion and reviewed the assumptions on which
such analyses were based and the factors considered in connection with such
opinion.
The full text of CSFB's written opinion dated January 15, 1999 to the
Hearst-Argyle Board, which sets forth the procedures followed, assumptions
made, matters considered and limitations on the review undertaken, is attached
as Annex V to this Joint Proxy Statement/Prospectus and is incorporated herein
by reference. Holders of Hearst-Argyle Common Stock are urged to read this
opinion carefully in its entirety. CSFB's opinion is addressed to the Hearst-
Argyle Board and relates only to the fairness of the consideration to be paid
by Hearst-Argyle in the Merger from a financial point of view to Hearst-
Argyle, does not address any other aspect of the proposed Merger or any
related transaction and does not constitute a recommendation to any
stockholder as to how such stockholder should vote at the Hearst-Argyle
Meeting. The summary of the opinion of CSFB set forth in this Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to the full
text of such opinion.
In arriving at its opinion, CSFB reviewed the Merger Agreement and certain
publicly available business and financial information relating to the Pulitzer
Broadcasting Business and Hearst-Argyle. CSFB also reviewed certain other
information relating to the Pulitzer Broadcasting Business and Hearst-Argyle,
including financial forecasts, provided to CSFB by Pulitzer and Hearst-Argyle,
and met with managements of Pulitzer and Hearst-Argyle to discuss the
businesses and prospects of the Pulitzer Broadcasting Business and Hearst-
Argyle. CSFB also considered certain financial and stock market data of
Pulitzer and Hearst-Argyle and compared certain financial and stock market
data of Pulitzer with certain financial and stock market data for other
publicly held companies in businesses similar to Pulitzer and Hearst-Argyle
and considered, to the extent publicly available, the financial terms of
certain other business combinations and other transactions recently effected.
CSFB also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria that CSFB deemed
relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the information provided to or otherwise
reviewed by CSFB and relied on such information being complete and accurate in
all material respects. With respect to financial forecasts, CSFB assumed that
such forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Pulitzer and Hearst-
Argyle as to the future financial performance of Pulitzer and Hearst-Argyle
and the cost savings and other potential synergies (including the amount,
timing and achievability thereof) anticipated to result from the Merger. In
addition, CSFB was not requested to, and did not make an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Pulitzer or Hearst-Argyle, nor was CSFB furnished with any such evaluations
or appraisals. CSFB's opinion was necessarily based upon information available
to, and financial, economic, market and other conditions as they existed and
could be evaluated by, CSFB on the date of its opinion. CSFB did not express
any opinion as to the actual value of the Hearst-Argyle Series A Common Stock
when issued pursuant to the Merger or the prices at which the Hearst-Argyle
Series A Common Stock will trade subsequent to the Merger. Although CSFB
evaluated the consideration to be paid by Hearst-Argyle in the Merger from a
financial point of view, CSFB was not requested to, and did not, recommend the
specific consideration payable in the Merger, which consideration was
determined between Pulitzer and Hearst-Argyle. No other limitations were
imposed on CSFB with respect to the investigations made or procedures followed
by CSFB in rendering its opinion.
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In preparing its opinion to the Hearst-Argyle Board, CSFB performed a
variety of financial and comparative analyses, including those described below
performed by CSFB in connection with its opinion dated May 25, 1998. The
summary of CSFB's analyses set forth below does not purport to be a complete
description of the analyses underlying CSFB's opinion. The preparation of a
fairness opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods of financial
analyses and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. In arriving at its opinion, CSFB made qualitative judgments as to
the significance and relevance of each analysis and factor considered by it.
Accordingly, CSFB believes that its analyses must be considered as a whole and
that selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying such analyses and its opinion. In its analyses, CSFB made
numerous assumptions with respect to Hearst-Argyle, Pulitzer, industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Hearst-
Argyle and Pulitzer. No company, transaction or business used in such analyses
as a comparison is identical to Hearst-Argyle or Pulitzer or the proposed
Merger, nor is an evaluation of the results of such analyses entirely
mathematical; rather such analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed. The estimates
contained in such analyses and the ranges of valuations resulting from any
particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or
less favorable than those suggested by such analyses. In addition, analyses
relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, such analyses and estimates are inherently subject
to substantial uncertainty. CSFB's opinion and financial analyses were only
one of many factors considered by the Hearst-Argyle Board in its evaluation of
the proposed Merger and should not be viewed as determinative of the views of
the Hearst-Argyle Board or the management of Hearst-Argyle with respect to the
Merger or the consideration to be paid by Hearst-Argyle in the Merger.
The following is a summary of the material analyses performed by CSFB in
connection with its financial presentation and opinion to the Hearst-Argyle
Board dated May 25, 1998.
Selected Companies Analysis. CSFB compared certain financial and operating
data of the Pulitzer Broadcasting Business to corresponding data of selected
publicly traded companies in the television broadcasting industry. Such
companies included: Hearst-Argyle; Clear Channel Communications, Inc.; Granite
Broadcasting Corporation; Gray Communications Systems, Inc.; Sinclair
Broadcasting Group, Inc.; and Young Broadcasting Inc. (collectively, the
"Selected Companies"). CSFB compared, among other things, enterprise values
(equity market value plus net debt) as multiples of estimated 1998 and 1999
broadcasting cash flow and EBITDA. All multiples were based on closing stock
prices on May 13, 1998. Applying a range of selected multiples for the
Selected Companies of enterprise value relative to estimated 1998 and 1999
broadcasting cash flow of 10.4x to 11.4x and 9.5x to 11.4x, respectively, and
estimated 1998 and 1999 EBITDA of 11.0x to 12.0x and 10.5x to 11.5x,
respectively, to corresponding financial data of the Pulitzer Broadcasting
Business indicated an implied enterprise reference range for the Pulitzer
Broadcasting Business (before any premium for private market transactions) of
approximately $1,280 million to $1,530 million, and an implied equity
reference range of approximately $580 million to $830 million.
Selected Transactions Analysis. Using publicly available information, CSFB
analyzed the purchase prices and implied transaction multiples paid in
selected transactions in the television broadcasting industry, including
(acquiror/target): Sinclair Broadcast Group, Inc./Max Media Properties,
L.L.C.; Sinclair Broadcast Group, Inc./Sullivan Broadcast Holdings, Inc.;
Hicks, Muse, Tate & Furst Inc./LIN Television Corp.; Sinclair Broadcast Group,
Inc./Heritage Media Corp.; The Hearst Corporation/Argyle Television, Inc.;
Hicks, Muse, Tate & Furst Inc./Jupiter/Smith TV Holdings; Meredith
Corporation/First Media Television, L.P.; A.H. Belo Corporation/The Providence
Journal Company; Raycom Media, Inc./AFLAC Incorporated; Tribune
Company/Renaissance Communications Corp.; News Corp./New World Communications
Group Inc.; and, Media General, Inc./Park
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Communications, Inc. (collectively, the "Selected Transactions"). CSFB
compared the purchase prices paid in each Selected Transaction as a multiple
of broadcasting cash flow projected for the calendar year in which such
transaction was announced. Applying a range of selected multiples for the
Selected Transactions of purchase price to estimated 1998 and 1999
broadcasting cash flow of the Pulitzer Broadcasting Business of 14.0x to 15.5x
and 13.0x to 14.5x, respectively, resulted in an implied enterprise reference
range for the Pulitzer Broadcasting Business of approximately $1,730 million
to $1,950 million, and an implied equity reference range of approximately
$1,030 million to $1,260 million.
Discounted Cash Flow Analysis. CSFB estimated the present value of the
unlevered free cash flow that the Pulitzer Broadcasting Business could produce
on a pro forma basis for the years ended 1998 through 2007, based on certain
operating and financial forecasts and other information provided by the
management of Hearst-Argyle and certain sensitivities to such estimates to
reflect potentially lower revenue growth. Ranges of terminal values were
estimated using multiples of projected 2007 broadcasting cash flow of 11.0x to
13.0x. The free cash flow streams and estimated terminal values were then
discounted to present value using discount rates ranging from 9.5% to 10.5%.
This analysis indicated an implied enterprise reference range for the Pulitzer
Broadcasting Business of approximately $1,665 million to $2,270 million, and
an implied equity reference range of approximately $965 million to $1,570
million.
Aggregate Reference Ranges. On the basis of the valuation methodologies
employed in the analyses described above, CSFB derived aggregate enterprise
and equity reference ranges for the Pulitzer Broadcasting Business of
approximately $1,750 million to $2,000 million and $1,050 million to $1,300
million, respectively.
Pro Forma Merger Analysis. CSFB analyzed the potential pro forma effect of
the Merger on the estimated ATCF and EBITDA per share of Hearst-Argyle for
fiscal years 1999 through 2001, based on financial forecasts provided by the
management of Hearst-Argyle. Based on an assumption that the Merger would be
consummated at a value of $35.00 per share of Hearst-Argyle common stock, an
assumed cost of debt of 6.0% and a tax rate of 40%, this analysis indicated
that the proposed Merger would be approximately (2.6)% and (0.2)% dilutive to
Hearst-Argyle's estimated ATCF per share in calendar years 1999 and 2000,
respectively, approximately 1.4% accretive to Hearst-Argyle's estimated ATCF
per share in calendar year 2001, and approximately 3.4%, 4.2% and 4.0%
accretive to Hearst-Argyle's estimated EBITDA per share in calendar years
1999, 2000 and 2001, respectively. Based on an additional assumption that
Hearst-Argyle would repurchase approximately $300 million of its common stock
at an average repurchase price of $37.50 per share, this analysis indicated
that the proposed Merger would be approximately 0.8%, 6.5% and 9.5% accretive
to Hearst-Argyle's estimated ATCF per share in calendar years 1999, 2000 and
2001, respectively, and approximately 8.4%, 13.4% and 14.6% accretive to
Hearst-Argyle's estimated EBITDA per share in calendar years 1999, 2000 and
2001, respectively. The actual results achieved by the combined company may
vary from projected results and the amount and price of any shares repurchased
by Hearst-Argyle may vary from those assumed in this analysis and, in each
case, the variations may be material.
Other Factors and Analyses. In the course of preparing its opinion, CSFB
performed certain other analyses and considered certain other information and
data, including, among other things, (i) the relative contributions of Hearst-
Argyle and the Pulitzer Broadcasting Business to certain operational measures
of the combined company in fiscal year 1998 and (ii) the history of trading
prices for Hearst-Argyle and Pulitzer Common Stock and the relationship
between movements of such common stock.
Miscellaneous. Pursuant to the terms of CSFB's engagement, Hearst-Argyle has
agreed to pay CSFB for its financial advisory services in connection with the
Merger an aggregate fee equal to 0.50% of the total consideration (including
liabilities assumed) payable in the Merger, as calculated and payable upon the
closing, not to exceed $8.5 million. If the Merger were consummated as of
February 9, 1999, the aggregate financial advisory fee payable to CSFB would
be $8.5 million. Hearst-Argyle also has agreed to reimburse CSFB for all out-
of-pocket expenses incurred by CSFB in performing its services, including the
fees and expenses for legal counsel and any other advisor retained by CSFB,
and to indemnify CSFB and certain related persons and entities against certain
liabilities under the federal securities laws, arising out of CSFB's
engagement.
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CSFB and its affiliates have in the past provided financial services to
Hearst-Argyle unrelated to the proposed Merger, for which CSFB and its
affiliates have received compensation. In the ordinary course of its business,
CSFB and its affiliates may actively trade both the debt and equity securities
of both Hearst-Argyle and Pulitzer for their own accounts and for the accounts
of customers and, accordingly, may at any time hold long or short positions in
such securities.
Interests of Officers, Directors and Principal Stockholders in the
Transactions
In connection with the execution of the Merger Agreement, the Pulitzer
Parties and Hearst-Argyle entered into a Registration Rights Agreement, dated
May 25, 1998, pursuant to which the Pulitzer Parties and related parties will
be entitled to certain registration rights with respect to public offerings of
Hearst-Argyle Series A Common Stock. In addition, the Pulitzer Parties,
Hearst-Argyle and Hearst Broadcasting entered into a Board Representation
Agreement, dated May 25, 1998, pursuant to which the Pulitzer Parties have
been granted the right, subject to certain conditions and restrictions, to
cause Hearst-Argyle to nominate for election to the Hearst-Argyle Board, and
Hearst Broadcasting to vote in favor of the election of, two individuals
designated by the Pulitzer Parties. Subject to the terms and conditions of the
Board Representation Agreement (as described herein), after the consummation
of the Merger, Michael E. Pulitzer and Ken J. Elkins shall serve as the
initial directors nominated by the Pulitzer Parties on the Hearst-Argyle
Board. See "The Merger Agreement--Ancillary Agreements--Registration Rights
Agreement" and "--Board Representation Agreement."
The Pulitzer Principal Stockholders have advised Pulitzer that they expect
to sell a portion of the Pulitzer Common Stock issuable upon conversion of
their shares of Pulitzer Class B Common Stock prior to the consummation of the
Spin-Off and the Merger. These sales may occur in transactions (that may
include block transactions) on the NYSE, in negotiated transactions, or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale or at negotiated prices. The
Pulitzer Principal Stockholders may effect such transactions by selling
Pulitzer Common Stock directly to purchasers or to or through broker-dealers
that may act as agents or principals. Pulitzer has filed a registration
statement relating to the proposed sale by certain of the Pulitzer Principal
Stockholders of up to 1,126,000 shares of Pulitzer Common Stock, although any
such sales are not expected to exceed 5% of the total combined voting power
and equity value of all the issued and outstanding shares of Pulitzer Stock.
Other than the Pulitzer Parties, as of the Pulitzer Record Date, executive
officers or directors of Pulitzer beneficially owned an aggregate of 79,425
shares of Pulitzer Common Stock, representing approximately 1.1% of the
outstanding shares of Pulitzer Common Stock, and no shares of Pulitzer Class B
Common Stock.
Directors and executive officers of Hearst-Argyle beneficially owned
1,432,511 shares of Hearst-Argyle Series A Common Stock, or approximately
13.3% of the outstanding shares of Hearst-Argyle Series A Common Stock, as of
the Hearst-Argyle Record Date. Hearst Broadcasting beneficially owned all of
the outstanding shares of Hearst-Argyle Series B Common Stock and 4,036,725
shares of Hearst-Argyle Series A Common Stock as of the Hearst-Argyle Record
Date.
Upon consummation of the Merger, based on the 37,096,774 shares of Hearst-
Argyle Merger Stock being delivered to Pulitzer stockholders in the Merger, if
the Merger were consummated as of February 9, 1999, and assuming the sale
prior to the Merger of all shares of Pulitzer Common Stock proposed to be sold
by the Pulitzer Principal Stockholders (as disclosed in the registration
statement filed with the SEC), the Pulitzer Principal Stockholders, together
with the executive officers, directors and other affiliates of Pulitzer, would
own as a group approximately 24.9% of the outstanding shares of Hearst-Argyle
Common Stock; and Hearst Broadcasting, together with the current executive
officers, directors and other affiliates of Hearst-Argyle, would own as a
group approximately 53.4% of the outstanding shares of Hearst-Argyle Common
Stock.
Pursuant to the Merger Agreement and the Contribution Agreement, Hearst-
Argyle, Pulitzer and New Pulitzer have agreed to indemnify each other's
respective officers and directors for certain customary matters, including for
misleading statements or omissions in documents filed with the SEC, certain
third party claims and liabilities relating to the Pulitzer Broadcasting
Business and Pulitzer's publishing business. See "The Merger Agreement--
Indemnification."
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Pulitzer is a party to agreements with each of Michael E. Pulitzer, Ken J.
Elkins, Nicholas G. Penniman IV, Ronald H. Ridgway, C. Wayne Godsey and John
Kueneke (collectively, the "Pulitzer Executives") pursuant to which Pulitzer
has agreed to pay each Pulitzer Executive a retention award on the earlier of
(i) January 1, 2000, and (ii) the Closing Date, provided the Pulitzer
Executive remains in the continuous employ of Pulitzer until such earlier
date. The amounts of the retention awards are $900,000, $600,000, $150,000,
$450,000, $250,000 and $250,000, respectively. These agreements also provide
for the payment of bonuses on or after the completion of the Merger. The
amounts of the transaction completion bonuses are $1,000,000, $1,000,000,
$150,000, $450,000, $375,000 and $375,000, respectively. The Compensation
Committee of the Pulitzer Board may award additional transaction completion
bonuses to each Pulitzer Executive and certain other management personnel,
other than Messrs. Elkins, Godsey and Kueneke. The agreements for Messrs.
Elkins, Godsey and Kueneke provide for cash separation payments of
approximately $1,350,000, $850,000 and $650,000, respectively. The exact
amount of the cash separation payments to these individuals will depend in
large part upon the values assigned to the accelerated vesting of their
unvested stock options and other non-cash benefits, and may be limited by the
deductibility provisions of Section 280G of the Internal Revenue Code. Each of
these agreements provides for full payment to the Pulitzer Executive's estate
if the Pulitzer Executive dies before the Closing. Pulitzer has entered into
similar agreements with certain of its other officers and executives who will
be entitled to receive transaction completion bonuses aggregating
approximately $984,000. Certain of these individuals will also be entitled to
receive, among other things, retention awards aggregating approximately
$289,000. In addition, pursuant to the Merger Agreement, Hearst-Argyle has
agreed to assume the obligation to make payments of retirement or other
benefits that have been earned as of the Effective Time (which will become
fully vested at that time) to certain broadcasting executives of Pulitzer
under Pulitzer's supplemental executive retirement plan. New Pulitzer has
agreed to pay to Hearst-Argyle an amount equal to the aggregate amount of such
payments net of a deferred tax benefit. The net amount has been estimated to
be $100,000, although the actual amount may be higher or lower depending on
the final actuarial calculations at the Effective Time.
Pulitzer and New Pulitzer anticipate that following the consummation of the
Merger, upon approval of New Pulitzer's Board of Directors and the
recommendation of its outside compensation consultants, New Pulitzer will
enter into an employment agreement with each of Messrs. Pulitzer and Ridgway.
It is anticipated that these agreements will be for varying terms and will
provide each with salary and other compensation substantially similar to the
salary and other compensation currently provided by Pulitzer. New Pulitzer has
entered into employment agreements with Messrs. Cole C. Campbell, Terry Egger,
and James V. Maloney that become effective upon consummation of the Merger.
Mr. Campbell will serve as Editor of the St. Louis Post-Dispatch, Mr. Egger
will serve as General Manager of the St. Louis Post-Dispatch, and Mr. Maloney
will serve as Secretary, Director of Shareholder Relations of New Pulitzer.
Each of these agreements is for a term of three years, and each agreement
includes salary and bonus opportunities that are substantially similar to what
is currently provided by Pulitzer, except that the agreement with Mr. Egger
includes a provision for a restricted stock grant that would vest if his
employment with New Pulitzer continues until the end of the three-year term.
James M. Snowden, Jr., who is a director of Pulitzer and a director of New
Pulitzer, is an executive vice president of Huntleigh. Since November 6, 1995,
Huntleigh has had a retainer relationship with Pulitzer with respect to
general financial advisory services. In addition, in December 1997, Pulitzer
entered into an engagement letter with Huntleigh pursuant to which Huntleigh
has acted as a financial advisor to Pulitzer with respect to various
alternatives regarding the Pulitzer Broadcasting Business. Pursuant to this
engagement letter, Pulitzer has paid Huntleigh $200,000 in financial advisory
fees. In addition, Pulitzer will be obligated to pay Huntleigh a fee of $1.5
million upon consummation of the Spin-Off and additional fees aggregating
approximately $9.1 million (based on the closing price of Hearst-Argyle Series
A Common Stock on January 21, 1999) upon consummation of the Merger. New
Pulitzer intends to retain Huntleigh in the future as a financial advisor in
connection with such matters as it deems appropriate. Pulitzer has agreed to
reimburse Huntleigh, and its affiliates, partners, directors, agents,
employees and control persons for certain legal and other expenses and to
indemnify Huntleigh against certain liabilities, including certain liabilities
under the federal securities laws.
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William Bush, who is a director of Pulitzer and a director of New Pulitzer,
is a partner in Fulbright & Jaworski L.L.P. Pulitzer has retained, and New
Pulitzer intends to retain in the future, Fulbright & Jaworski L.L.P. as legal
counsel in connection with such legal matters as it deems appropriate.
Hearst-Argyle Stock Repurchase Program
Simultaneously with the public announcement of the Merger Agreement, the
Hearst-Argyle Board authorized a market repurchase program (the "Repurchase
Program") pursuant to which Hearst-Argyle may purchase, at such times and on
such terms as it determines appropriate, up to $300 million of Hearst-Argyle
Series A Common Stock. The Hearst-Argyle Board authorized the Repurchase
Program in order to adjust the capital structure of Hearst-Argyle with respect
to its debt to equity ratio in light of the significant amount of equity to be
issued in the Merger. Hearst-Argyle has no obligation to Pulitzer or New
Pulitzer to make any such purchases. As of February 9, 1999, Hearst-Argyle
had, pursuant to the Repurchase Program, purchased 1,835,727 shares of Hearst-
Argyle Series A Common Stock for aggregate consideration of $54.0 million. In
addition, at the time of the public announcement of the Merger Agreement,
Hearst Broadcasting notified Hearst-Argyle of its intention to purchase up to
10 million shares of Hearst-Argyle Series A Common Stock from time to time in
the open market, in private transactions or otherwise. As of February 9, 1999
and subsequent to the public announcement of the Merger Agreement, Hearst
Broadcasting had purchased 4,132,698 shares of Hearst-Argyle Series A Common
Stock for an aggregate consideration of $124.5 million.
Accounting Treatment
The Merger will be accounted for by Hearst-Argyle using the purchase method.
Hearst-Argyle will be the acquiror of the Pulitzer Broadcasting Business and,
as a result, the assets and liabilities of the Pulitzer Broadcasting Business
will be consolidated with those of Hearst-Argyle at their estimated fair
values. The results of operations of the Pulitzer Broadcasting Business will
be included in the consolidated financial statements of Hearst-Argyle
subsequent to the Closing Date of the Merger.
Pulitzer's historical basis in its assets and liabilities contributed to and
assumed by New Pulitzer will be carried over to New Pulitzer. The Merger, the
Spin-Off and the related transactions will be accounted for by New Pulitzer as
a reverse-spin transaction, and accordingly New Pulitzer's results of
operations for periods reported prior to the consummation of the Merger, the
Spin-Off and related transactions will represent the historical results of
operations previously reported by Pulitzer. See "Information Incorporated By
Reference."
THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement and the exhibits and schedules thereto, a copy of which is attached
as Annex I to this Joint Proxy Statement/Prospectus and is incorporated herein
by reference. This summary is qualified in its entirety by reference to the
full and complete text of the Merger Agreement.
Pre-Merger Transactions
Prior to and as a condition to the Merger, each of the following
transactions must be consummated.
Financing. Prior to the Spin-Off, Pulitzer has agreed to use commercially
reasonable efforts to obtain the New Debt through a financing in the amount of
$700 million on terms reasonably and mutually acceptable to Pulitzer and
Hearst-Argyle, which may be secured by the proceeds thereof, the Broadcasting
Assets to be acquired by Hearst-Argyle in the Merger or the issued and
outstanding shares of capital stock of Pulitzer Broadcasting and/or the
Broadcasting Subsidiaries. Pulitzer expects to enter into a commitment letter
with The Chase Manhattan Bank ("Chase"), pursuant to which Chase, subject to
the negotiation, execution and delivery of definitive documentation and
several conditions, will commit to lend to Pulitzer $700 million, which loan
will
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be due and payable upon two days' prior written notice and secured initially
by the cash proceeds of the loan. Upon payment of the Existing Debt and the
occurrence of the Spin-Off, the lien on the cash will be released and replaced
by a pledge of all the issued and outstanding shares of capital stock of
Pulitzer Broadcasting and the Broadcasting Subsidiaries. On or before the
Closing Date, Pulitzer will use a portion of the proceeds of the New Debt to
pay or provide for the payment of Existing Debt and the Deal Expenses.
Pulitzer will contribute the balance of the proceeds of the New Debt, along
with any other remaining cash and cash equivalents then owned by Pulitzer, to
New Pulitzer pursuant to the Contribution Agreement. Under the terms of the
proposed commitment letter, Pulitzer will pay a corporate finance fee to Chase
of $500,000, payable on or before the Closing Date. If for any reason the
Merger is not consummated, Pulitzer expects to repay a portion of the New Debt
with the proceeds remaining after any payment of Existing Debt or Deal
Expenses. However, under such circumstances, if the New Debt is not fully
repaid on the day after the New Debt is borrowed, Chase Securities Inc.
("CSI"), on behalf of Chase, will be permitted to structure, arrange and
syndicate senior secured credit facilities in the amount of $700 million, the
proceeds of which will be applied to refinance the New Debt. If the New Debt
remains unpaid and outstanding for more than three business days, Pulitzer
will pay to Chase an advisory fee in the amount of $5.25 million, provided
that if the New Debt is repaid from the proceeds of a syndicated financing
arranged or underwritten by CSI or any of its affiliates, the advisory fee
will be credited against any syndication or underwriting fees payable to Chase
in connection with the refinancing.
Spin-Off. The Merger Agreement provides that, pursuant to a Contribution and
Assumption Agreement between Pulitzer and New Pulitzer, a form of which is
attached as Exhibit C to Annex I hereto (the "Contribution Agreement"), prior
to the Closing, Pulitzer will effect the Contribution by contributing and
transferring to New Pulitzer and/or its wholly owned subsidiaries
(collectively, the "New Pulitzer Group") (i) all of its assets other than (A)
the issued and outstanding capital stock of Pulitzer Broadcasting and of the
Broadcasting Subsidiaries and (B) the Broadcasting Assets; (ii) the net
proceeds of the New Debt after paying or providing for the Existing Debt and
the Deal Expenses; and, (iii) any other remaining cash and cash equivalents
then owned by Pulitzer. The assets and certain other rights that will not be
contributed to the New Pulitzer Group are hereinafter referred to as the
"Retained Assets." In connection with the Contribution, New Pulitzer, among
other things, will (i) assume all liabilities of Pulitzer that exist as of, or
otherwise relate to any period ending on or prior to, the Effective Time,
other than those liabilities associated with the Pulitzer Broadcasting
Business, the New Debt and Pulitzer's obligations under the Merger Agreement
and the other agreements contemplated thereby (the "Retained Liabilities") and
(ii) issue and deliver to Pulitzer such number of shares of New Pulitzer
Common Stock and New Pulitzer Class B Common Stock as will be required for the
Distribution.
Following the Contribution, and immediately prior to the Merger, Pulitzer
will effect the Distribution by distributing to each holder of Pulitzer Common
Stock one share of New Pulitzer Common Stock for each share of Pulitzer Common
Stock held and to each holder of Pulitzer Class B Common Stock one share of
New Pulitzer Class B Common Stock for each share of Pulitzer Class B Common
Stock held. As a result, each holder of Pulitzer capital stock immediately
prior to the Distribution will own the same number and class of shares in New
Pulitzer as such holder owns in Pulitzer. Each share of Pulitzer Stock owned
directly or indirectly by Pulitzer as treasury stock will be cancelled at the
time of the Distribution. Each share of the capital stock of New Pulitzer
issued and outstanding immediately prior to the Distribution and owned,
directly or indirectly, by Pulitzer or any of its subsidiaries (other than
those to be distributed in accordance with the Distribution) will be cancelled
at the time of the Distribution.
The Contribution and the Distribution collectively constitute the Spin-Off.
As part of the Contribution, Pulitzer will agree to indemnify, defend and hold
harmless the New Pulitzer Group, and their respective successors-in-interest
and each of their respective past and present directors and officers from all
losses, claims, damages or liabilities, joint or several, of Pulitzer, to the
extent they arise out of, or are based upon or otherwise relate to, the
Retained Liabilities, the Retained Assets or the operations of Pulitzer
Broadcasting or the Broadcasting Subsidiaries, except for certain liabilities
relating to taxes, employee benefits, litigation and certain other matters.
See "The Merger Agreement--Indemnification." Notwithstanding the foregoing,
New Pulitzer
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will be responsible for all tax liabilities of Pulitzer and its subsidiaries
for periods through the date (the "Closing Date") on which the closing of the
Merger and related transactions occurs (the "Closing"), and Hearst-Argyle, as
the surviving corporation, will be responsible for all Retained Liabilities
and all liabilities pertaining to the Retained Assets for periods thereafter.
New Pulitzer will also be responsible for certain taxes arising from or
relating to the Merger, the Contribution, the Spin-Off and related
transactions. See "The Merger Agreement--Tax Matters."
Amendments to Organizational Documents of Pulitzer and New Pulitzer. Prior
to the Contribution and Distribution, the Pulitzer Charter will be amended in
connection with the Spin-Off in order to permit the Distribution. Currently,
the Pulitzer Charter provides that, if dividends or other distributions (other
than of Pulitzer Stock) are declared, the amount of such dividend or other
distribution payable on each share of Pulitzer Stock shall in all cases be
equal to the amount of such dividend or other distribution payable on each
other share of Pulitzer Stock. This provision prohibits the distribution to
holders of Pulitzer Common Stock of New Pulitzer Common Stock and the
simultaneous distribution to holders of Pulitzer Class B Common Stock of New
Pulitzer Class B Common Stock, as contemplated by the Distribution. The
Pulitzer Charter Amendment, if approved and adopted, will permit such
distributions by creating a specific exception for distributions of shares of
New Pulitzer. See "Proposal to Approve and Adopt the Pulitzer Charter
Amendment" and a copy of the form of Pulitzer Charter Amendment attached as
Annex III hereto. The New Pulitzer Certificate of Incorporation (the "New
Pulitzer Charter") has been amended and restated and contains provisions
substantially similar to the current Pulitzer Charter, as proposed to be
amended by the Pulitzer Charter Amendment. See "Comparison of Rights of
Stockholders of Pulitzer and New Pulitzer" and a copy of the New Pulitzer
Charter attached as Annex VII hereto.
The Merger
General. In addition to providing for the transactions described above under
"--The Pre-Merger Transactions," the Merger Agreement provides that, subject
to (i) the requisite adoption and approval by Hearst-Argyle stockholders of
the Hearst-Argyle Merger Proposal; (ii) the requisite adoption and approval by
Pulitzer stockholders of the Pulitzer Proposals; and, (iii) the satisfaction
or waiver of certain other conditions, at the Effective Time, Pulitzer (which,
at the time of the Merger, will own only the Pulitzer Broadcasting Business
subject to the related liabilities, the New Debt and certain other
obligations) will be merged with and into Hearst-Argyle, the separate
existence of Pulitzer will cease, and Hearst-Argyle will continue as the
surviving corporation in the Merger. As a result of the Merger, (i) Hearst-
Argyle will acquire the Pulitzer Broadcasting Business and, with certain
exceptions, will be responsible for all of the liabilities of Pulitzer
relating to the Pulitzer Broadcasting Business, the New Debt and the
obligations of Pulitzer under the Merger Agreement and the other agreements
contemplated thereby and (ii) shares of Pulitzer Stock outstanding immediately
prior to the Merger will be converted into shares of Hearst-Argyle Merger
Stock (as defined below). Because the Merger is structured as a merger of
Pulitzer with and into Hearst-Argyle, Hearst-Argyle will assume all
liabilities of Pulitzer as a matter of law at the Effective Time, including
the New Debt. Pursuant to the Merger Agreement and the Contribution Agreement,
Pulitzer, New Pulitzer and Hearst-Argyle have agreed to indemnify each other
with respect to certain matters, including New Pulitzer's indemnification of
Hearst-Argyle in respect of all liabilities of Pulitzer not related to the
Pulitzer Broadcasting Business (including any tax to which Pulitzer is subject
as a result of the Spin-Off) other than the New Debt and the obligations of
Pulitzer under the Merger Agreement and the other agreements contemplated
thereby, and the indemnification of Hearst-Argyle in respect of certain
liabilities relating to the Pulitzer Broadcasting Business. See "--
Indemnification."
Effective Time of Merger. The Merger will become effective upon the filing
of a certificate of merger with the Secretary of State of the State of
Delaware in accordance with applicable law (the "Effective Time"). It is
anticipated that, if approved by the stockholders of both Hearst-Argyle and
Pulitzer, the Merger will become effective in March 1999; however, because the
Merger and the related transactions are conditioned upon, among other things,
certain regulatory approvals and third party consents, no assurances can be
given as to when the consummation of the Merger will actually occur, if at
all.
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Merger Consideration. Pursuant to the Merger Agreement and without any
action on the part of the holder of any shares of Pulitzer capital stock, at
the Effective Time each share of Pulitzer Stock issued and outstanding
immediately prior to the Merger (except for shares of Pulitzer Class B Common
Stock with respect to which dissenters' rights are properly exercised) will be
converted into and become the number of fully-paid and nonassessable shares of
Hearst-Argyle Series A Common Stock (the "Common Stock Conversion Number")
equal to the quotient obtained by dividing the 37,096,774 shares of Hearst-
Argyle Series A Common Stock to be delivered to Pulitzer stockholders in the
Merger (the "Hearst-Argyle Merger Stock") by the number of shares of Pulitzer
Stock outstanding immediately prior to the Effective Time. Based on the number
of shares of Pulitzer Stock outstanding on the Pulitzer Record Date, if the
Merger were consummated on the date hereof, the Common Stock Conversion Number
(or the number of shares of Hearst-Argyle Series A Common Stock to be
delivered per share of Pulitzer Stock) would be 1.64 shares. The fixed number
of shares of Hearst-Argyle Merger Stock was determined under the Merger
Agreement by dividing an aggregate consideration of $1.15 billion by a price
of $31.00 per share for the Hearst-Argyle Series A Common Stock. On February
9, 1999, the closing price of Hearst-Argyle Series A Common Stock on the NYSE
was $27.875 per share. Based on this price, the aggregate value of the Hearst-
Argyle Merger Stock is $1,034,072,575.25, and the value of Hearst-Argyle
Merger Stock to be received per share of Pulitzer Stock is $45.717. Because
the aggregate number of shares of Hearst-Argyle Merger Stock is fixed and the
actual market price of the Hearst-Argyle Series A Common Stock is subject to
fluctuation, the actual aggregate market value of Hearst-Argyle Merger Stock
and market value of Hearst-Argyle Merger Stock to be received per share of
Pulitzer Stock, at the Effective Time, may be greater or less than these
amounts.
If, between May 25, 1998 and the Effective Time, the outstanding shares of
Hearst-Argyle Series A Common Stock are changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
or if any extraordinary dividend or distribution is made with respect to the
Hearst-Argyle Series A Common Stock, then the Common Stock Conversion Number
will be correspondingly adjusted to reflect such event.
The Merger Agreement provides that no fractional shares of Hearst-Argyle
Merger Stock will be issued in connection with the Merger. In lieu of any such
fractional interests, each holder of Pulitzer Stock entitled to receive
Hearst-Argyle Merger Stock in the Merger will be entitled to receive an amount
in cash (without interest), rounded to the nearest cent, determined by
multiplying the fractional interest in the share of Hearst-Argyle Merger Stock
to which such holder would otherwise be entitled (after taking into account
all shares of Pulitzer Stock then held of record by such holder) by the
closing sales price of a share of Hearst-Argyle Series A Common Stock on the
NYSE on the Closing Date. Hearst-Argyle currently expects that any such
payments will be made from cash on hand.
If the Merger were consummated on the date hereof, the 37,096,774 shares of
Hearst-Argyle Merger Stock being delivered to holders of Pulitzer Stock would
represent approximately 77.5% of the outstanding Hearst-Argyle Series A Common
Stock on the Hearst-Argyle Record Date and approximately 41.6% of the
outstanding Hearst-Argyle Common Stock on such date (each on a pro forma basis
for the Merger). See "Ownership of Hearst-Argyle Stock Before and After the
Merger."
Payment for Shares. As soon as practicable after the Effective Time, a
letter of transmittal will be mailed by the Exchange Agent to each holder of
record of Pulitzer Stock (other than Pulitzer, New Pulitzer or any of their
respective subsidiaries) immediately prior to the Effective Time to be used in
forwarding such holder's certificates evidencing such shares for surrender and
exchange for certificates evidencing the shares of Hearst-Argyle Merger Stock
to which such holder has become entitled and, if applicable, cash in lieu of a
fractional share of Hearst-Argyle Series A Common Stock. The letter of
transmittal will be accompanied by instructions specifying the other details
of the exchange. PULITZER STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES
UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL.
After the Effective Time, each certificate formerly representing Pulitzer
Stock, until surrendered and exchanged, will be deemed for all purposes to
evidence the number of full shares of Hearst-Argyle Series A
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Common Stock into which the shares of Pulitzer Stock shall have been so
converted pursuant to the Merger and cash in lieu of a fractional share of
Hearst-Argyle Series A Common Stock. The holder of such unexchanged
certificate will not be entitled to receive any dividend or other distribution
payable by Hearst-Argyle to its stockholders until such certificate is
surrendered. Subject to the effect of applicable law, such holders of
unexchanged certificates shall not be entitled to receive interest on any
dividends or distributions. All such dividends or other distributions held by
the Exchange Agent for payment or delivery to the holders of unsurrendered
Certificates and unclaimed at the end of one year from the Effective Time
shall be repaid or redelivered by the Exchange Agent to Hearst-Argyle, after
which time any holder of Certificates who has not theretofore surrendered such
Certificates to the Exchange Agent, subject to applicable law, shall look as a
general creditor only to Hearst-Argyle for payment or delivery of such
dividends or distributions, as the case may be.
Appraisal Rights. Any holder of record of shares of Pulitzer Class B Common
Stock outstanding immediately prior to the Merger that has validly exercised
such holder's appraisal rights under Section 262 of the DGCL will not be
entitled to receive, in respect of the shares of Pulitzer Class B Common Stock
as to which such holder has validly exercised such appraisal rights, shares of
Hearst-Argyle Merger Stock unless and until such holder shall have failed to
perfect, or shall have effectively withdrawn or lost, such holder's right to
payment for such holder's shares of Pulitzer Class B Common Stock under
Section 262 of the DGCL. In such event, such holder shall be entitled to
receive the Hearst-Argyle Merger Stock (in addition to the shares of New
Pulitzer Class B Common Stock received pursuant to the Distribution) that such
holder would have been entitled had such holder not exercised appraisal
rights. Pulitzer, Hearst-Argyle and New Pulitzer have reached certain
agreements relating to any such exercise of appraisal rights, including
Hearst-Argyle's agreement, as the surviving corporation of the Merger, to pay
any amount payable to any such stockholder who becomes entitled under Section
262 of the DGCL for such holder's shares of Pulitzer Class B Common Stock. See
"Rights of Dissenting Pulitzer Stockholders" for further information
concerning the rights of holders of Pulitzer Class B Common Stock to dissent,
including a discussion of the mechanics of perfecting such rights.
Certificate of Incorporation and By-Laws; Directors and Officers. The Merger
Agreement provides that the Hearst-Argyle Charter and the Hearst-Argyle By-
Laws, each as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation and By-Laws of the surviving corporation. In
addition, the directors and officers of Hearst-Argyle immediately prior to the
Effective Time will be the directors and officers of the surviving
corporation; provided, however, that pursuant to the Board Representation
Agreement entered into by Hearst-Argyle, Hearst Broadcasting and the Pulitzer
Parties, the Pulitzer Parties will have certain rights to representation on
the Hearst-Argyle Board. See "--Ancillary Agreements--Board Representation
Agreement."
Closing and Closing Date. The Closing will take place as soon as practicable
after the satisfaction or waiver of the conditions set forth in the Merger
Agreement and summarized below (but no later than five business days
thereafter) or on such other date as Hearst-Argyle, Pulitzer and New Pulitzer
may agree.
Restrictions on Transfer of Hearst-Argyle Merger Stock. The shares of
Hearst-Argyle Series A Common Stock that will be issued to Pulitzer
stockholders pursuant to the Merger will be freely transferable, except that
shares of Hearst-Argyle Series A Common Stock issued to persons who are deemed
to be "affiliates" (as such term is defined under the Securities Act) of
Pulitzer at the time of the Pulitzer Meeting may be resold by them only
pursuant to an effective registration statement covering such securities, in
transactions permitted by the resale provisions of Rule 145 under the
Securities Act (or Rule 144 in the case of such persons who become affiliates
of Hearst-Argyle after the Merger) or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of Pulitzer or
Hearst-Argyle generally include individuals or entities that control, are
controlled by, or are under common control with, such person and may include
certain officers and directors of such person as well as principal
stockholders of such person. Based on the 37,096,774 shares of Hearst-Argyle
Merger Stock being delivered to Pulitzer stockholders in the Merger and the
number of shares of Pulitzer Stock outstanding on the Pulitzer Record Date, if
the Merger were consummated as of February 9, 1999 and assuming the sale prior
to the Merger of all shares of Pulitzer Common Stock proposed to be sold by
the Pulitzer Principal Stockholders, affiliates of Pulitzer will receive
approximately 22.2 million shares of Hearst-Argyle Series A
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Common Stock pursuant to the Merger. The Merger Agreement requires Pulitzer to
use reasonable efforts to deliver or cause to be delivered to Hearst-Argyle,
prior to the Closing Date, from each person identified by Pulitzer as an
affiliate, a letter agreement to the effect that such person will not sell or
otherwise dispose of any of the shares of Hearst-Argyle Series A Common Stock
issued to such person pursuant to the Merger except (i) pursuant to an
effective registration statement under the Securities Act or (ii) in a
transaction which, in the reasonable opinion of Hearst-Argyle's counsel, is
not required to be registered under the Securities Act and is permissible
under Rule 145. See "--Conditions Precedent."
Restrictions on Transfer of New Pulitzer Stock. The shares of New Pulitzer
Stock received by Pulitzer stockholders pursuant to the Spin-Off will not be
subject to any restrictions on transfer (other than those that may be related
to federal and state securities laws or, if applicable, the provisions of the
New Pulitzer Voting Trust Agreement). However, each holder of 5% or more of
either the total combined voting power or equity value of the issued and
outstanding Pulitzer Stock has represented that such holder has no present
plan or intention to dispose of any of the shares of New Pulitzer Stock that
such holder will receive in the Spin-Off, except for possible gifts to
charitable organizations, trusts or split-interest trusts, gifts for estate
planning purposes to family members or to entities beneficially owned by
family members or the donor and sales of a limited amount of shares of New
Pulitzer Stock that will only be made simultaneously with, and in proportion,
to sales of the Hearst-Argyle Merger Stock received by them pursuant to the
Merger. All such gifts, transfers or sales by such 5% Pulitzer stockholders
will not exceed in the aggregate 9.5% of the number of shares of stock of
either Hearst-Argyle or New Pulitzer outstanding immediately after the Merger.
Such 5% Pulitzer stockholders have further agreed that in the absence of
unanticipated events or circumstances necessitating a change of their
respective present plans and intentions, they will not dispose of shares of
New Pulitzer Stock for a period of one year after the Spin-Off and the Merger
other than the permitted gifts, transfers or sales described above.
Transfers of shares of New Pulitzer Class B Common Stock will be further
restricted by certain provisions of the New Pulitzer Charter, as amended from
time to time.
Working Capital Adjustment
Two days prior to the Effective Time, Pulitzer will inform Hearst-Argyle of
its estimate of the difference between its total current assets and its total
current liabilities (other than the New Debt, the Existing Debt and the Deal
Expenses) (the "Working Capital Amount") as of the end of the most recently
available month end period immediately preceding the Effective Time and after
giving effect to the Contribution, the Distribution and the disposition of
cash and cash equivalents (the "Estimated Working Capital Amount"). At the
Effective Time, if the Estimated Working Capital Amount exceeds $41 million,
Hearst-Argyle will pay to New Pulitzer the amount of such excess, and if $41
million exceeds the Estimated Working Capital Amount, New Pulitzer will pay to
Hearst-Argyle the amount of such excess.
Within 90 days after the Effective Time, Hearst-Argyle will deliver to New
Pulitzer its determination of the Working Capital Amount as of the Closing
Date (the "Closing Working Capital Amount"). Within 10 days thereafter (or
within 10 days of the resolution of any dispute regarding such determination,
which dispute, if not resolved by Hearst-Argyle and New Pulitzer, will be
resolved by an independent certified public accounting firm mutually
acceptable to Hearst-Argyle and New Pulitzer, the decision of which shall be
final and binding on Hearst-Argyle and New Pulitzer), adjustment payments will
be made as follows: If the Closing Working Capital Amount as adjusted, if at
all, by the preceding dispute resolution process (the "Final Working Capital
Amount") exceeds the Estimated Working Capital Amount, then Hearst-Argyle will
pay to New Pulitzer the amount of such excess, and if the Estimated Working
Capital Amount exceeds the Final Working Capital Amount, New Pulitzer will pay
to Hearst-Argyle the amount of excess. Any such payments will include interest
from the Closing Date to the date of payment at the prime rate charged by
Citibank, N.A. in New York City, will be made in immediately available funds
and will be made on an after-tax basis.
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Conditions Precedent
Conditions to the Obligations of All Parties. The respective obligations of
Hearst-Argyle, on the one hand, and Pulitzer and New Pulitzer, on the other
hand, to consummate the Merger and each of the transactions contemplated by
the Merger Agreement are conditioned on the following:
(i) the Hearst-Argyle Merger Proposal shall have been approved and
adopted by the stockholders of Hearst-Argyle;
(ii) the Pulitzer Proposals shall have been approved and adopted by the
stockholders of Pulitzer;
(iii) the Spin-Off, the Pulitzer Charter Amendment and certain amendments
to the New Pulitzer Charter shall have been consummated in accordance with
the terms of the Merger Agreement and Pulitzer shall have drawn down in its
entirety the New Debt;
(iv) any waiting period applicable to the consummation of the
transactions contemplated by the Merger Agreement under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
shall have expired or been terminated (which has occurred), and any other
governmental or regulatory approvals, notices or temporary or permanent
waivers or other licenses or grants, required with respect to the
transactions contemplated thereby shall have been either filed or received
and be in effect;
(v) no federal, state or foreign governmental authority or other agency
or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent)
that remains in effect and that has the effect of making the transactions
contemplated by the Merger Agreement illegal or otherwise prohibiting such
transactions or that questions the validity or the legality of the
transactions contemplated by the Merger Agreement and that in any case
could reasonably be expected to have a material adverse effect on the
Pulitzer Broadcasting Business or on Hearst-Argyle and its subsidiaries
taken as a whole; and,
(vi) the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part shall have been declared effective under the
Securities Act, and no stop orders with respect thereto shall have been
issued.
Conditions to Obligations of Pulitzer and New Pulitzer. The obligations of
Pulitzer and New Pulitzer to effect the Merger and each of the transactions
contemplated by the Merger Agreement are conditioned on the following:
(i) the representations and warranties of Hearst-Argyle in the Merger
Agreement or in any agreement contemplated thereby or any other document
delivered pursuant thereto shall be true and correct in all material
respects on and as of the Closing Date, and at the Closing, Hearst-Argyle
shall have delivered to Pulitzer and New Pulitzer a certificate to that
effect;
(ii) each of the obligations of Hearst-Argyle to be performed on or
before the Closing Date pursuant to the terms of the Merger Agreement or
the agreements contemplated thereby shall have been duly performed in all
material respects on or before the Closing Date, and at the Closing Hearst-
Argyle shall have delivered to Pulitzer and New Pulitzer a certificate to
that effect;
(iii) the Hearst-Argyle Merger Stock shall have been approved for listing
on the NYSE (which has occurred), subject to official notice of issuance;
(iv) the New Pulitzer Common Stock shall have been approved for listing
on the NYSE (which has occurred), subject to official notice of issuance;
(v) Pulitzer shall have received from the IRS a private letter ruling
(which has been received) that the Spin-Off will qualify as a
reorganization within the meaning of Section 368(a)(1)(D) of the Code and
as a tax-free distribution to Pulitzer stockholders under Section 355(a) of
the Code (see "Federal Income Tax Consequences of the Spin-Off, the Merger
and Related Transactions--The Spin-Off");
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(vi) Pulitzer shall have received from its counsel, Fulbright & Jaworski
L.L.P. (or another nationally recognized law firm acceptable to Pulitzer),
an opinion (which has been received) that the Merger constitutes a
reorganization under Section 368(a)(1)(A) of the Code (with appropriate
exceptions, assumptions and qualifications and based upon appropriate
representations, certificates and letters) (see "Federal Income Tax
Consequences of the Spin-Off, the Merger and Related Transactions--The
Merger"); and,
(vii) Pulitzer and New Pulitzer shall have received all customary closing
documents they may reasonably request relating to the existence of Hearst-
Argyle and the authority of Hearst-Argyle to enter into the Merger
Agreement and the transactions contemplated thereby, all in form and
substance reasonably satisfactory to Pulitzer and New Pulitzer.
Conditions to Obligations of Hearst-Argyle. The obligations of Hearst-Argyle
to effect the Merger are subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
(i) the representations and warranties of Pulitzer and New Pulitzer
contained in the Merger Agreement or in any other document delivered
pursuant thereto shall be true and correct in all material respects on and
as of the Closing Date, and at the Closing Pulitzer and New Pulitzer shall
have delivered to Hearst-Argyle their respective certificates to that
effect;
(ii) each of the obligations of Pulitzer and New Pulitzer to be performed
on or before the Closing Date pursuant to the terms of the Merger Agreement
shall have been duly performed in all material respects on or before the
Closing Date, and at the Closing Pulitzer and New Pulitzer shall have
delivered to Hearst-Argyle their respective certificates to that effect;
(iii) Pulitzer shall have delivered to Hearst-Argyle a certificate signed
by the Chief Financial Officer of Pulitzer certifying, as of the Closing
Date, as to the number of shares of capital stock of Pulitzer outstanding,
indicating the class and series of such shares;
(iv) Hearst-Argyle shall have received all customary closing documents it
may reasonably request relating to the existence of Pulitzer, New Pulitzer,
Pulitzer Broadcasting, and the Broadcasting Subsidiaries, and the authority
of Pulitzer and New Pulitzer to enter into the Merger Agreement and the
transactions contemplated by the Merger Agreement, all in form and
substance reasonably satisfactory to Hearst-Argyle;
(v) Hearst-Argyle shall have received from its counsel, Rogers & Wells
LLP (or another nationally recognized law firm acceptable to Hearst-Argyle)
an opinion (which has been received), that the Merger constitutes a
reorganization under Section 368(a)(1)(A) of the Code (with appropriate
exceptions, assumptions and qualifications and based upon appropriate
representations, certificates and letters) (see "Federal Income Tax
Consequences of the Spin-Off, the Merger and Related Transactions--The
Merger");
(vi) Pulitzer shall have paid in full the Existing Debt as of the
Closing;
(vii) There shall have been obtained and delivered to Hearst-Argyle all
necessary approvals and consents to the assignment to Hearst-Argyle of the
network affiliation agreements of Pulitzer's television and radio stations
(the "Pulitzer Stations"); and,
(viii) Each of the persons deemed to be an affiliate of Pulitzer pursuant
to Rule 145 under the Securities Act shall have executed and delivered to
Hearst-Argyle a letter agreement (a form of which is attached as Exhibit J
to the Merger Agreement) whereby each such affiliate agrees to certain
restrictions on the sale of the Hearst-Argyle Merger Stock.
Acquisition Proposals
The Merger Agreement prohibits Pulitzer, its subsidiaries and their
respective officers, directors, representatives and agents from, directly or
indirectly, knowingly encouraging, soliciting, initiating or participating in
any way in discussions or negotiations with, or knowingly providing any
confidential information to, any individual, partnership, corporation or any
other person (other than Hearst-Argyle or any affiliate or associate of
Hearst-Argyle and their respective directors, officers, employees,
representatives and agents)
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concerning any merger, consolidation, business combination, recapitalization,
liquidation or dissolution of Pulitzer, Pulitzer Broadcasting or any
Broadcasting Subsidiary, the sale of any substantial part of the assets of
Pulitzer Broadcasting or any of the Broadcasting Subsidiaries (other than in
the ordinary course of business consistent with past practice), the sale of
any shares of capital stock of Pulitzer Broadcasting or any of the
Broadcasting Subsidiaries, or the sale of shares representing a controlling
interest of the capital stock of Pulitzer, Pulitzer Broadcasting or the
Broadcasting Subsidiaries or any similar transactions or series of
transactions involving Pulitzer Broadcasting. However, the Pulitzer Board may
(i) take and disclose to Pulitzer's stockholders a position with respect to a
tender offer for Pulitzer Stock by a third party pursuant to Rules 14d-9 and
14e-2 promulgated under the Exchange Act; (ii) make such disclosure to
Pulitzer's stockholders as, in the judgment of the Pulitzer Board, with the
advice of outside counsel, may be required under applicable law; and, (iii)
respond to any unsolicited third party proposal or inquiry by advising the
individual, partnership, corporation or any other person making such proposal
or inquiry of the terms of the provisions summarized in this paragraph.
The Merger Agreement also provides that notwithstanding anything to the
contrary set forth above, the Pulitzer Board may respond to any Acquisition
Proposal and may provide information and afford access to, and negotiate and
hold discussions with, any third party or group in connection therewith if the
Pulitzer Board determines, with the advice of outside counsel, that it may be
required to do so to comply with its fiduciary duties. An "Acquisition
Proposal" means any proposal, offer or any expression of interest by any third
party relating to a possible transaction as described above, other than
Hearst-Argyle. Subject to the fiduciary duties of Pulitzer's Board of
Directors, in the event that Pulitzer, New Pulitzer or any of their
subsidiaries or any of their respective officers, directors, employees,
representatives or agents receives from any third party an Acquisition
Proposal, Pulitzer must advise Hearst-Argyle promptly of such Acquisition
Proposal and thereafter keep Hearst-Argyle reasonably and promptly informed of
all material facts and circumstances relating to the Acquisition Proposal and
Pulitzer's response thereto.
The Merger Agreement requires Hearst-Argyle to notify Pulitzer and provide
it with pertinent information in the event Hearst-Argyle or any of its
subsidiaries, or any of their respective directors, officers, representatives
or agents (i) solicits, initiates or participates in any way in discussions or
negotiations with, or provides any confidential information to, any third
party (other than Pulitzer or any affiliate or associates of Pulitzer and
their respective directors, officers, employees, representatives and agents)
concerning any merger, sale of substantially all of the assets of Hearst-
Argyle, sale of shares representing a controlling interest of capital stock of
Hearst-Argyle or similar transactions or series of transactions involving
Hearst-Argyle or (ii) receives any proposal or inquiry in respect of any such
transaction or any request to provide any such information or hold any such
negotiations or discussions.
Certain Covenants
Interim Operations of Pulitzer. Pursuant to the Merger Agreement, Pulitzer
has agreed, among other things, that from May 25, 1998 to the Closing Date,
Pulitzer shall not, without the prior written consent of Hearst-Argyle:
(i) amend the Pulitzer Charter or the Pulitzer By-Laws;
(ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, other than cash dividends declared and paid
consistent with Pulitzer's past practice (except that (A) any subsidiary of
Pulitzer other than Pulitzer Broadcasting or any Broadcasting Subsidiary
may declare and pay dividends that are payable to Pulitzer or to any other
subsidiary of Pulitzer; (B) Pulitzer Broadcasting or any Broadcasting
Subsidiary may declare and pay dividends in cash and cash equivalents that
are payable to Pulitzer or to any other subsidiary of Pulitzer; and, (C)
Pulitzer Broadcasting may declare and pay a dividend of all of the capital
stock of Pulitzer Sports (as defined herein) to Pulitzer), or redeem or
otherwise acquire any of its securities other than for cash;
(iii) except pursuant to the terms of the Pulitzer Class B Common Stock,
the Pulitzer Option Plans, or the Pulitzer Employee Stock Purchase Plan (as
defined herein), split, combine or reclassify any of its capital
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stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution of any shares of its capital stock;
(iv) except (A) to the extent that Pulitzer is acting in the ordinary
course of business or is otherwise released therefrom in connection with
the Contribution or Distribution or (B) any investment or acquisition
relating to the newspaper business or any activity related thereto, (x)
create, incur or assume any debt (other than New Debt) not outstanding as
of May 25, 1998 (including obligations in respect of capital leases); (y)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person or entity; or, (z) make any loans, advances or capital
contributions to, or investments in, any person or entity other than New
Pulitzer or another subsidiary;
(v) except pursuant to the terms of the Pulitzer Class B Common Stock,
the Pulitzer Option Plans or the Pulitzer Employee Stock Purchase Plan,
issue, sell, deliver or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or
any other securities or amend any of the terms of any such securities
outstanding on May 25, 1998;
(vi) terminate, amend, modify or waive compliance with any of the
provisions, terms or conditions of the Contribution Agreement directly or
indirectly in respect of the assets or the liabilities retained by Pulitzer
or affecting the rights or obligations of Pulitzer thereunder from and
after the Effective Time;
(vii) subject to the fiduciary duties of the Pulitzer Board, terminate,
amend, modify or waive any of the terms or conditions of any
confidentiality agreement in effect as of May 25, 1998 between Pulitzer and
any other prospective acquiror of Pulitzer, Pulitzer Broadcasting or the
Broadcasting Subsidiaries, provided that Pulitzer, Pulitzer Broadcasting or
any Broadcasting Subsidiary may waive, and Hearst-Argyle will not enforce
after Closing, any restriction on employment of any employee of Pulitzer,
Pulitzer Broadcasting or any Broadcasting Subsidiary who is not employed by
Hearst-Argyle, Pulitzer Broadcasting or any Broadcasting Subsidiary at
Closing or whose employment with any of them is terminated after Closing;
or,
(viii) take or agree in writing or otherwise to take any of the foregoing
actions or any actions that would (A) make any representation or warranty
of Pulitzer or New Pulitzer contained in the Merger Agreement untrue or
incorrect, in any material respect, as of the date made or as of the
Closing Date; (B) result in any of the conditions to Closing in the Merger
Agreement not being satisfied; or, (C) be inconsistent, in any material
respect, with the terms of the Merger Agreement or the transactions
contemplated thereby.
Interim Operations of Pulitzer Broadcasting. Pursuant to the Merger
Agreement, Pulitzer has agreed that, from May 25, 1998 to the Closing Date, it
will cause Pulitzer Broadcasting and the Broadcasting Subsidiaries to conduct
their operations in the ordinary course of business consistent with past
practices. Pulitzer has also agreed that, except as otherwise contemplated by
the Merger Agreement (without the prior written consent of Hearst-Argyle), it
will not permit Pulitzer Broadcasting or any of the Broadcasting Subsidiaries
to:
(i) amend its Certificate of Incorporation or By-Laws;
(ii) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other equity securities or amend any of the terms of any
securities outstanding on May 25, 1998;
(iii) acquire, lease, sell or dispose of any assets or any of the
television station licenses granted by the FCC, other than acquisitions,
leases, sales or dispositions of inventory and equipment in the ordinary
course of business consistent with past practices or inventory items
repurchased, depleted or worn out in accordance with Pulitzer
Broadcasting's normal operating procedures;
(iv) except for certain permitted exceptions, subject to any lien any of
its properties or assets, tangible or intangible;
(v) increase the amount of any cash compensation payable to its employees
if such increase would cause the aggregate cash compensation payable to all
employees on an annualized basis to exceed, by more
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than 5%, the cash compensation payable by Pulitzer Broadcasting to all of
its employees under its 1998 budget; provided, that the foregoing
restrictions do not apply to the employment, bonus, and/or severance
agreements made with the corporate executives of Pulitzer Broadcasting and
the managers of the Pulitzer Stations;
(vi) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, or redeem or otherwise acquire any of its securities,
except that Pulitzer Broadcasting and the Broadcasting Subsidiaries may pay
cash dividends, or otherwise make cash distributions, to Pulitzer or any of
its subsidiaries as described herein in "--Excess Cash";
(vii) fail to maintain the Broadcasting Assets at customary levels;
(viii) by any act or omission to act within its reasonable knowledge and
power, surrender, modify, adversely affect or forfeit any of the material
licenses;
(ix) enter into or amend any program license or program contract for any
Pulitzer Station that will be in effect after the Effective Time, or enter
into or amend any other contract or agreement that, in each case, will be
in effect after the Effective Time and requiring payments to or by Pulitzer
Broadcasting or any of the Broadcasting Subsidiaries of more than $250,000;
(x) (A) create, incur or assume any indebtedness not currently
outstanding (including obligations in respect of capital leases); (B)
except in the ordinary course of business, assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person; or, (C) except in the
ordinary course of business, make any loans, advances or capital
contributions to, or investments in, any person other than New Pulitzer or
another subsidiary; and,
(xi) take or agree to take any of the foregoing actions or any action
that would (A) make any representation or warranty of Pulitzer or New
Pulitzer contained in the Merger Agreement untrue or incorrect, in any
material respect, as of the date when made or as of the Closing Date; (B)
result in any of the conditions to Closing in the Merger Agreement not
being satisfied; or, (C) be inconsistent, in any material respect, with the
terms of the Merger Agreement or the transactions contemplated thereby.
In addition, Pulitzer has agreed to use its commercially reasonable efforts
to (i) maintain the present operations of the Pulitzer Stations; (ii) preserve
intact the business organization of the Pulitzer Stations; (iii) preserve the
Pulitzer Stations' existing relationships with employees, suppliers, customers
and their agencies and others having business with the Pulitzer Stations; and,
(iv) maintain in full force and effect the Pulitzer Stations' network
affiliation agreements.
Interim Operations of Hearst-Argyle. Hearst-Argyle has agreed that, except
as contemplated by the Merger Agreement, during the period from May 25, 1998
to the Closing Date, Hearst-Argyle will not, without the prior written consent
of Pulitzer:
(i) amend the Hearst-Argyle Charter (other than to provide for the
issuance of preferred stock and to increase its authorized shares of common
stock or any series thereof);
(ii) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class; provided, however, that Hearst-Argyle may (A) issue shares of
its capital stock upon the exercise of options outstanding on May 25, 1998;
(B) grant options to purchase shares of its capital stock (and issue any
shares of capital stock upon exercise of such options) pursuant to employee
compensation arrangements consistent with past practices; (C) issue shares
of common stock upon conversion of any shares of capital stock; and, (D)
issue shares of capital stock at or above fair market value;
(iii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, except for dividends declared and paid consistent
with Hearst-Argyle's past practice;
(iv) (A) enter into a transaction or (B) except for indebtedness incurred
in connection with the New Debt, create, incur or assume any indebtedness
not currently outstanding (including obligations in respect
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of capital leases but excluding indebtedness incurred in refinancing,
replacement or substitution of indebtedness that is currently outstanding)
that in the case of clauses (i) or (ii) would result in a down-grading
below investment grade in the rating of any rated debt securities of
Pulitzer by both Standard & Poor's Corporation and Moody's Investors
Service;
(v) sell, lease or dispose of any assets material to Hearst-Argyle and
its subsidiaries taken as a whole, other than (A) sales of inventory in the
ordinary course of business consistent with past practices; and, (B) in
connection with or in exchange for acquisitions of assets related to the
business of Hearst-Argyle;
(vi) make any material change in the lines of business in which it
participates or is engaged; or,
(vii) take, or agree in writing or otherwise to take, any of the
foregoing actions or any other actions that would (A) make any
representation or warranty of Hearst-Argyle contained in the Merger
Agreement untrue or incorrect, in any material respect, as of the date when
made or as of the Closing Date; (B) result in any of the conditions to
Closing in the Merger Agreement not being satisfied in any material
respect; or, (C) be inconsistent, in any material respect, with the terms
of the Merger Agreement or the transactions contemplated thereby.
Excess Cash. The Merger Agreement provides that, from time to time, after
May 25, 1998 and until the Effective Time, and subject to applicable law, (i)
Pulitzer Broadcasting and the Broadcasting Subsidiaries may pay cash
dividends, or otherwise make cash distributions, to Pulitzer or any of its
subsidiaries and (ii) Pulitzer shall contribute to New Pulitzer cash held by
Pulitzer, including the proceeds of the New Debt after payment or provision
for the Existing Debt and the Deal Expenses. Immediately prior to the
Contribution, Pulitzer Broadcasting and the Broadcasting Subsidiaries have
agreed, to the extent permitted by law, to pay dividends in cash or cash
equivalents, or otherwise make contributions in cash or cash equivalents, to
Pulitzer and its subsidiaries so that neither Pulitzer Broadcasting nor the
Broadcasting Subsidiaries owns any cash or cash equivalents at the Effective
Time except that each of the television and radio stations owned by Pulitzer
may retain cash in those operating and payroll accounts in existence as of May
25, 1998, in amounts necessary, as determined by Pulitzer, for general
operating purposes of each of such stations or group of such stations, as the
case may be.
Capital Expenditures. The Merger Agreement provides that, prior to the
Effective Time, Pulitzer Broadcasting and the Broadcasting Subsidiaries shall
be responsible for and pay all capital expenditures incurred in the ordinary
and usual course of their respective businesses based upon Pulitzer's plans
concerning the timing of such capital expenditures during 1998.
SEC Filings. The Merger Agreement requires Pulitzer, New Pulitzer and
Hearst-Argyle to prepare and file any filings required to be filed by each of
them under the Securities Act, the Exchange Act or any other federal or state
laws relating to the transactions contemplated by the Merger Agreement and to
use their reasonable best efforts to respond to any comments of the SEC or any
other appropriate government official with respect thereto. In addition,
Pulitzer, New Pulitzer and Hearst-Argyle have agreed to cooperate with each
other and provide to each other all information necessary in order to prepare
such filings.
Gross-Up Matters. The Merger Agreement provides that New Pulitzer shall be
liable for, shall pay and shall indemnify and hold Hearst-Argyle, its
subsidiaries, their affiliates and their respective directors, officers and
employees harmless against any liabilities and/or expenses arising from any
claim or dispute relating to those certain Gross-Up Agreements (the "Gross-Up
Agreements"), entered into by Pulitzer with certain former stockholders of
Pulitzer (the "1986 Selling Stockholders"). In connection with the Gross-Up
Agreements, Pulitzer agreed under certain circumstances to make additional
payments (the "Additional Payments") to the 1986 Selling Stockholders in the
event that a Gross-Up Transaction (as defined herein) occurred prior to
May 13, 2001. A "Gross-Up Transaction" is defined in the Gross-Up Agreements
to mean, among other transactions, (i) any merger in any transaction or series
of related transactions, of more than 85% of the voting securities or equity
of, Pulitzer pursuant to which holders of Pulitzer Common Stock receive
securities other than Pulitzer Common Stock and (ii) any recapitalization,
dividend or distribution, or series of related recapitalizations, dividends or
distributions in which holders of Pulitzer Common Stock receive securities
(other than Pulitzer Common Stock)
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having a Fair Market Value (as defined herein) of not less than 33 1/3% of the
Fair Market Value of the shares of Pulitzer Common Stock immediately prior to
such transaction. The amount of the Additional Payments, if any, would equal
(x) the product of (i) the amount by which the Transaction Proceeds (as
defined herein) exceeds the Imputed Value (as defined herein) multiplied by
(ii) the Applicable Percentage (i.e., 50% for the period from May 13, 1996
through May 12, 2001) multiplied by (iii) the number of shares of Pulitzer
Common Stock issuable upon conversion of the shares of Pulitzer Class B Common
Stock owned by the 1986 Selling Stockholders, adjusted for, among other
things, stock dividends and stock splits; less (y) the sum of any additional
payments previously received by the 1986 Selling Stockholders; provided,
however, that in the event of any recapitalization, dividend or distribution,
the amount by which the Transaction Proceeds exceed the Imputed Value shall
not exceed the amount paid or distributed pursuant to such recapitalization,
dividend or distribution in respect of one share of Pulitzer Common Stock.
The term "Transaction Proceeds" is defined in the Gross-Up Agreements to
mean, in the case of a merger, the aggregate Fair Market Value of the
consideration received pursuant thereto by the holder of one share of Pulitzer
Common Stock, and, in the case of a recapitalization, dividend or
distribution, the aggregate Fair Market Value of the amounts paid or
distributed in respect of one share of Pulitzer Common Stock plus the
aggregate Fair Market Value of one share of the Pulitzer Common Stock
following such transaction. The "Imputed Value" for one share of Pulitzer
Common Stock on a given date is defined in the Gross-Up Agreements to mean an
amount equal to $28.82 compounded annually from May 12, 1986 to such given
date at the rate of 15% per annum, the result of which is $154.19 at May 12,
1998. There was no specific provision for adjustment of the $28.82 amount, but
if it were adjusted to reflect all stock dividends and stock splits of
Pulitzer since September 30, 1986, it would now equal $15.72, which if
compounded annually from May 12, 1986 at the rate of 15% per annum would now
equal $84.11.
"Fair Market Value," in the case of any consideration other than cash
received in a Gross-Up Transaction, is defined in the Gross-Up Agreements to
mean the fair market value thereof as agreed to by a valuation firm selected
by Pulitzer and a valuation firm selected by the 1986 Selling Stockholders,
or, if the two valuation firms do not agree on the fair market value, the fair
market value of such consideration as determined by a third valuation firm
selected by the two other valuation firms. Any such agreement or determination
shall be final and binding on the parties.
As a result of the foregoing, the amount of the Additional Payments, if any,
which may be payable by New Pulitzer with respect to the Merger and the
Distribution cannot be determined at this time. However, if the Distribution
were determined to be a Gross-Up Transaction and if the Fair Market Value of
the Transaction Proceeds with respect to the Merger and the Distribution were
determined to exceed the Imputed Value, then the Additional Payments to the
1986 Selling Stockholders would equal approximately $5.9 million for each
$1.00 by which the Transaction Proceeds exceed the Imputed Value. Accordingly,
depending on the ultimate resolution of the meaning and application of various
provisions of the Gross-Up Agreements, including the determination of Imputed
Value and Fair Market Value of the Transaction Proceeds, in the opinion of
Pulitzer's management, the amount of an additional payment, if any, could be
material to the consolidated financial statements of Pulitzer. The additional
payment, if any, to the 1986 Selling Stockholders will be recorded directly to
additional paid-in capital as the payment of this contingent amount is a
direct cost of the disposal of the Pulitzer Broadcasting Business.
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The following table illustrates the calculation of potential additional
payments under the Gross-up Transaction agreements, assuming, among other
things, a determination of a Gross-up Transaction, an Imputed Value of $84.11
and a Fair Market Value of Transaction Proceeds of various amounts above and
below $84.11.
<TABLE>
<CAPTION>
For the Period May 25,
1998
(date of Merger press
release)
For the Month Ended through December 31,
December 31, 1998 1998
----------------------- -----------------------
High Low High Low
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Fair Market Value of
Transaction Proceeds (using
high and low closing prices
of Pulitzer's Common
Stock)...................... $ 86.63 $ 76.63 $ 89.25 $ 64.94
Less Imputed Value (assumes
adjustment to reflect stock
dividends and stock splits
since 1986)................. $ 84.11 $ 84.11 $ 84.11 $ 84.11
----------- ---------- ----------- ----------
Transaction Proceeds in
excess of Imputed Value..... $ 2.52 n/a $ 5.14 n/a
Multiply by applicable
percentage.................. 50% 50% 50% 50%
Multiply by the number of
shares of Pulitzer Common
Stock issuable upon
conversion of the shares of
Pulitzer Class B Common
Stock owned by the 1986
Selling Stockholders,
adjusted for stock dividends
and stock splits since
1986........................ 11,700,850 11,700,850 11,700,850 11,700,850
----------- ---------- ----------- ----------
Additional payment to the
1986 Selling Stockholders... $14,743,071 $ 0 $30,071,185 $ 0
=========== ========== =========== ==========
</TABLE>
If the Imputed Value is determined to be $154.19 instead of $84.11, no
additional payment to the 1986 Selling Stockholders would be required under
any of the above calculations.
In the opinion of Pulitzer's management, the amount of additional payment,
if any, is not likely to have a material adverse effect on the existing day-
to-day newspaper publishing and related new media properties now operated by
Pulitzer and, following the Spin-Off, to be operated by New Pulitzer. The
amount of additional payment, if any, will reduce, however, the amount of cash
available to New Pulitzer to finance potential acquisition opportunities in
the future.
Internal Revenue Service Private Letter Ruling. Pulitzer has received the
IRS Ruling that the Spin-Off will qualify as a reorganization within the
meaning of Section 368(a)(1)(D) of the Code and that the Pulitzer stockholders
will recognize no gain or loss (and no amount will be included in the income
of the Pulitzer stockholders) as a result of the Spin-Off under Section 355(a)
of the Code. The receipt of the IRS Ruling is a condition to the obligation of
Pulitzer to consummate the Merger. See "--The Merger--Closing and Closing
Date," "--The Merger--Conditions Precedent" and "Federal Income Tax
Consequences of the Spin-Off, the Merger and Related Transactions--The Spin-
Off."
Certain Representations and Warranties
The Merger Agreement contains customary representations and warranties by
each of Hearst-Argyle, Pulitzer, and New Pulitzer. The representations and
warranties of the parties will not survive beyond the Closing Date.
The representations of Pulitzer and New Pulitzer are made with respect to
those companies, Pulitzer Broadcasting and the Broadcasting Subsidiaries, and
in certain cases with respect to the other subsidiaries of Pulitzer, and
relate generally to: (i) due organization, good standing, qualification and
corporate power; (ii) absence of violations of, among other things, their
respective organizational documents, by-laws, certain contracts, applicable
laws, orders and judgments; (iii) required consents and approvals of
governmental authorities; (iv) approval by the Boards of Directors of Pulitzer
and New Pulitzer of the Merger Agreement, the
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Contribution, the Distribution, and the other transactions contemplated
thereby, the stockholder vote required, and, in the case of Pulitzer, receipt
of the Goldman Opinion as to the fairness of the consideration to be received
by Pulitzer shareholders in the Merger and the Spin-Off; (v) the capital
structure of Pulitzer, New Pulitzer, Pulitzer Broadcasting and the
Broadcasting Subsidiaries; (vi) the accuracy of information contained in
certain SEC reports and financial statements; (vii) the absence of certain
material changes or undisclosed liabilities; (viii) compliance with applicable
laws; (ix) the Pulitzer Station network affiliation agreements; (x) taxes;
(xi) litigation; (xii) employee benefits; (xiii) labor matters; (xiv) title to
properties; (xv) the filing of appropriate SEC and FCC reports; (xvi)
environmental matters; and, (xvii) brokers and finders.
The representations of Hearst-Argyle are made only with respect to itself
and relate generally to: (i) due organization, good standing, qualification
and corporate power; (ii) absence of violations of, among other things, its
charter documents, by-laws, certain contracts, applicable laws, orders and
judgments; (iii) required consents and approvals of governmental authorities;
(iv) approval by the Hearst-Argyle Board of the Merger Agreement, the other
agreements executed in connection with the Merger, and the other transactions
contemplated thereby, and the stockholder vote required; (v) the capital
structure of Hearst-Argyle; (vi) the accuracy of information contained in
certain SEC reports and financial statements; (vii) the filing of appropriate
SEC reports; (viii) certain tax matters; (ix) the absence of certain material
changes or undisclosed liabilities; (x) compliance with applicable laws; (xi)
taxes; (xii) litigation; (xiii) brokers and finders; (xiv) solvency; and, (xv)
FCC qualification.
Indemnification
Pursuant to the Merger Agreement and the Contribution Agreement, Hearst-
Argyle, Pulitzer, and New Pulitzer will indemnify one another and each other's
respective officers and directors with respect to various matters summarized
below.
Hearst-Argyle will indemnify Pulitzer and New Pulitzer, each of their
officers and directors and each other person, if any, who controls any of the
foregoing within the meaning of the Exchange Act, against losses that arise
out of material misstatements of fact or omissions for which Hearst-Argyle is
responsible in documents filed with the SEC in connection with the Merger and
the related transactions and agreements. New Pulitzer (and, if the Merger
Agreement is terminated prior to the consummation of the Merger, Pulitzer)
will indemnify Hearst-Argyle, each of its officers and directors and each
other person, if any, who controls any of the foregoing within the meaning of
the Exchange Act, against any losses that arise out of such material
misstatements of fact or omissions for which New Pulitzer or Pulitzer is
responsible in documents filed with the SEC in connection with the Merger and
the related transactions and agreements.
Each of Hearst-Argyle and New Pulitzer also has agreed to indemnify the
other and their respective subsidiaries against losses attributable to certain
tax liabilities. See "--Tax Matters."
New Pulitzer, from and after the Closing Date, will indemnify Hearst-Argyle,
its subsidiaries (including Pulitzer Broadcasting and the Broadcasting
Subsidiaries), any of their affiliates, and any person who was an officer,
director, partner or employee of Pulitzer, Pulitzer Broadcasting or any of the
Broadcasting Subsidiaries against losses to the extent they arise from any
suit, action, proceeding or investigation pending at or arising after the
Closing Date relating to Pulitzer's subsidiaries (other than Pulitzer
Broadcasting and the Broadcasting Subsidiaries) and their respective
operations prior to the Effective Time of the Merger. In addition, New
Pulitzer will indemnify Hearst-Argyle, Pulitzer Broadcasting and its
affiliates against all losses related to liabilities and obligations under any
employee benefit plan not assumed by Hearst-Argyle and liabilities for any
payments made pursuant to the Gross-Up Agreements. See "--Certain Employee
Matters." Pulitzer and New Pulitzer, jointly and severally, prior to the
Effective Time, and New Pulitzer after the Effective Time, will indemnify
Hearst-Argyle and its subsidiaries against all losses arising from or relating
to any claim, action or proceeding brought by or on behalf of the holders of
Pulitzer Stock in connection with the Merger and the related transactions and
agreements except for losses arising from the actions or omissions of Hearst-
Argyle or losses that arise out of material misstatements of fact or omissions
for which Pulitzer and New Pulitzer are not responsible in documents filed
with the SEC in connection with the Merger and the related transactions and
agreements.
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Hearst-Argyle will indemnify New Pulitzer, its subsidiaries, any of their
affiliates, and any person who was an officer, director, partner or employee
of Pulitzer Broadcasting or any of the Broadcasting Subsidiaries prior to the
Closing Date against losses to the extent they arise from any suit, action,
proceeding or investigation pending at or arising after the Closing Date
relating to the business and operations of Pulitzer Broadcasting or any of the
Broadcasting Subsidiaries. Hearst-Argyle has also agreed to indemnify Pulitzer
and New Pulitzer against all losses arising from or relating to any claim,
action or proceeding brought by or on behalf of the holders of Hearst-Argyle
Series A Common Stock in connection with the Merger and the related
transactions and agreements except for losses arising from the actions or
omissions of Pulitzer or losses that arise out of such material misstatements
of fact or omissions for which Hearst-Argyle is not responsible in documents
filed with the SEC in connection with the Merger and the related transactions
and agreements.
In addition, pursuant to the terms of the Contribution Agreement and except
as otherwise provided in the Merger Agreement, (i) Pulitzer will indemnify New
Pulitzer and its subsidiaries and their respective successors-in-interest and
each of their respective past and present officers and directors against all
losses (including any legal or any other expenses reasonably incurred), with
certain exceptions (including losses relating to taxes, employee benefits,
litigation, payments pursuant to the Gross-Up Agreements and certain other
matters), to the extent they arise out of or relate to Pulitzer Broadcasting
or the Broadcasting Subsidiaries or any of the assets or liabilities retained
by Pulitzer in connection with the Spin-Off, and (ii) New Pulitzer will
indemnify Pulitzer, Pulitzer Broadcasting and each of the Broadcasting
Subsidiaries and their respective successors-in-interest and each of their
respective past and present officers and directors against all losses
(including any legal or any other expenses reasonably incurred), with certain
exceptions (including losses relating to taxes and litigation), for any loss
arising out of or related to any of the assets received or liabilities assumed
by New Pulitzer in connection with the Spin-Off. See "--Tax Matters."
Tax Matters
New Pulitzer will be liable for, will pay and will indemnify and hold
harmless Hearst-Argyle (as the surviving corporation in the Merger) and its
subsidiaries, on an after-tax basis, against (i) any tax liability of Pulitzer
or any subsidiary of Pulitzer attributable to any tax period (or portion
thereof) ending on or before the Closing Date ("Pre-Closing Tax Period"),
including tax liabilities resulting from the Spin-Off, but not including tax
liabilities of Pulitzer resulting from the Merger not qualifying as a
reorganization under Section 368(a)(1)(A) of the Code by reason of any action
or inaction of Hearst-Argyle subsequent to the Effective Time or primarily
from Hearst-Argyle's breach of certain covenants concerning the
representations that it makes in connection with the request for a private
letter ruling filed with the IRS and the conduct of Hearst-Argyle's operations
after the Closing Date, (ii) any tax liability of New Pulitzer or any
subsidiary of New Pulitzer, whether attributable to a Pre-Closing Tax Period
or any tax period beginning after the Closing Date ("Post-Closing Tax
Period"); and, (iii) any transfer tax liability attributable to the Spin-Off.
Hearst-Argyle (as the acquiring and surviving corporation in the Merger)
will be liable for, will pay and will indemnify and hold harmless New Pulitzer
and its subsidiaries, on an after-tax basis, against (i) any tax liability of
Hearst-Argyle or any subsidiary of Hearst-Argyle (other than Pulitzer or any
subsidiary of Pulitzer) attributable to any Pre-Closing Tax Period; (ii) any
tax liability of Hearst-Argyle or any subsidiary of Hearst-Argyle attributable
to any Post-Closing Tax Period; (iii) any transfer tax liability attributable
to the Merger; and, (iv) any tax liability (including any income taxes for
which any stockholders of Pulitzer immediately prior to the Effective Time are
liable as a result of transactions contemplated by the Merger Agreement)
arising primarily as a result of a breach by Hearst-Argyle of covenants set
forth in the Merger Agreement relating to the conduct of its operations after
the Closing Date (provided that actions or omissions of New Pulitzer do not
materially contribute to the incurrence of such tax liabilities).
Hearst-Argyle will be responsible for the preparation and filing of all tax
returns relating to the business or assets of Pulitzer and Pulitzer
Broadcasting required to be filed after the Closing Date (other than certain
Pulitzer consolidated tax returns described in the Merger Agreement that
relate to Pre-Closing Tax Periods, which will be prepared and filed by New
Pulitzer).
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To the extent required or permitted by applicable law or administrative
practice, the then-current tax period of Pulitzer or any subsidiary of
Pulitzer will terminate as of the close of the Closing Date. Any taxes imposed
with respect to any tax period that begins before and ends after the Closing
Date will be allocated between the Pre-Closing Tax Period and the Post-Closing
Tax Period based on an interim closing of the books of Pulitzer in the manner
prescribed in the Merger Agreement. Each party will be entitled to all refunds
or credits of any tax for which it is liable under the Merger Agreement.
Hearst-Argyle and New Pulitzer will cooperate with each other in a timely
manner in the preparation and filing of any tax returns, payment of any taxes
in accordance with the Merger Agreement, and the conduct of any audit or other
proceeding.
Certain Employee Matters
Employees of Pulitzer, Pulitzer Broadcasting and the Broadcasting
Subsidiaries ("Broadcast Employees") will generally continue to be so employed
as of the Effective Time. From and after the Effective Time, except with
respect to benefits accrued and unpaid prior to the Effective Time, in
general, Broadcast Employees shall cease to be covered by all employee benefit
plans and arrangements previously extended to them by Pulitzer or any of its
affiliates ("Pulitzer Benefit Plans") but shall be fully vested in their
benefits accrued through the Effective Time under Pulitzer's pension plans for
the Broadcast Employees. As of the Effective Time, in general, New Pulitzer
will assume all liabilities and responsibilities with respect to Broadcast
Employees or former employees of Pulitzer Broadcasting under, or relating to,
the Pulitzer Benefit Plans except with respect to certain health and welfare
benefits (including certain post-retirement medical obligations).
At the Effective Time, Hearst-Argyle will provide or cause all Broadcast
Employees to be provided with compensation and employee benefits, including a
group health care plan, which are, in general, no less favorable in the
aggregate than the benefits previously provided under the Pulitzer Benefit
Plans. Any employee benefit plan of Hearst-Argyle (which covers Broadcast
Employees) will grant Broadcast Employees credit for prior service with
Pulitzer and its affiliates prior to the Effective Time for purposes of
eligibility, vesting and seniority. All account balances held for the
Broadcast Employees under the Pulitzer Retirement Savings Plan and all accrued
benefits under the Pulitzer Pension Plan will be transferred in cash to, and
the related obligations to make benefit payments will be assumed by,
respectively, an existing or newly established qualified defined contribution
or defined benefits plan sponsored by Hearst-Argyle or Pulitzer Broadcasting.
Pulitzer Stock Option Plans
At or immediately prior to the Effective Time, Pulitzer will cause all
options then outstanding under Pulitzer's 1986 and 1994 stock option plans
(the "Pulitzer Option Plans"), whether or not vested, to be cashed out and
terminated. The amount payable by Pulitzer in respect of the termination of an
outstanding Pulitzer stock option will be equal to the difference between the
exercise price of the option and the average daily closing price of Pulitzer
Common Stock for the 10 trading days immediately prior to the Closing Date.
Pulitzer may prohibit the exercise of vested options after a specified cutoff
date prior to the Effective Time in order to facilitate the orderly
liquidation and termination of the remaining vested and nonvested outstanding
options. Participation in the Pulitzer Publishing Company 1997 Employee Stock
Purchase Plan (the "Pulitzer Employee Stock Purchase Plan") was suspended as
of September 30, 1998.
Termination of Merger Agreement
General. The Merger Agreement may be terminated and the transactions
contemplated thereby, including the Merger, abandoned at any time prior to the
Closing: (i) by mutual written consent duly authorized by the Boards of
Directors of Pulitzer, New Pulitzer and Hearst-Argyle; (ii) by either Hearst-
Argyle or Pulitzer if the stockholders of Hearst-Argyle fail to approve the
Hearst-Argyle Merger Proposal or the stockholders of Pulitzer fail to approve
the Pulitzer Proposals; (iii) by either Pulitzer or Hearst-Argyle, provided
the terminating party is not then in breach of its obligations under the
Merger Agreement, if the Merger is not consummated by May 1, 1999 (the
"Termination Date"); (iv) by Pulitzer, provided neither it nor New Pulitzer is
then in breach of any of
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its material obligations under the Merger Agreement, if either (A) Hearst-
Argyle fails to perform, in any material respect, any covenant in the Merger
Agreement and fails to cure such failure within 20 business days after written
notice by Pulitzer of such failure, or (B) if any condition to the obligations
of Pulitzer and New Pulitzer has not been satisfied and is not capable of
being satisfied prior to the Termination Date; (v) by Pulitzer, whether or not
the conditions to its obligations under the Merger Agreement have been
satisfied, if its Board determines, with the advice of outside counsel, in the
exercise of its fiduciary duties, to approve or recommend a Superior Proposal
or to authorize Pulitzer to enter into an agreement with respect to a Superior
Proposal; (vi) by Hearst-Argyle, provided it is not then in breach of any of
its material obligations under the Merger Agreement, if either (A) Pulitzer or
New Pulitzer fails to perform, in any material respect, any covenant in the
Merger Agreement and fails to cure such failure within 20 business days after
written notice by Hearst-Argyle of such failure, or, (B) any condition to the
obligations of Hearst-Argyle has not been satisfied and is not capable of
being satisfied prior to the Termination Date; (vii) by either Pulitzer or
Hearst-Argyle if either receives a notice that the United States Department of
Justice or the United States Federal Trade Commission has authorized the
institution of litigation challenging the Merger and related transactions
under the antitrust laws of the United States, which litigation includes a
motion seeking to prohibit the consummation of the Merger and related
transactions; or, (viii) by Hearst-Argyle if the Pulitzer Board shall have
withdrawn or modified in any manner materially adverse to Hearst-Argyle its
approval or recommendation of the Merger Agreement or the transactions
contemplated thereby or has approved or recommended a Superior Proposal.
"Superior Proposal" is defined in the Merger Agreement to mean an Acquisition
Proposal that the Pulitzer Board determines in the good faith exercise of its
business judgment (after consultation with Pulitzer's independent financial
advisors) to be more favorable to Pulitzer stockholders than the Merger.
If the Merger Agreement is terminated for any reason set forth above, the
Merger Agreement will become void and there will be no liability or obligation
on the part of Pulitzer, New Pulitzer or Hearst-Argyle, or the directors,
officers or stockholders of any party, except that (i) the parties'
indemnification obligations with respect to misstatements or omissions in
documents filed with the SEC shall survive; (ii) certain confidentiality
provisions shall survive; (iii) certain provisions with respect to the
reimbursement of expenses and the payment by Pulitzer or Hearst-Argyle of a
termination fee under certain circumstances, as described below, and certain
other expense allocation provisions, shall survive; and, (iv) each party will
remain liable for any breach of the Merger Agreement.
Termination Fees. If the Merger Agreement is terminated (i) by Pulitzer,
because the Pulitzer Board determines, in the exercise of its fiduciary
duties, to approve or recommend or to authorize Pulitzer to enter an agreement
with respect to a Superior Proposal; (ii) by Pulitzer or Hearst-Argyle if the
Merger and related transactions are not approved by the stockholders of
Pulitzer; or, (iii) by Hearst-Argyle if the Pulitzer Board shall have modified
or withdrawn its approval and recommendation of the Merger and related
transactions, as described above, then Pulitzer will pay to Hearst-Argyle a
fee of $50 million.
If the Merger Agreement is terminated by either Pulitzer or Hearst-Argyle
because the Merger and related transactions are not approved by the
stockholders of Hearst-Argyle, then Hearst-Argyle will pay to Pulitzer a fee
of $50 million. In addition, Hearst-Argyle has agreed, to pay Pulitzer a fee
of $50 million in the event that Pulitzer is unable to obtain the New Debt at
the time that the Merger Agreement is terminated (i) by the mutual agreement
of Pulitzer, New Pulitzer and Hearst-Argyle; (ii) because the Merger has not
occurred by the Termination Date; or, (iii) due to Hearst-Argyle's failure to
perform, in any material respect, any covenant in the Merger Agreement when
performance thereof is due and is not cured within 20 Business Days after
written notice by Pulitzer thereof, in each case, for any reason other than
(A) Pulitzer's failure to use commercially reasonable efforts to obtain the
New Debt or (B) a breach of the Merger Agreement by Pulitzer.
Amendment; Waiver
Subject to applicable law, (i) the Merger Agreement may be amended at any
time (including after the approval of the Pulitzer Proposals and after the
approval of the Hearst-Argyle Proposal) by an instrument in writing signed on
behalf of all of the parties thereto and (ii) the parties may (A) extend any
time for performance
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of any of the obligations of the other parties to the Merger Agreement; (B)
waive inaccuracies in the representations and warranties of any other party;
or, (C) waive compliance with any of the agreements or conditions for their
respective benefit therein.
Regulatory Approvals
Consummation of the Merger requires: (i) notification pursuant to, and
expiration or termination of the waiting period under, the HSR Act and the
rules and regulations thereunder and (ii) consents of the FCC to the transfer
of control of certain licenses issued by the FCC to Pulitzer. Early
termination of the initial waiting period under the HSR Act has been granted
and the FCC consents have been obtained.
On November 24, 1998, the Mass Media Bureau (the "Bureau") of the FCC,
acting pursuant to delegated authority, granted the Transfer Application. The
FCC's consent to the transfer of control of the Pulitzer Stations to Hearst-
Argyle included the following waivers of the FCC's rules: (i) a temporary,
six-month waiver of the television duopoly rule to permit the common ownership
of WBAL-TV, Baltimore, Maryland, and WGAL(TV), Lancaster, Pennsylvania
following consummation of the Merger; (ii) a conditional waiver of the
television duopoly rule to permit the common ownership of WWWB(TV), Lakeland,
Florida, and WESH(TV), Daytona Beach, Florida; (iii) a conditional waiver of
the television duopoly rule to permit the common ownership of WLWT(TV),
Cincinnati, Ohio, and WLKY-TV, Louisville, Kentucky; (iv) a continued
permanent waiver of the television duopoly rule to permit the common ownership
of KCCI(TV), Des Moines, Iowa, and KETV(TV), Omaha, Nebraska; (v) a continued
waiver of the one-to-a-market rule to permit the common ownership of WXII-TV,
Winston-Salem, North Carolina, and WXII(AM), Kernersville, North Carolina;
and, (vi) a continued waiver of the one-to-a-market rule to permit the common
ownership of WLKY-TV, Louisville, Kentucky, and WLKY(AM), Louisville,
Kentucky. The conditional waivers are based on an ongoing FCC rulemaking,
which among other things is considering changes to the FCC's television
duopoly rule, which currently prohibits the common ownership of television
stations with overlapping Grade B signal contours. The FCC has proposed to
allow common ownership of stations with overlapping Grade B contours as long
as there is no overlap of the stations' Grade A signal contours and the
stations are located in separate DMAs. The FCC has stated that it will grant
temporary waivers of the rule in circumstances in which these criteria are
met, although such waivers will be conditioned on the outcome of the
rulemaking. Some commentators have urged the FCC to eliminate the rule
entirely, or to allow common ownership of stations licensed to communities in
separate DMAs, regardless of the amount of signal overlap.
Although the Bureau granted the conditional waivers requested in the
Transfer Application, there can be no guarantee the duopoly rule ultimately
will be changed in a manner that would allow permanent common ownership of the
stations subject to the conditional waivers. If the rule is not changed in
such a manner, the Bureau's order requires the licensees subject to such a
conditional waiver to come into compliance with the rule within six-months of
completion of the rulemaking proceeding.
On July 20, 1998, WLOS Licensee, Inc. ("WLOS"), licensee of WLOS(TV),
Asheville, North Carolina, filed with the FCC a petition to deny the Transfer
Application to WYFF(TV), claiming that Pulitzer lacked the requisite
qualifications to be an FCC licensee as the result of certain pleadings
Pulitzer filed with the FCC opposing WLOS's application to acquire WLOS(TV)
and a separate but related application to assign WFBC-TV, Anderson, South
Carolina, to a third party with which WLOS intended to enter into a local
marketing agreement. On August 13, 1998, Pulitzer Broadcasting filed an
opposition to WLOS's petition to deny the Transfer Application. Pulitzer
Broadcasting subsequently filed a supplement to its opposition on August 14,
1998. WLOS submitted a reply to the Pulitzer Broadcasting opposition on August
20, 1998. In granting the Transfer Application, the Bureau considered the
merits of the WLOS petition and denied it. Under FCC rules, WLOS or, under
certain circumstances, other interested parties had until December 28, 1998 to
ask the Bureau to reconsider its grant of the Transfer Application, or ask the
full FCC to review the Bureau's action. No such request for reconsideration or
review was filed.
An application seeking the consent of the FCC to the Kelly Transaction was
filed on August 28, 1998. Currently, the Grade A contour of KCRA-TV overlaps
with the Grade A contour of KSBW(TV), Salinas,
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California. The FCC's television duopoly rule prohibits the common ownership
of two television stations with overlapping Grade A or Grade B contours.
Pursuant to an ongoing rulemaking proceeding considering changes to the
television duopoly rule, however, the FCC has adopted a policy of granting
waivers conditioned on the outcome of the rulemaking proceeding in situations
where two television stations have no overlap of their Grade A contours and
the stations are located in separate DMAs. An application seeking the
modification of the facilities of KSBW(TV) in a manner that would eliminate
the Grade A (but not the Grade B) contour overlap between KSBW(TV) and KCRA-TV
(the "KSBW(TV) Modification Application") has been granted by the FCC. On
December 11, 1998, the FCC granted its consent to the Kelly Transaction.
Because of the signal contour overlap between KCRA and Hearst-Argyle's
KSBW(TV), the FCC's grant was conditioned on (i) Hearst-Argyle completing the
modification of the KSBW facilities that will eliminate the Grade A signal
contour overlap between the stations within nine months of the consummation of
the Kelly Transaction; and (ii) the outcome of the pending FCC rulemaking
considering changes to the duopoly rule that would, if adopted, allow the
common ownership of certain stations, including KCRA and the modified KSBW,
with overlapping Grade B signal contours. As noted above, the FCC requires
that licensees subject to duopoly waivers conditioned on the outcome of the
pending rulemaking proceeding to come into compliance with the duopoly rule if
the rule is not changed to allow permanent common ownership of the stations.
The Kelly Transaction was consummated on January 5, 1999.
Ancillary Agreements
In accordance with the terms of the Merger Agreement, the following
additional ancillary agreements have been or will be entered into:
Board Representation Agreement. In connection with the execution of the
Merger Agreement, Hearst-Argyle, Hearst Broadcasting and the Pulitzer Parties
entered into a Board Representation Agreement, dated May 25, 1998 (the
"Representation Agreement"). The Representation Agreement grants the Pulitzer
Parties the right to designate two persons (the "Designees") for election as
additional members of the Hearst-Argyle Board following consummation of the
Merger. The initial Designees will be Michael E. Pulitzer and Ken J. Elkins.
Hearst-Argyle agreed that the Designees would be proposed for election to
the Hearst-Argyle Board either (i) if following the consummation of the Merger
there are one or more vacancies on the Hearst-Argyle Board or the members of
such Board have the power to create new directorships, at the first meeting of
the Hearst-Argyle Board following consummation of the Merger or (ii) if there
are no such vacancies or power to create new directorships, at the first
meeting of stockholders of Hearst-Argyle held after consummation of the
Merger. Following the election of the initial Designees, in each instance in
which individuals are nominated for election to the Hearst-Argyle Board,
Hearst-Argyle agreed to cause the Designees to be validly and timely nominated
for election to the Hearst-Argyle Board in the same manner as other proposed
directors are nominated and Hearst Broadcasting agreed to vote all the Hearst-
Argyle Stock it owns for the election to the Hearst-Argyle Board of the
Designees.
The parties to the Representation Agreement further agreed that Hearst-
Argyle and Hearst Broadcasting's obligations thereunder shall be suspended for
so long as the nomination or appointment of, or the Pulitzer Parties' right to
designate a Designee, would (i) create a violation or, as a result of any
proposed acquisition of an ownership interest in, management or control of or
other ownership with a radio or television broadcast station, a potential
violation by Hearst-Argyle or any of its subsidiaries of any rule, regulation
or policy of the FCC, including the FCC rules and policies regarding
attribution of ownership or (ii) restrict or prohibit or, as a result of any
proposed acquisition of an ownership interest in, management or control of or
other ownership with a radio or television broadcast station, would restrict
or prohibit Hearst-Argyle or any of its subsidiaries from maintaining,
obtaining or renewing any license, approval or authorization granted by the
FCC (in each case, an "Ownership Conflict"). Subject to applicable law, in the
event that by virtue of such an Ownership Conflict, the Pulitzer Parties are
no longer entitled to representation on the Hearst-Argyle Board, or in the
event the Pulitzer Parties should elect from time to time in lieu of a seat or
seats on the Hearst-Argyle Board, the Pulitzer Parties
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shall be entitled to designate a non-voting observer or observers to the
Hearst-Argyle Board. In addition, the rights of the Pulitzer Parties under the
Representation Agreement shall terminate if the Pulitzer Parties cease to
beneficially own in the aggregate at least 50% of the Hearst-Argyle Merger
Stock received by such Pulitzer Parties.
Registration Rights Agreement. Hearst-Argyle and the Pulitzer Parties have
entered into a Registration Rights Agreement, dated May 25, 1998 (the
"Registration Rights Agreement"), relating to the Hearst-Argyle Merger Stock
to be issued to the Pulitzer Parties and their respective affiliates in the
Merger. Pursuant to the Registration Rights Agreement, Hearst-Argyle will have
certain obligations to register under the Securities Act the shares of Hearst-
Argyle Merger Stock issued to the Pulitzer Parties and their respective
affiliates in the Merger (which would approximate 23.7 million shares) (the
"Registrable Shares"). After May 25, 1999, each Pulitzer Party may make a
written request, from time to time, for registration under the Securities Act
of all or a portion of the Registrable Shares held by such Pulitzer Party (a
"Demand Registration"). Until May 25, 2005, a maximum of two Demand
Registrations may be requested by each Pulitzer Party. Thereafter, only one
Demand Registration may be requested by each Pulitzer Party, provided that
such Pulitzer Party shall not have previously requested two Demand
Registrations that were effected or deemed effected, in which event such
Pulitzer Party may not request any further Demand Registrations.
Hearst-Argyle will not, however, be obligated to effect a Demand
Registration if each Demand Registration effected prior to May 25, 2001, is
not in respect of Registrable Shares with a fair market value in excess of $50
million, each Demand Registration effected on or after May 25, 2001 and prior
to May 25, 2003 is not in respect of Registrable Shares with a fair market
value in excess of $75 million, and each Demand Registration effected on or
after May 25, 2003 is not in respect of Registrable Shares with a fair market
value in excess of $100 million. In addition, Hearst-Argyle is not obligated
to effect a Demand Registration within 12 months after the effective date of a
previous Demand Registration, and Hearst-Argyle has the right to postpone for
up to 120 days any Demand Registration if Hearst-Argyle reasonably believes it
would be detrimental or otherwise disadvantageous to Hearst-Argyle or its
stockholders to file such registration statement. Hearst-Argyle cannot
exercise its right to postpone a Demand Registration more than once during any
twelve-month period. In addition, subject to certain terms and conditions
contained in the Registration Rights Agreement, the Pulitzer Parties, subject
to certain limitations, have the right until May 25, 2005 to include
Registrable Shares in any registration statement filed by Hearst-Argyle in
respect of a primary or secondary offering of Hearst-Argyle Series A Common
Stock (other than on Form S-4 or Form S-8).
The Registration Rights Agreement prohibits the Pulitzer Parties, at the
request of the underwriters managing a registered public offering, from
disposing of any of their shares of Hearst-Argyle capital stock for 15 days
prior to and 90 days following the effective date of any underwritten
offering. Hearst-Argyle is also prohibited from publicly selling (except
pursuant to benefit plans and registrations on Form S-4) any Hearst-Argyle
Series A Common Stock (or securities convertible into such stock) during the
15-day period prior to, and the 90-day period following, the effective date of
an underwritten public offering that is a Demand Registration. In addition,
Hearst-Argyle will be obligated to use its reasonable efforts to cause all
holders of 5% or more of any class of capital stock of Hearst-Argyle and all
other holders of securities of Hearst-Argyle purchased from Hearst-Argyle
other than in a public offering to enter into agreements with Hearst-Argyle
with restrictions similar to those in the preceding sentence.
The Registration Rights Agreement provides that all expenses incurred by
Hearst-Argyle in complying with its obligation under the Registration Rights
Agreement including, without limitation, all registration and filing fees,
fees and expenses of complying with securities and blue sky laws, listing
fees, printing expenses and fees and disbursements of accountants and counsel
for Hearst-Argyle will be paid by Hearst-Argyle. The expenses paid by Hearst-
Argyle will not include underwriting discounts and commissions attributable to
shares of the Pulitzer Parties and the fees and disbursements of counsel to
the Pulitzer Parties.
Hearst-Argyle Voting Agreement. In connection with the execution of the
Merger Agreement, Hearst Broadcasting entered into the Hearst-Argyle Voting
Agreement, dated May 25, 1998 (the "Hearst-Argyle Voting
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Agreement") with Pulitzer, relating to the shares of Hearst-Argyle Stock owned
by Hearst Broadcasting. Pursuant to the Hearst-Argyle Voting Agreement, Hearst
Broadcasting agreed, from May 25, 1998 until either the Merger is consummated
or the Merger Agreement is terminated, that at any meeting of the holders of
Hearst-Argyle Stock, however called, or in connection with any written consent
of the holders of Hearst-Argyle Stock, Hearst Broadcasting shall vote (or
cause to be voted) all shares of Hearst-Argyle Stock held of record or
beneficially owned by Hearst Broadcasting, whether owned as of May 25, 1998 or
thereafter acquired (i) in favor of the Merger, the execution and delivery by
Hearst-Argyle of the Merger Agreement, and the approval of the terms thereof,
and each of the other transactions and actions contemplated by the Merger
Agreement and the Hearst-Argyle Voting Agreement (and the matters related to
the consummation thereof) and any actions required in furtherance thereof and
(ii) against any action or agreement that would result in a breach in any
respect of any covenant, representation or warranty or any other obligation or
agreement of Hearst-Argyle under the Merger Agreement or Hearst-Argyle Voting
Agreement or that would result in any of the conditions to the obligations of
Hearst-Argyle under the Merger Agreement not being fulfilled.
As of the Hearst-Argyle Record Date, Hearst Broadcasting owned 100% of the
issued and outstanding shares of Hearst-Argyle Series B Common Stock and
4,036,725 of the issued and outstanding shares of Hearst-Argyle Series A
Common Stock, representing in the aggregate approximately 87.1% of the
outstanding voting power of the Hearst-Argyle Common Stock and 86.0% of the
outstanding voting power of the Hearst-Argyle Stock. Therefore, Hearst
Broadcasting has sufficient voting power to approve the Hearst-Argyle
Proposals regardless of the vote of any other stockholders.
Pulitzer Voting Agreement. In connection with and as a condition to the
execution and delivery of the Merger Agreement, Hearst-Argyle and the Pulitzer
Principal Stockholders entered into the Amended and Restated Pulitzer Voting
Agreement, dated as of May 25, 1998 (the "Pulitzer Voting Agreement," and
together with the Hearst-Argyle Voting Agreement, the "Voting Agreements"),
relating to shares of Pulitzer Stock that the Pulitzer Principal Stockholders
may vote or of which they may direct the vote. The Pulitzer Voting Agreement
provides that each Pulitzer Principal Stockholder, during the period
commencing on May 25, 1998 and continuing until the first to occur of the
effective time of the Merger or the date on which the Merger Agreement is
terminated, in connection with any meeting or written consent of the holders
of Pulitzer Stock, shall vote (or cause to be voted) all shares of Pulitzer
Stock that it may vote or of which it may direct the vote, whether owned on
May 25, 1998 or thereafter acquired (i) in favor of the Merger, the execution
and delivery by Pulitzer of the Merger Agreement and the Contribution
Agreement and the approval of the terms thereof, and each of the other actions
contemplated by the Merger Agreement, the Contribution Agreement and the
Pulitzer Voting Agreement and any actions required in furtherance thereof;
(ii) against any action or agreement that would result in a breach in any
respect of any covenant, representation or warranty or any other obligation or
agreement of Pulitzer under the Merger Agreement or the Contribution
Agreement; and, (iii) except as otherwise agreed to in writing in advance by
Hearst-Argyle, against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement and the Contribution
Agreement): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving Pulitzer or its
subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
Pulitzer or its subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of Pulitzer or its subsidiaries; (C) any change in
a majority of the persons who constitute the board of directors of Pulitzer;
(D) any change in the present capitalization of Pulitzer or any amendment of
Pulitzer's Charter or By-Laws; (E) any other material change in Pulitzer's
corporate structure or business; or, (F) any other action involving Pulitzer
or its subsidiaries that is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or materially adversely affect the
Merger and the transactions contemplated by the Merger Agreement, the
Contribution Agreement and the Pulitzer Voting Agreement.
AS OF THE PULITZER RECORD DATE, THE PULITZER PRINCIPAL STOCKHOLDERS,
COLLECTIVELY, HAD THE POWER TO DIRECT THE VOTE OF 14,443,209 SHARES OF
PULITZER CLASS B COMMON STOCK, REPRESENTING IN THE AGGREGATE (I) APPROXIMATELY
94.4% OF THE ISSUED AND OUTSTANDING SHARES OF PULITZER CLASS
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B COMMON STOCK AND (II) APPROXIMATELY 90.1% OF THE OUTSTANDING VOTING POWER OF
PULITZER STOCK WITH RESPECT TO THE PULITZER MERGER PROPOSAL. AS OF THE
PULITZER RECORD DATE, THE PULITZER PRINCIPAL STOCKHOLDERS DID NOT OWN ANY
SHARES OF PULITZER COMMON STOCK. PURSUANT TO THE PULITZER VOTING AGREEMENT,
THE PULITZER PRINCIPAL STOCKHOLDERS HAVE AGREED TO DIRECT THE VOTE OF ALL OF
THEIR SHARES OF PULITZER STOCK IN FAVOR OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY IT (INCLUDING THE PULITZER CHARTER AMENDMENT).
THEREFORE, THE PULITZER PRINCIPAL STOCKHOLDERS HAVE SUFFICIENT VOTING POWER TO
APPROVE THE PULITZER MERGER PROPOSAL REGARDLESS OF THE VOTE OF ANY OTHER
HOLDERS OF PULITZER STOCK. THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
BY THE PULITZER MERGER PROPOSAL, HOWEVER, IS CONDITIONAL UPON THE APPROVAL AND
ADOPTION OF THE PULITZER CHARTER AMENDMENT PROPOSAL. ACCORDINGLY, THE SPIN-OFF
AND THE MERGER AND THE RELATED TRANSACTIONS WILL NOT BE CONSUMMATED UNLESS THE
PULITZER CHARTER AMENDMENT PROPOSAL IS APPROVED AND ADOPTED BY THE REQUISITE
VOTE OF PULITZER STOCKHOLDERS.
Execution of the Pulitzer Voting Agreement and Hearst-Argyle Voting
Agreement was a condition to Hearst-Argyle and Pulitzer's entering into the
Merger Agreement, and no compensation was paid to any person in consideration
for entering into such agreements.
FCC Agreement. In connection with the execution of the Merger Agreement,
Hearst-Argyle and the Pulitzer Principal Stockholders entered into an FCC
Agreement, dated May 25, 1998 (the "FCC Agreement"). The FCC Agreement
provides that if an Ownership Conflict arises at any time (including at the
Effective Time), whether as a consequence of action by the Pulitzer Principal
Stockholders, New Pulitzer or Hearst-Argyle (including, without limitation,
the acquisition or proposed acquisition of an ownership interest in, or
management or control of, or other relationship with, a radio or television
broadcast station by Hearst-Argyle or any of its subsidiaries) or otherwise,
such that such Pulitzer Principal Stockholder's ownership of shares of Hearst-
Argyle Series A Common Stock would (i) cause Hearst-Argyle to be non-compliant
with the rules and regulations of the FCC governing ownership of mass media
facilities by broadcast licensees including, but not limited to, the FCC's
rules and policies concerning attribution of ownership (collectively, the "FCC
Cross-Ownership Rules") or any other rule, regulation or policy of the FCC
(together with the FCC Cross-Ownership Rules, the "FCC Rules") or (ii)
restrict or prohibit Hearst-Argyle's ability to maintain, renew or obtain any
license, approval or authorization granted by the FCC, then each Pulitzer
Principal Stockholder whose ownership of shares of Hearst-Argyle Series A
Common Stock is determined, according to the FCC's ownership attribution
principles, to be a contributing cause of Hearst-Argyle's non-compliance (each
an "Attributable Stockholder") will exchange its shares of Hearst-Argyle
Series A Common Stock for new shares in Hearst-Argyle (the "Replacement
Shares") to the limited extent necessary for Hearst-Argyle to be in compliance
with the FCC Cross-Ownership Rules.
The Replacement Shares shall possess characteristics identical in every
respect to the then-existing shares held by the Pulitzer Principal
Stockholders; provided, however, that (i) they will be non-voting in nature,
except on such matters as the FCC Rules and relevant decisions of the FCC
would permit, consistent with preserving the non-attributable status of the
Replacement Shares, and except as otherwise required by law and (ii) to the
extent the Replacement Shares are shares of Hearst-Argyle Series A or Series B
Preferred Stock, such Replacement Shares shall be senior to shares of common
stock of Hearst-Argyle in liquidation as to the par value of such shares. In
addition, each Replacement Share shall be convertible into a full voting
common share of Hearst-Argyle at the Attributable Stockholder's election, at
such time as an Ownership Conflict no longer would exist upon such conversion,
including, without limitation, in the event that: (i) a change in either
Hearst-Argyle's ownership of mass media facilities or New Pulitzer's ownership
of mass media facilities, or both, makes the Replacement Shares no longer
necessary to preserve Hearst-Argyle's compliance with the FCC Rules; (ii) the
FCC Rules are repealed or amended or other circumstances arise such that the
Replacement Shares are no longer necessary to preserve Hearst-Argyle's
compliance therewith; or, (iii) any Attributable Stockholder desires to sell
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or otherwise transfer the Replacement Shares to a person or persons whose
ownership of such shares will not result in an Ownership Conflict.
Unless otherwise agreed upon by the applicable Pulitzer Principal
Stockholder and Hearst-Argyle, the Replacement Shares shall be exchanged for
shares of Hearst-Argyle Series A Common Stock on a pro rata basis among the
Attributable Stockholders. As a condition of any transfer of Hearst-Argyle
Common Stock by a Pulitzer Principal Stockholder, as a result of which the
transferee shall hold a direct or indirect interest in 5% or more of Hearst-
Argyle Stock, the Pulitzer Principal Stockholder shall cause such transferee
to execute and deliver to Hearst-Argyle a joinder agreement whereby such
transferee shall agree to take and hold such Hearst-Argyle Stock subject to
the FCC Agreement.
Arizona Diamondbacks Letter Agreement. On May 25, 1998, Pulitzer, New
Pulitzer and Hearst-Argyle entered into a Letter Agreement whereby Hearst-
Argyle agreed to acquire and New Pulitzer agreed to sell all the issued and
outstanding shares (the "Pulitzer Sports Shares") of capital stock of Pulitzer
Sports, Inc. ("Pulitzer Sports"), a Delaware corporation and wholly owned
subsidiary of Pulitzer Broadcasting. Pulitzer Sports owns certain partnership
interests in AZPB Limited Partnership, a partnership that owns a certain
percentage of the Arizona Diamondbacks Major League Baseball team. In
consideration of the transfer by New Pulitzer of the Pulitzer Sports Shares to
Hearst-Argyle, Hearst-Argyle has agreed to pay to New Pulitzer the sum of $5
million. The consummation date of the transfer of the Pulitzer Sports Shares
shall be the later of (i) the Effective Time or (ii) three (3) business days
after receipt of all necessary consents and authorizations of Major League
Baseball and the National League with respect to the transfer of the Pulitzer
Sports Shares.
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CAPITALIZATION
The following table sets forth the capitalization of Hearst-Argyle as of
September 30, 1998, and the pro forma capitalization of Hearst-Argyle after
giving effect to (i) the Kelly Transaction; (ii) the Kelly Transaction and the
Merger; and, (iii) the Kelly Transaction and the Merger, net of the
divestiture of WGAL. This table presents the pro forma capitalization of
Hearst-Argyle after giving effect to the issuance of 37,096,774 shares of
Hearst-Argyle Series A Common Stock to the Pulitzer stockholders in accordance
with the Merger Agreement. This table should be read in conjunction with the
Hearst-Argyle unaudited pro forma combined condensed financial statements
giving effect to the Kelly Transaction and to the Merger included elsewhere in
this document and the Hearst-Argyle, Kelly Broadcasting and Pulitzer
Broadcasting Business historical consolidated financial statements, including
notes thereto, which are incorporated by reference elsewhere herein.
<TABLE>
<CAPTION>
Pro Forma Elimination of Net Pro
Hearst- Pro Forma Book Value of Forma
Hearst-Argyle Argyle(a) Merger(b)(c) WGAL(d) Divestiture(c)
------------- ---------- ------------ ------------------ --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Borrowings:
Credit Facility........ $ 80,000 $ 780,000 $(14,691) $ 765,309
Senior Notes........... $500,000 500,000 500,000 500,000
Senior Subordinated
Notes................. 2,596 2,596 2,596 2,596
Long-term debt......... 450,000 450,000 450,000
-------- ---------- ---------- -------- ----------
Total................ 502,596 1,032,596 1,732,596 (14,691) 1,717,905
-------- ---------- ---------- -------- ----------
Stockholders' Equity:
Preferred Stock........ 2 2 2 2
Series A Common
Stock................. 125 125 496 496
Series B Common
Stock................. 413 413 413 413
Additional Paid-in
Capital............... 201,889 201,889 1,351,518 1,351,518
Accumulated Deficit.... 151,138 151,138 151,138 151,138
Treasury Stock......... (21,222) (21,222) (21,222) (21,222)
-------- ---------- ---------- -------- ----------
Total................ 332,345 332,345 1,482,345 -- 1,482,345
-------- ---------- ---------- -------- ----------
Total Capitalization.... $834,941 $1,364,941 $3,214,941 $(14,691) $3,200,250
======== ========== ========== ======== ==========
</TABLE>
- --------
(a) Pro Forma Hearst-Argyle includes Hearst-Argyle and the Kelly Transaction
as of September 30, 1998.
(b) Pro Forma Merger includes Hearst-Argyle, the Kelly Transaction and the
Merger as of September 30, 1998.
(c) Assumes the issuance to Pulitzer Stockholders of 37,096,774 shares of
Hearst-Argyle Series A Common Stock, assuming the market price of Hearst-
Argyle Series A Common Stock on the Closing Date is $31.00 per share, and
Hearst-Argyle's assumption of the New Debt ($700 million) for the Pulitzer
Broadcasting Business and Hearst-Argyle's assumption of $530 million of
long-term debt for the Kelly Transaction.
(d) Upon consummation of the Merger, Hearst-Argyle will own two television
stations in an area (WGAL in Lancaster, PA and WBAL in Baltimore, MD) with
overlapping service contours in violation of the FCC's local ownership
rules. The FCC's rules prohibit the ownership of two stations in the same
geographic area whose service contours overlap. Accordingly, the FCC, as
part of its consent to the Merger, required Hearst-Argyle to file an
application to divest one of the aforementioned stations (or propose such
other action that would result in compliance with such FCC rules) within
six months from consummation of the Merger. If WGAL is sold for cash, the
proceeds of such sale will be used to reduce indebtedness under the Chase
Credit Facility and therefore the pro forma capitalization reflects the
effects of a reduction in the Chase Credit Facility by an amount equal to
$14.7 million, the net book value of WGAL. The net book value has been
used in the capitalization table for the divestiture of WGAL because no
other valuation currently can be based on an independent third party
offer. The divestiture of WGAL at net book value would be equivalent to
selling WGAL at a price equal to less than two times WGAL's 1997 broadcast
cash flow. Given the valuations of broadcasting properties in recent
transactions, including the valuation of the Pulitzer Broadcasting
Business implied by the Hearst-Argyle Merger Stock, Hearst-Argyle
management believes that the divestiture of WGAL will occur at a valuation
significantly higher than its net book value. See "The Merger Agreement--
Regulatory Approvals."
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OWNERSHIP OF HEARST-ARGYLE STOCK BEFORE AND AFTER THE MERGER
The following table sets forth, based on information as of the Hearst-Argyle
Record Date, the ownership of Hearst-Argyle Common Stock before the Merger and
the anticipated beneficial ownership of Hearst-Argyle Common Stock after
giving effect to the Merger, as to (i) each Hearst-Argyle director and
executive officer; (ii) all Hearst-Argyle directors and executive officers, as
a group; (iii) all Pulitzer stockholders, as a group; and, (iv) each person
known to Hearst-Argyle to be the beneficial owner of 5% or more of any class
or series of Hearst-Argyle voting securities and each person expected to be
the beneficial owner of 5% or more of any class or series of Hearst-Argyle
voting securities.
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<TABLE>
<CAPTION>
Before the Merger
---------------------------------------------------------
% of
Series A % of Series B Total Total
Common Series Common % of Series Common Common
--------- ------ ---------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Bob Marbut(1)... 1,005,461 9.3% -- -- 1,005,461 1.9%
John Conomikes.. 5,000 * -- -- 5,000 *
David J.
Barrett(2)..... 77,667 * -- -- 77,667 *
Anthony J.
Vinciquerra(3).. 61,403 * -- -- 61,403 *
Dean H.
Blythe(4)...... 45,730 * -- -- 45,730 *
Harry T.
Hawks(5)....... 137,983 1.3% -- -- 137,983 *
Ibra
Morales(5)..... 236,634 2.2% -- -- 236,634 *
Philip
Stolz(6)....... 26,667 * -- -- 26,667 *
Frank A.
Bennack, Jr.... 20,000 * -- -- 20,000 *
Victor F.
Ganzi.......... 20,000 * -- -- 20,000 *
George R.
Hearst, Jr..... 5,000 * -- -- 5,000 *
William R.
Hearst III..... 10,000 * -- -- 10,000 *
Gilbert C.
Maurer......... 10,000 * -- -- 10,000 *
David
Pulver(7)...... 81,656 * -- -- 81,656 *
Virginia H.
Randt.......... -- -- -- -- -- --
Caroline L.
Williams(7).... 32,646 * -- -- 32,646 *
All Hearst-
Argyle
directors and
executive
officers as a
group
(16 persons)(8)(9).. 1,775,847 16.0% -- -- 1,775,847 3.4%
Hearst
Broadcasting,
Inc............ 4,036,725 37.5% 41,298,648 100.0% 45,335,373 87.1%
Pulitzer
Stockholders
(as a group)... -- -- -- -- -- --
Ken J.
Elkins(10)..... -- -- -- -- -- --
David E. Moore.. -- -- -- -- -- --
Emily Rauh
Pulitzer....... -- -- -- -- -- --
Michael E.
Pulitzer(10)... -- -- -- -- -- --
<CAPTION>
After the Merger
---------------------------------------------------------------
% of
Series A Series B Total Total
Common % of Series Common % of Series Common Common
---------- ----------- ---------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Bob Marbut(1)... 1,005,461 2.1% -- -- 1,005,461 1.1%
John Conomikes.. 5,000 * -- -- 5,000 *
David J.
Barrett(2)..... 77,667 * -- -- 77,667 *
Anthony J.
Vinciquerra(3).. 61,403 * -- -- 61,403 *
Dean H.
Blythe(4)...... 45,730 * -- -- 45,730 *
Harry T.
Hawks(5)....... 137,983 * -- -- 137,983 *
Ibra
Morales(5)..... 236,634 * -- -- 236,634 *
Philip
Stolz(6)....... 26,667 *
Frank A.
Bennack, Jr.... 20,000 * -- -- 20,000 *
Victor F.
Ganzi.......... 20,000 * -- -- 20,000 *
George R.
Hearst, Jr..... 5,000 * -- -- 5,000 *
William R.
Hearst III..... 10,000 * -- -- 10,000 *
Gilbert C.
Maurer......... 10,000 * -- -- 10,000 *
David
Pulver(7)...... 81,656 * -- -- 81,656 *
Virginia H.
Randt.......... -- -- -- -- -- --
Caroline L.
Williams(7).... 32,646 * -- -- 32,646 *
All Hearst-
Argyle
directors and
executive
officers as a
group
(16 persons)(8)(9).. 7,905,869 16.4% -- -- 7,905,869 8.8%
Hearst
Broadcasting,
Inc............ 4,036,725 8.4% 41,298,648 100.0% 45,335,373 50.9%
Pulitzer
Stockholders
(as a group)... 37,096,774 77.5% -- -- 37,096,774 41.6%
Ken J.
Elkins(10)..... 29,567 * -- -- 29,567 *
David E. Moore.. 6,440,042 13.5% -- -- 6,440,042 7.2%
Emily Rauh
Pulitzer....... 11,120,820 23.2% -- -- 11,120,820 12.5%
Michael E.
Pulitzer(10)... 6,127,122 12.8% -- -- 6,127,122 6.9%
</TABLE>
- ------
* Less than 1%
(1) Includes 50,000 presently exercisable options.
(2) Includes 76,667 presently exercisable options.
(3) Includes 50,000 presently exercisable options.
(4) Includes 43,334 presently exercisable options.
(5) Includes 33,334 presently exercisable options.
(6) Includes 26,667 presently exercisable options.
(7) Includes 15,000 presently exercisable options.
(8) Includes 316,669 presently exercisable options.
(9) After Merger, 18 persons.
(10) To join Hearst-Argyle Board after the Merger.
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<PAGE>
OWNERSHIP OF NEW PULITZER STOCK AFTER THE SPIN-OFF AND THE MERGER
Following the Spin-Off and the Merger, holders of Pulitzer Class B Common
Stock and holders of Pulitzer Common Stock will own New Pulitzer Class B
Common Stock and New Pulitzer Common Stock, respectively, constituting 100% of
the issued and outstanding shares of each such class of New Pulitzer capital
stock in the same proportion as shares of Pulitzer Class B Common Stock and
Pulitzer Common Stock, respectively, were held immediately prior to the Spin-
Off.
COMPARATIVE PER-SHARE MARKET AND DIVIDEND INFORMATION
As of July 22, 1998, the Hearst-Argyle Series A Common Stock has been listed
on the NYSE under the symbol "HTV." Prior to listing on NYSE, Hearst-Argyle
Series A Common Stock was quoted on the Nasdaq National Market under the
Symbol "HATV." Prior to the consummation of the Hearst Transaction, shares of
Series A Common Stock of Argyle were traded on the Nasdaq National Market
under the Symbol "ARGL." The Pulitzer Common Stock is listed on the NYSE under
the symbol "PTZ." Neither the Hearst-Argyle Series B Stock nor the Pulitzer
Class B Common Stock is publicly traded.
The table below sets forth, for the calendar quarters indicated, the
reported high and low sales prices of the Series A Common Stock of Argyle
prior to the consummation of the Hearst Transaction on August 29, 1997 and of
the Hearst-Argyle Series A Common Stock subsequent to the consummation of the
Hearst Transaction, on the Nasdaq National Market or the NYSE, as the case may
be, and the reported high and low sales prices of the Pulitzer Common Stock on
the NYSE.
<TABLE>
<CAPTION>
Hearst-Argyle
Series A Pulitzer
Common Stock Common Stock
------------- -----------------
High Low High Low
------ ------ -------- --------
<S> <C> <C> <C> <C>
1997
First Quarter................................. 29 1/8 23 7/8 50 5/8 43 1/4
Second Quarter................................ 25 1/2 22 1/2 54 1/4 40 7/8
Third Quarter................................. 30 5/8 24 7/8 57 1/2 49 3/4
Fourth Quarter................................ 32 5/8 26 1/4 63 11/16 51 13/16
1998
First Quarter................................. 38 27 1/4 87 7/16 57 7/16
Second Quarter................................ 41 1/4 32 5/8 92 1/8 77 3/4
Third Quarter................................. 40 1/4 31 5/8 89 5/16 74 3/8
Fourth Quarter................................ 33 1/4 24 86 11/16 64 3/8
</TABLE>
On May 22, 1998, the last full trading day prior to the public announcement
of the Merger, the closing price of the Hearst-Argyle Series A Common Stock on
the Nasdaq National Market and the Pulitzer Common Stock on the NYSE was
$34.25 per share and $90.00 per share, respectively. On February 9, 1999, the
most recent practicable date prior to the mailing of this Joint Proxy
Statement/Prospectus, the closing price of the Hearst-Argyle Series A Common
Stock and the Pulitzer Common Stock, in each case on the NYSE, was $27.875 per
share and $81.25 per share, respectively. Holders of Hearst-Argyle Stock and
Pulitzer Stock are urged to obtain current market quotations for the Hearst-
Argyle Series A Common Stock and the Pulitzer Common Stock prior to making any
decision with respect to the Merger and other transactions contemplated by the
Merger Agreement.
Following the Spin-Off and the Merger, New Pulitzer expects to pay quarterly
dividends on New Pulitzer Common Stock and New Pulitzer Class B Common Stock
at the same rate as that currently paid with respect to the Pulitzer Common
Stock and the Pulitzer Class B Common Stock. Future dividends will, however,
be subject to the earnings, financial condition and capital requirements of
New Pulitzer, as well as the limitations under any credit agreement or other
agreement to which New Pulitzer may become a party in the future.
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<PAGE>
Hearst-Argyle has not paid any dividends on the Hearst-Argyle Series A
Common Stock since its inception and does not anticipate that it will pay any
dividends on the Hearst-Argyle Series A Common Stock in the foreseeable
future. Hearst-Argyle's senior credit facility limits the ability of Hearst-
Argyle to pay dividends on the Hearst-Argyle Series A Common Stock under
certain conditions.
FEDERAL INCOME TAX CONSEQUENCES OF THE SPIN-OFF, THE MERGER
AND RELATED TRANSACTIONS
The following is a summary of the material federal income tax consequences
to the Pulitzer stockholders of the Spin-Off, the Merger and the transactions
contemplated thereby. The tax treatment of a stockholder may vary depending
upon his particular situation, and certain stockholders (including individuals
who hold options in respect of Pulitzer Common Stock, insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, and persons
who are neither citizens nor residents of the United States, or which are
foreign corporations, foreign partnerships or foreign estates or trusts as to
the United States) may be subject to special rules not discussed below. The
following summary is based on the Code, Treasury Regulations promulgated
thereunder, administrative rulings and pronouncements, and judicial decisions
as of the date hereof, all of which are subject to change (possibly with
retroactive effect), and does not address any state, local or foreign tax
consequences.
EACH PULITZER STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS TAX ADVISOR AS
TO THE PARTICULAR TAX CONSEQUENCES TO HIM, HER OR IT OF THE TRANSACTIONS
DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
The Spin-Off
Pulitzer has received the IRS Ruling that the Spin-Off will qualify as a
reorganization within the meaning of Section 368(a)(1)(D) of the Code and as a
tax-free distribution to Pulitzer stockholders under Section 355(a) of the
Code. A ruling from the IRS, while generally binding on the IRS, may under
certain circumstances be revoked or modified by the IRS retroactively.
Pulitzer and Hearst-Argyle are not currently aware of any facts or
circumstances that would cause the IRS to revoke or modify the IRS Ruling.
Taxation to Pulitzer Stockholders. The IRS Ruling confirms that the Spin-Off
will have the following effects: (i) the Spin-Off will be a "reorganization"
within the meaning of Section 368(a)(1)(D) of the Code; (ii) Pulitzer
stockholders will recognize no gain or loss (and no amount will be included in
their income) as a result of their receipt of New Pulitzer Stock in the Spin-
Off; (iii) the aggregate adjusted tax basis of the New Pulitzer Stock and
Pulitzer Stock in the hands of each Pulitzer stockholder will be the same as
the adjusted tax basis of the Pulitzer Stock held by such Pulitzer stockholder
immediately prior to the Distribution, allocated in proportion to the
respective fair market values of the New Pulitzer Stock and Pulitzer Stock
owned by such Pulitzer stockholder (if the Pulitzer stockholder holds blocks
of Pulitzer Stock that were purchased at different times or for different
prices, such allocation must be separately calculated for each of such blocks
of Pulitzer Stock); and, (iv) the holding period of the New Pulitzer Stock
received from Pulitzer by a Pulitzer stockholder in the Spin-Off will in each
instance include the holding period of the Pulitzer Stock held by such
Pulitzer stockholder immediately before the Distribution, provided that such
Pulitzer stockholder held the Pulitzer Stock as a capital asset on the date of
the Distribution.
If the Spin-Off did not qualify as a tax-free distribution to Pulitzer
stockholders under Section 355(a) of the Code, each Pulitzer stockholder would
be required to recognize taxable income and/or gain and thus could be liable
for income tax in an amount that could be material. See "Risk Factors--Risk
Factors Associated with the Spin-Off and the Merger--Federal Income Tax Risks
Relating to the Spin-Off."
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<PAGE>
Each Pulitzer stockholder who receives New Pulitzer Stock in the Spin-Off
must attach to such stockholder's federal income tax return, for the year in
which the New Pulitzer Stock is received, a statement that describes the
applicability of Section 355 of the Code to the Spin-Off. Pulitzer will
provide to each Pulitzer stockholder of record as of the date of the
Distribution the information necessary in order to furnish such statement to
the IRS.
Taxation to Pulitzer. As a result of the Spin-Off and the Merger, Pulitzer
will be required under Section 355(e) of the Code to recognize taxable gain in
an amount equal to the excess, if any, of the fair market value of the New
Pulitzer Stock distributed to Pulitzer's stockholders in the Distribution over
Pulitzer's adjusted tax basis in such New Pulitzer Stock immediately prior to
the Distribution. There can be no assurance that the IRS will agree with
Pulitzer's determination of the fair market value of the New Pulitzer Stock
distributed to Pulitzer's stockholders in the Distribution or Pulitzer's
resulting tax liability. Under the Merger Agreement, New Pulitzer will be
liable and will indemnify Hearst-Argyle and its subsidiaries, on an after tax
basis, for any unpaid tax liabilities of Pulitzer arising by reason of the
application of Section 355(e) of the Code to the Spin-Off.
The Merger
Fulbright & Jaworski L.L.P., counsel for Pulitzer, has delivered an opinion
that the description of the Federal income tax consequences of the Merger to
Pulitzer and Pulitzer stockholders contained under this heading correctly sets
forth the material Federal income tax consequences of the Merger to Pulitzer
and Pulitzer stockholders. Rogers & Wells LLP, counsel for Hearst-Argyle, has
delivered an opinion that the description of the Federal income tax
consequences of the Merger to Hearst-Argyle and Hearst-Argyle stockholders
contained under this heading correctly sets forth the material Federal income
tax consequences of the Merger to Hearst-Argyle and Hearst-Argyle
stockholders. These opinions are based upon, among other things,
representation letters provided by Pulitzer and Hearst-Argyle containing
customary statements relating to certain technical requirements under the
Code, including statements by Hearst-Argyle (similar to those previously made
to the IRS in connection with the IRS Ruling request) concerning the
continuation of the Broadcasting Business and the use of certain assets of
Pulitzer after the Merger.
Based upon the representation letters provided to counsel, which will be
confirmed by Pulitzer and Hearst-Argyle prior to the closing of the Merger, it
is the opinion of Fulbright & Jaworski L.L.P. that:
(i) the Merger will qualify as a reorganization under Section 368(a)(1)(A)
of the Code;
(ii) no gain or loss will be recognized by Pulitzer as a result of
consummation of the Merger;
(iii) no gain or loss will be recognized by a Pulitzer stockholder upon the
exchange of shares of Pulitzer Stock for shares of Hearst-Argyle Merger Stock
pursuant to the Merger, except upon the receipt of cash in lieu of a
fractional share or Hearst-Argyle Merger Stock;
(iv) the aggregate adjusted tax basis of shares of Hearst-Argyle Merger
Stock received (including a fractional share deemed received) by a Pulitzer
stockholder pursuant to the Merger will be the same as the aggregate adjusted
tax basis of the shares of Pulitzer Stock surrendered in exchange therefor;
(v) the holding period of the shares of Hearst-Argyle Merger Stock received
(including a fractional share deemed received) by a Pulitzer stockholder
pursuant to the Merger will include the holding period of the shares of
Pulitzer Stock surrendered in exchange therefor, provided that such Pulitzer
Stock is held as a capital asset by the Pulitzer stockholder at the
consummation of the Merger; and
(vi) a Pulitzer stockholder who receives cash in lieu of a fractional share
of Hearst-Argyle Merger Stock will be treated as if the fractional share had
been distributed as part of the exchange and then such Pulitzer stockholder
had received a cash distribution in redemption of such fractional share, which
will be taxed as provided in Section 302 of the Code.
Based upon the representation letters provided to counsel, which will be
confirmed by Pulitzer and Hearst-Argyle prior to the closing of the Merger, it
is the opinion of Rogers & Wells LLP that the Merger will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code.
Accordingly, no gain or loss will be recognized by Hearst-Argyle or Hearst-
Argyle stockholders.
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<PAGE>
The IRS takes the position that the consequences of a transaction such as
the Merger are adequately established in the tax law and it will not issue a
ruling as to whether such a transaction qualifies as a reorganization under
Section 368(a)(1)(A) of the Code. Therefore, no ruling from the IRS has been
or will be requested with respect to the federal income tax consequences of
the Merger.
It is a condition to the obligation of Hearst-Argyle and Pulitzer to
consummate the Merger that each shall have received confirmation, dated the
closing date, of the opinion of its respective counsel contained under this
heading. A copy of each such opinion has been filed as an exhibit to the
Registration Statement of which this Joint Proxy Statement/Prospectus is a
part.
An opinion of counsel is not binding on the IRS or the courts, and no
assurance can be given that the IRS will not challenge the tax treatment of
the Merger. Further, the opinions of Fulbright & Jaworski L.L.P. and Rogers &
Wells LLP are dependent upon future events, such as Hearst-Argyle continuing
to own and conduct the Broadcasting Business after the Merger, the results of
which will not be reviewed by counsel. Pulitzer and Hearst-Argyle are not
currently aware of any facts or circumstances that would cause the
representations that they have made to counsel to be untrue or incorrect in
any material respect.
If the Merger did not qualify as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code, the Merger would be treated as a taxable
exchange for federal income tax purposes. In that event, each Pulitzer
stockholder would be required to recognize gain or loss equal to the
difference between (i) the sum of the fair market value of the Hearst-Argyle
Merger Stock received by such Pulitzer stockholder plus any cash received by
such Pulitzer stockholder in lieu of fractional share of Hearst-Argyle Merger
Stock and (ii) the adjusted tax basis of the Pulitzer Stock held by such
Pulitzer stockholder immediately before the Merger, and Pulitzer would be
required to recognize taxable gain in an amount equal to the excess of (x) the
sum of the aggregate fair market value of the Hearst-Argyle Merger Stock
received, any cash received in lieu of fractional shares of Hearst-Argyle
Merger Stock, and the amount of the New Debt and other liabilities of Pulitzer
assumed by Hearst-Argyle in the Merger, over (y) the aggregate adjusted tax
basis of Pulitzer's assets. Under the Merger Agreement, New Pulitzer will be
liable and will indemnify Hearst-Argyle and its subsidiaries, on an after-tax
basis, against any tax liability of Pulitzer or any Pulitzer subsidiaries
attributable to any tax period (or portion thereof) prior to the consummation
of the Merger (including any taxable gain to Pulitzer as described above),
except for any tax liability of Pulitzer resulting from the Merger not
qualifying as a reorganization by reason of actions taken by Hearst-Argyle
after consummation of the Merger. In addition, if the Merger did not qualify
as a reorganization under Section 368(a)(1)(A) of the Code, the Spin-Off would
likely not qualify as a tax-free distribution to Pulitzer stockholders under
Section 355(a) of the Code. See "Risk Factors--Risk Factors Associated with
the Spin-Off and the Merger--Federal Income Tax Risks Relating to the Merger"
and "The Merger Agreement--Tax Matters."
The highest marginal individual Federal income tax rate (which applies to
ordinary income and gain from the sale or exchange of capital assets held for
one year or less) is 39.6%. The maximum regular Federal income tax rate on
capital gains derived by individual taxpayers generally is 20% for sales and
exchanges of capital assets held for more than one year. All net capital gain
of a corporate taxpayer is subject to tax at ordinary corporate income tax
rates of up to 35%.
Backup Withholding
Under the backup withholding rules, a holder of New Pulitzer Stock and
Hearst-Argyle Series A Common Stock may be subject to backup withholding at
the rate of 31% with respect to dividends and proceeds of redemption
(including cash received in lieu of a fractional share of Hearst-Argyle Merger
Stock in the Merger), unless such stockholder (i) is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact or (ii) provides a correct taxpayer identification number, certifies as
to no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. Any amount withheld
under these rules will be credited against the stockholders's federal income
tax liability. New Pulitzer or Hearst-Argyle may require holders of New
Pulitzer Stock or Hearst-Argyle
131
<PAGE>
Series A Common Stock, respectively, to establish an exemption from backup
withholding or to make arrangements satisfactory to New Pulitzer or Hearst-
Argyle, respectively, with respect to the potential application of backup
withholding. A stockholder who does not provide New Pulitzer or Hearst-Argyle
with his or her current taxpayer identification number may be subject to
penalties imposed by the IRS.
PROPOSAL TO APPROVE AND ADOPT THE HEARST-ARGYLE CHARTER AMENDMENT
The Hearst-Argyle Board has approved and declared advisable, and is
submitting to the Hearst-Argyle stockholders for their approval and adoption
the Hearst-Argyle Charter Amendment Proposal. The Hearst-Argyle Charter
Amendment will increase the number of authorized shares of Hearst-Argyle
Common Stock from 200 million to 300 million shares, 200 million of such
shares to be designated Hearst-Argyle Series A Common Stock and 100 million of
such shares to be designated Hearst-Argyle Series B Common Stock. Currently,
the 200 million shares of Hearst-Argyle Common Stock authorized by the Hearst-
Argyle Charter are designated as 100 million shares of Hearst-Argyle Series A
Common Stock and 100 million shares of Hearst-Argyle Series B Common Stock.
Because Hearst-Argyle has a sufficient number of authorized shares of Common
Stock (without the additional authorized shares contemplated by the Hearst-
Argyle Charter Amendment Proposal), the approval of the Hearst-Argyle Charter
Amendment Proposal is not a condition to the approval of the Hearst-Argyle
Merger Proposal. This description is qualified in its entirety by reference to
the complete text of the Hearst-Argyle Charter Amendment, a copy of which is
attached as Annex II hereto and incorporated herein by reference.
The Board of Directors is seeking approval and adoption of the Hearst-Argyle
Charter Amendment Proposal in order to have the additional shares of Common
Stock available for general corporate purposes, including future acquisitions,
equity financings, and grants of stock options. The proposed increase in the
number of authorized shares of Common Stock will afford Hearst-Argyle the
flexibility to take advantage of business and financial opportunities without
the delay and expense of seeking stockholder approval for the authorization of
additional stock at a later time. The Board of Directors believes that, if the
proposed amendment to the Certificate of Incorporation is not approved by
Hearst-Argyle's stockholders, Hearst-Argyle's ability to engage in certain
future acquisition or capital raising transactions will be adversely affected.
PROPOSAL TO APPROVE AND ADOPT THE PULITZER CHARTER AMENDMENT
The Pulitzer Board has approved and declared advisable, and is submitting to
the Pulitzer stockholders for their approval, the Pulitzer Charter Amendment
Proposal. The Pulitzer Charter Amendment permits Pulitzer to distribute to
holders of Pulitzer Stock one share of New Pulitzer Common Stock for each
share of Pulitzer Common Stock held and one share of New Pulitzer Class B
Common Stock for each share of Pulitzer Class B Common Stock held. The
Pulitzer Charter Amendment Proposal is required in connection with the Spin-
Off. This description is qualified in its entirety by reference to the
complete text of the Pulitzer Charter Amendment Proposal, a copy of the form
of which is attached as Annex III hereto and incorporated herein by reference.
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<PAGE>
DESCRIPTION OF NEW PULITZER
Introduction
Pulitzer is engaged in newspaper publishing and television and radio
broadcasting. Pursuant to the Spin-Off, New Pulitzer will continue the
newspaper publishing and related new media operations of Pulitzer. Pursuant to
the Merger, Hearst-Argyle will receive the television and radio broadcasting
operations of Pulitzer. Set forth below is a description of the newspaper
publishing and related new media businesses of Pulitzer that will continue to
operate through New Pulitzer.
General
Pulitzer is engaged in newspaper publishing and related "new media"
businesses. Its newspaper operations consist of two major metropolitan
dailies: the St. Louis Post-Dispatch (the "Post-Dispatch"), the only major
daily newspaper serving the St. Louis metropolitan area; and the Arizona Daily
Star (the "Star"), serving the Tucson metropolitan area. Each of these
publications also operates electronic news, information and communication web
sites on the Internet. In addition, Pulitzer's Pulitzer Community Newspaper
group (the "PCN Group") includes 12 dailies that serve smaller markets,
primarily in the West and Midwest, as well as a number of weekly and bi-weekly
publications.
The Pulitzer Publishing Company was founded by the first Joseph Pulitzer in
1878 to publish the original St. Louis Post-Dispatch and has operated
continuously since that time under the direction of the Pulitzer family.
Michael E. Pulitzer, a grandson of the founder, currently serves as Chairman
of the Board, President and Chief Executive Officer of Pulitzer.
Management
On January 1, 1999, Robert C. Woodworth began serving as President and Chief
Executive Officer of New Pulitzer, pursuant to a three-year employment
agreement with New Pulitzer. Mr. Woodworth was a Vice President-Newspapers of
Knight Ridder, Inc. from May 1997 until December 1998. Prior to that, Mr.
Woodworth worked for Capital Cities/ABC in various positions, most recently as
Publisher of The Kansas City Star. Mr. Woodworth will be named a director of
New Pulitzer following consummation of the Merger. Mr. Pulitzer will continue
to serve as Chairman of the Board of New Pulitzer.
New Pulitzer has also entered into employment agreements with Messrs. Cole
C. Campbell, Terrance C.Z. Egger and James V. Maloney, which become effective
upon consummation of the Merger. Mr. Campbell will serve as Editor of the St.
Louis Post-Dispatch, Mr. Egger will serve as General Manager of the St. Louis
Post-Dispatch, and Mr. Maloney will serve as Secretary and Director of
Shareholder Relations of New Pulitzer, the same positions Messrs. Campbell,
Egger and Maloney currently hold with Pulitzer, respectively.
New Pulitzer anticipates that, following consummation of the Merger, upon
approval of New Pulitzer's Board of Directors and the recommendation of
outside compensation consultants, New Pulitzer will enter into an employment
agreement with each of Messrs. Pulitzer and Ronald H. Ridgway. Mr. Pulitzer
would serve as Chairman of the Board of Directors, and Mr. Ridgway would serve
as Senior Vice President-Finance, the same position he currently holds with
Pulitzer.
It is anticipated that most of the other directors and officers of Pulitzer
will continue as directors and officers of New Pulitzer.
Operating Strategy
Pulitzer's long-term operating strategy for its media assets has been, and
New Pulitzer's long-term operating strategy will be, to maximize each
property's growth and profitability through maintenance of editorial
excellence, leadership in locally responsive news, and prudent control of
costs. Management believes that editorial excellence and leadership in locally
responsive news will, over the long-term, allow New Pulitzer to
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<PAGE>
maximize its market share in each of its respective markets. Experienced local
managers implement Pulitzer's strategy in each media market, with centralized
Pulitzer management providing oversight and guidance in all areas of planning
and operations.
Pulitzer complements its internal growth strategies with a disciplined and
opportunistic acquisition strategy that is focused on acquiring media
properties that Pulitzer believes are a good fit with its operating strategy,
possess attractive growth potential and meet Pulitzer's objectives for after-
tax cash flow. Management believes that Pulitzer's reputation, financial
position, cash flow and conservative capital structure, among other factors,
will assist New Pulitzer in pursuing acquisitions. New Pulitzer intends to
seek out acquisition opportunities, with particular emphasis on small- to
medium-sized markets.
New Pulitzer believes that cost controls are an important tool in the
management of media properties that are subject to significant fluctuations in
advertising volume. New Pulitzer believes that prudent control of costs will
permit it to respond quickly when positive operating conditions offer
opportunities to expand market share and profitability and, alternatively,
when deteriorating operating conditions require cost reductions to protect
profitability. Pulitzer's disciplined budgeting process is one of the key
elements in controlling costs. Pulitzer employs, and New Pulitzer will
continue to employ, production technology in all of its media operations in
order to minimize production costs and produce an attractive and timely news
product for its readers.
Pulitzer's newspaper operations are geographically diverse, placing Pulitzer
in the Midwest, Southwest and Western regions of the United States. Due to the
close relationship between economic activity and advertising volume, New
Pulitzer believes that geographic diversity will provide New Pulitzer with
valuable protection from regional economic variances.
Publishing
New Pulitzer intends to continue the tradition of reporting and editorial
excellence that has resulted in Pulitzer's receiving 17 Pulitzer Prizes* over
the years.
Pulitzer publishes two major metropolitan daily newspapers, the St. Louis
Post-Dispatch and The Arizona Daily Star. Both daily newspapers have weekly
total market coverage sections that provide advertisers with market
saturation, and both offer alternative delivery systems that provide
advertisers with either targeted or total market coverage.
The PCN Group's 12 daily community newspapers have a combined average daily
circulation of approximately 162,000. The smaller markets served by these
newspapers and their locations will provide New Pulitzer with further
diversification and participation in several higher growth areas of the
western United States. A strong focus on local reporting and editorial
excellence is also considered the key to long-term success in these markets.
St. Louis Post-Dispatch
Founded in 1878 by the first Joseph Pulitzer, the Post-Dispatch has a long
history of reporting and editorial excellence and innovation in newspaper
publishing under the direction of the Pulitzer family. The Post-Dispatch is a
morning daily and Sunday newspaper serving primarily the greater St. Louis
metropolitan area. St. Louis is currently the 17th largest metropolitan
statistical area in the United States with a population of approximately 2.6
million.
Over the past several years, Pulitzer has taken a number of steps designed
to strengthen the market position of the Post-Dispatch. In 1997, the Post-
Dispatch completed an extensive redesign intended to make the newspaper more
accessible and relevant to readers, and Pulitzer is continuing to make
investments to enhance its news coverage capabilities and strengthen its
circulation and advertising operations.
- --------
* Pulitzer Prizes are awarded annually at Columbia University by the Pulitzer
Prize Board, an independent entity affiliated with the Columbia University
School of Journalism, founded by the first Joseph Pulitzer.
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The Post-Dispatch operates under an Agency Agreement, dated March 1, 1961,
as amended (the "St. Louis Agency Agreement"), between Pulitzer and The Herald
Company, Inc. (the "Herald Company") pursuant to which Pulitzer performs all
activities relating to the day-to-day operations of the newspaper, but
pursuant to which it must share one-half of the agency's operating income or
one-half of the agency's operating loss with the Herald Company (the "St.
Louis Agency").
The Post-Dispatch has consistently been a leader in technological innovation
in the newspaper industry. Pulitzer's commitment to the ongoing enhancement of
its operating systems has enabled the Post-Dispatch to offer a continually
improving product to both readers and advertisers while also realizing
substantial savings in labor cost. New Pulitzer believes the Post-Dispatch has
adequate facilities to sustain up to at least a 35% increase in daily
circulation without incurring significant capital expenditures. The Post-
Dispatch is in the process of upgrading and modifying its systems to make them
"Year-2000" compatible and expects to achieve full compliance during 1999.
The Post-Dispatch is distributed primarily through independent home delivery
carriers and single copy dealers. Home delivery accounted for approximately
76% of circulation for the daily Post-Dispatch and approximately 55% of
circulation for the Sunday edition during 1997.
The Arizona Daily Star
Founded in 1877, the Star is published in Tucson, Arizona, by Pulitzer's
wholly owned subsidiary, Star Publishing Company. Following the consummation
of the Spin-Off and Merger, Star Publishing Company will be a wholly owned
subsidiary of New Pulitzer. The Star, a morning and Sunday newspaper, and the
Tucson Citizen (the "Citizen"), an afternoon newspaper owned by Gannett Co.,
Inc. ("Gannett"), are southern Arizona's leading dailies. The Star and the
Citizen are published through an agency operation (the "Tucson Agency")
pursuant to an Agency Agreement, dated March 28, 1940, as amended and restated
(the "Tucson Agency Agreement"), and have a combined weekday circulation of
approximately 140,000. Tucson is currently the 69th largest metropolitan
statistical area in the United States with a population of approximately
781,000.
The Tucson Agency operates through TNI Partners, an agency partnership that
is owned half by Pulitzer and half by Gannett. TNI Partners is responsible for
all aspects of the business of the two newspapers other than editorial opinion
and gathering and reporting news. Revenues and expenses are generally shared
equally by the Star and the Citizen. Unlike the St. Louis Agency, Pulitzer's
consolidated financial statements include only its share of the combined
operating revenues and operating expenses of the two newspapers. See "--Agency
Agreements."
As a result of the Tucson Agency, the financial performance of Pulitzer's
Star Publishing Company subsidiary is directly affected by the operations and
performance of both the Star and Citizen.
In 1997, the Star's daily edition accounted for approximately 69% of the
combined daily circulation of the Tucson Agency publications. The Star's daily
and Sunday editions accounted for approximately 60% of the agency's total
advertising lineage.
The Star and the Citizen are printed at TNI Partners' modern, computerized
facility equipped with two eight-unit Metro offset presses. The writing,
editing and composing functions have been computerized, increasing efficiency
and reducing workforce requirements.
Pulitzer Community Newspapers, Inc.
On July 1, 1996, Pulitzer acquired for approximately $216 million all the
stock of Scripps League Newspapers, Inc. (subsequently renamed "Pulitzer
Community Newspapers, Inc."), a privately owned publisher of community
newspapers that serve smaller markets, primarily in the West and Midwest. The
PCN Group's 12 daily newspapers now include the Troy Daily News, which the PCN
Group acquired, together with a sister
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publication called the Miami Valley Sunday News, at the end of October 1998
for an aggregate purchase price of approximately $20 million. The PCN Group's
daily newspapers publish morning or afternoon editions during the week and,
generally, morning editions on the weekend. Home delivery through independent
contract carriers accounts for the significant portion of each newspaper's
circulation. With daily circulations ranging from approximately 31,000 to
5,000, the 12 daily newspapers in the PCN Group, ranked in order of daily
circulation, are:
<TABLE>
<S> <C>
The Daily Herald..................................... Provo, Utah
Santa Maria Times.................................... Santa Maria, California
The Napa Valley Register............................. Napa, California
The World............................................ Coos Bay, Oregon
The Hanford Sentinel................................. Hanford, California
The Arizona Daily Sun................................ Flagstaff, Arizona
Troy Daily News...................................... Troy, Ohio
The Daily Chronicle.................................. De Kalb, Illinois
The Daily Journal.................................... Park Hills, Missouri
The Garden Island.................................... Lihue, Hawaii
The Ravalli Republic................................. Hamilton, Montana
The Daily News....................................... Rhinelander, Wisconsin
</TABLE>
In addition, the PCN Group operates weekly newspapers in Petaluma,
California and Farmington and Fredericktown, Missouri and two weekly newspaper
groups in conjunction with the properties in Hanford and Santa Maria,
California.
The smaller markets served by PCN properties are attractive because they
generally have desirable demographic characteristics and above-average growth
rates. Collectively, the PCN Group markets exceed U.S. averages in such key
measures as annual household growth rate, average household income and average
household wealth; in addition, the average median home value in these markets
is nearly double the U.S. median average.
Further, these markets, which are often not served by major metropolitan
media, tend to be characterized by less media competition, which gives New
Pulitzer an opportunity to sustain and expand market shares.
PCN was acquired by Pulitzer on July 1, 1996. For the year ended December
31, 1997, PCN had consolidated operating revenues of approximately $69.7
million, of which advertising, preprints and circulation accounted for
approximately 66%, 12% and 19%, respectively. For the six-month period ended
December 31, 1996, PCN had consolidated operating revenues of approximately
$34.9 million, of which advertising, preprints and circulation accounted for
approximately 67%, 11% and 18%, respectively.
Pulitzer has recently made a significant investment in new computer systems
that handle typesetting, editing and web publishing, as well as financial and
statistical reporting, for its PCN Group properties. The standardized systems,
which are "Year-2000" compatible, permit centralized maintenance and support.
Related "New Media" Operations
Pulitzer has developed "new media" operations that are designed to enhance,
complement and add value to its traditional newspaper publishing businesses by
providing subscriber and advertiser services through various forms of
electronic distribution, including electronic publishing, voice services
delivered by phone, and electronic dissemination of information via the world
wide web/Internet. Pulitzer's objective in these operations is to develop and
expand its ability to provide advertisers access to a large and attractive
online audience.
Pulitzer is an Internet service provider as a central element of its
strategy in both St. Louis and Tucson. Full access to each newspaper's
"electronic publication" web site, as well as full Internet access, is
provided on a subscription basis. The Star's service, StarNet
(www.azstarnet.com), began operations in May 1995 and had
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approximately 12,500 subscribers at December 31, 1998. The service provided by
the Post-Dispatch, POSTnet (www.stlnet.com), started in January 1996 and had
approximately 16,400 subscribers as of December 31, 1998. The websites provide
access to current and archive material, including news, editorials and
classified advertising, from each newspaper, as well as interactive Internet-
specific enhancements such as message boards and chat rooms. Pulitzer is
currently developing enhanced online services featuring the three major
classified advertising categories--automotive, real estate and help wanted.
In addition, Pulitzer is a founding member of PAFET, a consortium of six
newspaper companies that is pursuing a program of research and investment
designed to help its members understand and participate in the opportunities
and challenges that the new media provide for newspaper properties.
Acquisition Strategy
One of Pulitzer's primary growth strategies has been a disciplined and
opportunistic acquisition program. In evaluating acquisition opportunities,
Pulitzer generally requires that candidates must: (i) be in businesses related
to Pulitzer's core publishing competencies; (ii) have strong cash flows; (iii)
reflect Pulitzer's preference for small- to medium-sized markets that possess
good growth or economic characteristics and, where possible, offer a
clustering opportunity with respect to present or future properties; (iv)
provide an opportunity for its disciplined management approach to add value;
and, (v) offer an attractive return on investment. Management of New Pulitzer
intends to pursue a similar growth strategy.
Agency Agreements
Newspapers in approximately 15 cities operate under joint operating or
agency agreements. Agency agreements generally provide for newspapers
servicing the same market to share certain printing and other facilities and
to pool certain revenues and expenses in order to decrease aggregate expenses
and thereby allow the continuing operation of multiple newspapers serving the
same market. The Newspaper Preservation Act of 1970 permits joint operating
agreements between newspapers under certain circumstances without violation of
the Federal antitrust laws.
St. Louis Agency. An agency operation between Pulitzer and The Herald
Company is conducted under the provisions of the St. Louis Agency Agreement.
For many years, the Post-Dispatch was the afternoon and Sunday newspaper
serving St. Louis, and the Globe Democrat was the morning paper and also
published a weekend edition. Although separately owned, from 1961 through
February 1984, the publication of both the Post-Dispatch and the Globe
Democrat was governed by the St. Louis Agency Agreement. From 1961 to 1979,
the two newspapers controlled their own news, editorial, advertising,
circulation, accounting and promotion departments and Pulitzer managed the
production and printing of both newspapers. In 1979, Pulitzer assumed full
responsibility for advertising, circulation, accounting and promotion for both
newspapers. In February 1984, after a number of years of unfavorable financial
results at the St. Louis Agency, the Globe Democrat was sold by the Herald
Company and the St. Louis Agency Agreement was revised to eliminate any
continuing relationship between the two newspapers and to permit the
repositioning of the daily Post-Dispatch as a morning newspaper.
Following the renegotiation of the St. Louis Agency Agreement at the time of
the sale of the Globe-Democrat, the Herald Company retained the contractual
right to half the profits or losses (as defined) of the operations of the St.
Louis Agency, which from February 1984 forward consisted solely of the
publication of the Post-Dispatch. The St. Louis Agency Agreement generally
provides for the Herald Company to share half the cost of, and to share in a
portion of the proceeds from the sale of, capital assets used in the
production of the Post-Dispatch. Under the St. Louis Agency Agreement,
Pulitzer supervises, manages and performs all activities relating to the day-
to-day publication of the Post-Dispatch and is solely responsible for the news
and editorial policies of the newspaper.
The consolidated financial statements of Pulitzer include all the operating
revenues and expenses of the St. Louis Agency. An agency adjustment is
provided as an operating expense reflecting that portion of the operating
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income of the St. Louis Agency allocated to The Herald Company. Under the St.
Louis Agency Agreement, for fiscal 1997, 1996, 1995, 1994 and 1993, Pulitzer
paid the Herald Company $19,450,000, $13,972,000, $12,502,000, $14,706,000,
and $10,660,000, respectively, for the Herald Company's share of the operating
income of the St. Louis Agency. As a result of such agency adjustment,
Pulitzer is, and during the term of the St. Louis Agency New Pulitzer will
continue to be, entitled to half the profits (as defined) from the operations
of the St. Louis Agency, the amount of which cannot be determined until the
end of each fiscal year.
The current term of the St. Louis Agency Agreement runs through December 31,
2034, following which either party may elect to renew the agreement for
successive periods of 30 years each.
Tucson Agency. The Tucson Agency Agreement has, since 1940, governed the
joint operations of the Star and Citizen. For financial reporting purposes,
the operations of the Tucson Agency are reflected in Pulitzer's consolidated
financial statements differently from the operations of the St. Louis Agency.
The consolidated financial statements of Pulitzer include only Pulitzer's
share of the combined revenues, operating expenses and income of the Star and
Citizen. TNI Partners, Inc. ("TNI Partners"), as agent for Pulitzer and
Gannett, is responsible for advertising and circulation, printing and delivery
and collection of all revenues of the Star and the Citizen. The Board of
Directors of TNI Partners presently consists of three directors chosen by
Pulitzer and three chosen by Gannett. Budgetary, personnel and other non-news
and editorial policy matters, such as advertising and circulation policies and
rates or prices, are determined by the Board of Directors of TNI Partners.
Each newspaper is responsible for its own news and editorial content. Revenues
and expenses are recorded by TNI Partners, and the resulting profit is
generally split 50-50 between Pulitzer and Gannett. Both partners have certain
administrative costs, which are borne separately. As a result of the Tucson
Agency, the Star and the Citizen benefit from increases and can be adversely
affected by decreases in each other's circulation.
The Tucson Agency Agreement runs through June 1, 2015, and contains renewal
provisions for successive periods of 25 years each.
Competition
Pulitzer's publications compete for readership and advertising revenues in
varying degrees with other metropolitan, suburban, neighborhood and national
newspapers and other publications as well as with television, radio, cable,
Internet, online services and other new media technologies, direct mail,
yellow page directories, billboards and other news and advertising media.
Competition for advertising is based upon circulation levels, readership
demographics, price and advertiser results, while competition for circulation
is generally based upon the content, journalistic quality and price of the
publication. In St. Louis and its surrounding suburban communities, the Post-
Dispatch's print competition for circulation and advertising revenues includes
paid suburban daily newspapers as well as a chain of community newspapers and
shoppers. These community newspapers and shoppers target selected geographic
markets throughout the St. Louis metropolitan area.
Due to the agency relationship existing in Tucson, the Star and the Citizen
cannot be viewed as competitors for advertising or circulation revenues. The
Star and the Citizen compete primarily against other media and against
Phoenix-area and suburban, neighborhood and national newspapers and other
publications.
Employee Relations
The Post-Dispatch has contracts with substantially all of its production
unions, with expiration dates ranging from February 1999 through February
2010. In addition, the Post-Dispatch has a multi-year contract with the St.
Louis Newspaper Guild, which expires in January 2003. All of the Post-Dispatch
labor contracts contain no-strike provisions.
TNI Partners' contract with Tucson Graphic Communications Union Local No.
212, covering certain pressroom employees, expired on December 31, 1998. While
negotiating a new contract, the union is operating under the provisions of the
previous contract. In each of the last several years, this contract has been
renegotiated for a one-year term.
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Raw Materials
Pulitzer's newspaper operations are significantly impacted by the cost of
newsprint, which accounted for approximately 20% of the total 1997 operating
expenses. During 1997, Pulitzer used approximately 100,900 metric tons of
newsprint in its production process at a total cost of approximately $56.8
million. Consumption at the Post-Dispatch represented approximately 72,600
metric tons of Pulitzer's total newsprint usage in 1997. In the last five
years, Pulitzer's average cost per ton of newsprint has varied from a low of
$452 per metric ton in 1994 to a high of $675 per metric ton in 1995. For the
first nine months of 1998, Pulitzer's average cost for newsprint was
approximately $590 per metric ton, compared to approximately $555 per metric
ton in 1997. A price increase to $615 per metric ton on September 1, 1998 was
subsequently rescinded by all of Pulitzer's newsprint suppliers. As a result,
Pulitzer expects its cost of newsprint for the fourth quarter of 1998 to be in
the range of $580 to $590 per metric ton. In the fourth quarter of 1997,
Pulitzer's average cost of newsprint was approximately $585 per metric ton.
The Post-Dispatch obtains the newsprint necessary for its operations from
five separate mills, three of which are located in Canada and two in the
United States. The Post-Dispatch has guaranteed the future supply of certain
volume levels through long-term agreements with two of its newsprint
suppliers. Pulitzer believes that the absence of long-term agreements with the
remaining three newsprint suppliers will not affect Pulitzer's ability to
obtain newsprint at competitive prices.
Pulitzer acquired five newsprint contracts with the purchase of the PCN
group in 1996. Combined with the tonnage purchased for the Post-Dispatch,
Pulitzer has been able to leverage its pricing power to obtain the best price
available for the PCN Group and to assure adequate supplies for all locations.
TNI Partners obtains the newsprint necessary for the Tucson Agency's
operations pursuant to an arrangement with Gannett, the owner of the Citizen.
Gannett purchases newsprint on behalf of TNI Partners under various
contractual arrangements and agreements. Newsprint is also purchased on the
spot market.
Employees
At December 31, 1998, Pulitzer's publishing operations had approximately
2,300 full-time employees. In St. Louis, a majority of the approximately 1,200
full-time employees engaged in publishing are represented by unions. Pulitzer
considers its relationship with its employees to be good.
DESCRIPTION OF NEW PULITZER CAPITAL STOCK
Pulitzer now owns all 100 issued and outstanding shares of New Pulitzer
Stock. Prior to the Spin-Off, Pulitzer will cause the New Pulitzer Charter to
be amended and restated and to contain provisions substantially similar to the
Pulitzer Charter as proposed to be amended, except that the authorized capital
stock of New Pulitzer will consist of 100,000,000 shares of each of New
Pulitzer Common Stock, New Pulitzer Class B Common Stock and New Pulitzer
Preferred Stock (as defined below).
Common Stock and Class B Common Stock
Dividends. Each share of New Pulitzer Common Stock and New Pulitzer Class B
Common Stock is entitled to dividends if, as and when dividends may be
declared by the Board of Directors of New Pulitzer (the "New Pulitzer Board")
and paid. Under the DGCL, New Pulitzer may declare and pay dividends only out
of its surplus, or in case there shall be no such surplus, out of its net
profits for the fiscal year in which the dividend is declared and/or the
preceding year. No dividends may be declared, however, if the capital of New
Pulitzer has been diminished by depreciation, losses or otherwise to an amount
less than the aggregate amount of capital represented by any issued and
outstanding stock having a preference on distribution. Dividends must be paid
on both the New Pulitzer Common Stock and the New Pulitzer Class B Common
Stock at any time that dividends are paid on either. Any dividend so declared
and payable in cash, capital stock of New Pulitzer (other than New Pulitzer
Common Stock or New Pulitzer Class B Common Stock) or other property will be
paid equally, share
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for share, on the New Pulitzer Class B Common Stock and New Pulitzer Common
Stock, except under certain circumstances. Dividends and distributions payable
in shares of New Pulitzer Class B Common Stock may be paid only on or to
shares of New Pulitzer Class B Common Stock, and dividends and distributions
payable in shares of New Pulitzer Common Stock may be paid only on or to
shares of New Pulitzer Common Stock. If a dividend or distribution payable in
New Pulitzer Common Stock is made on the New Pulitzer Common Stock, New
Pulitzer must also make a simultaneous dividend or distribution payable in New
Pulitzer Class B Common Stock on the New Pulitzer Class B Common Stock. If a
dividend or distribution payable in New Pulitzer Class B Common Stock is made
on the New Pulitzer Class B Common Stock, New Pulitzer must also make a
simultaneous dividend or distribution payable in New Pulitzer Common Stock on
the New Pulitzer Common Stock. Pursuant to any such dividend or distribution,
each share of New Pulitzer Class B Common Stock will receive a number of
shares of New Pulitzer Class B Common Stock equal to the number of shares of
New Pulitzer Common Stock payable on each share of New Pulitzer Common Stock.
Notwithstanding the foregoing, in the case of any dividend or other
distribution payable in stock of any corporation which immediately prior to
the time of such dividend or other distribution is a wholly-owned subsidiary
of New Pulitzer and which possesses authority to issue shares of capital stock
with voting characteristics substantially similar to those of the shares of
New Pulitzer Common Stock and New Pulitzer Class B Common Stock, respectively,
including a distribution pursuant to a stock dividend or division or split-up
of the shares of New Pulitzer, (i) only shares of capital stock of such a
subsidiary with voting characteristics substantially similar to those of the
New Pulitzer Class B Common Stock shall be distributed with respect to shares
of New Pulitzer Class B Common Stock and only shares of capital stock of such
a subsidiary with voting characteristics substantially similar to those of the
New Pulitzer Common Stock shall be distributed with respect to shares of New
Pulitzer Common Stock; (ii) the number of shares of such subsidiary's Class B
common stock payable on each share of New Pulitzer Class B Common Stock
pursuant to such dividend or other distribution shall be equal to the number
of shares of such subsidiary's common stock payable on each share of New
Pulitzer Common Stock pursuant to such dividend or other distribution; and,
(iii) such dividends or other distributions of shares of such subsidiary's
common stock and Class B common stock shall be made simultaneously.
Voting Rights. Each share of New Pulitzer Common Stock is entitled to one
vote, and each share of New Pulitzer Class B Common Stock is entitled to 10
votes, on all matters. Except as described below, the New Pulitzer Common
Stock and the New Pulitzer Class B Common Stock will vote together as a single
class on all matters presented for a vote of the stockholders, including the
election of directors. The holders of a majority of the outstanding shares of
New Pulitzer Common Stock or New Pulitzer Class B Common Stock, voting as
separate classes, must approve certain amendments affecting shares of such
class. Specifically, if there is any proposal to amend the New Pulitzer
Charter in a manner that would increase or decrease the number of authorized
shares of New Pulitzer Common Stock or New Pulitzer Class B Common Stock,
increase or decrease the par value of the shares of New Pulitzer Common Stock
or New Pulitzer Class B Common Stock or alter or change the powers,
preferences or special rights of the shares of New Pulitzer Common Stock or
New Pulitzer Class B Common Stock so as to affect them adversely, such an
amendment must be approved by a majority of the outstanding shares of the
affected class, voting separately as a class. In addition, any merger or
consolidation in which each share of New Pulitzer Common Stock receives
consideration that is not of the same type or is less than the amount of the
consideration to be received by each share of New Pulitzer Class B Common
Stock must be approved by a majority of the outstanding shares of New Pulitzer
Common Stock, voting separately as a class. Shares of New Pulitzer Common
Stock and New Pulitzer Class B Common Stock do not have cumulative voting
rights.
Terms of Conversion. Each share of New Pulitzer Class B Common Stock is
convertible at any time, at the option of and without cost to the stockholder,
into one share of New Pulitzer Common Stock. If at any time (i) the aggregate
voting power of all outstanding shares of New Pulitzer Class B Common Stock
represents less than 20% of the aggregate voting power of all issued and
outstanding shares of New Pulitzer Common Stock and New Pulitzer Class B
Common Stock or (ii) the New Pulitzer Board and the holders of a majority of
the outstanding shares of New Pulitzer Class B Common Stock approve the
conversion of all of the New Pulitzer Class B Common Stock into New Pulitzer
Common Stock, then each outstanding share of New Pulitzer Class B
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Common Stock shall be converted automatically into one share of New Pulitzer
Common Stock without any action by the holder. In the event of such a
conversion, certificates formerly representing outstanding shares of New
Pulitzer Class B Common Stock will thereafter be deemed to represent an equal
number of shares of New Pulitzer Common Stock.
Restrictions on Transfers of New Pulitzer Class B Common Stock. The transfer
of the New Pulitzer Class B Common Stock, except upon its conversion into New
Pulitzer Common Stock as described above, is restricted by the New Pulitzer
Charter to Permitted Transferees (as defined therein), which, in general,
includes only (A) as to holders of New Pulitzer Common Stock who are natural
persons, the original holders of such stock, their spouses or former spouses,
their lineal descendants and any spouse or former spouse of such lineal
descendants, and entities (such as trusts, corporations, partnerships, limited
liability companies and charitable organizations) controlled by the holders of
such New Pulitzer Class B Common Stock or their Permitted Transferees, or by
New Pulitzer's executive officers or directors and (B) as to holders of New
Pulitzer Class B Common Stock that are (i) corporations, partnerships, limited
liability companies or charitable organizations, any person who transferred
such shares of New Pulitzer Class B Common Stock to such entity and such
person's Permitted Transferees or (ii) trusts, any person who established the
trust and any person who would be a Permitted Transferee thereof, any original
holder or Permitted Transferee thereof, and any person to whom or for whose
benefit any portion of the principal of the trust may be distributed either
during or at the end of the term of such trust. Stockholders who desire to
sell their shares of New Pulitzer Class B Common Stock to other than Permitted
Transferees may convert their shares of New Pulitzer Class B Common Stock into
shares of New Pulitzer Common Stock and sell the shares of New Pulitzer Common
Stock, subject, however, to the limitations imposed by the proposed New
Pulitzer Voting Trust with respect to the shares of New Pulitzer Class B
Common Stock that will be deposited thereunder.
Liquidation Rights. In the event of the liquidation, dissolution or winding
up of New Pulitzer, holders of the shares of New Pulitzer Common Stock and New
Pulitzer Class B Common Stock are entitled to share equally, share for share,
in the net assets available for distribution.
Other. Following the Spin-Off, additional shares of New Pulitzer Class B
Common Stock may only be issued upon stock splits of, or stock dividends on,
the existing New Pulitzer Class B Common Stock. No stockholder of New Pulitzer
will have preemptive or other rights to subscribe for additional shares of New
Pulitzer.
Preferred Stock
The New Pulitzer Board is authorized to issue, by resolution, without any
action by the stockholders, up to 100 million shares of preferred stock ("New
Pulitzer Preferred Stock") and has the authority to establish the
designations, dividend rights, dividend rate, conversion rights, voting
rights, terms of redemption, liquidation preference, sinking fund terms and
all other preferences and rights of any series of New Pulitzer Preferred
Stock.
Additional Provisions of the New Pulitzer Charter
Following the Distribution, New Pulitzer will have a substantial number of
unissued and unreserved shares of New Pulitzer Common Stock and unissued and
undesignated shares of New Pulitzer Preferred Stock. These additional shares
may be utilized for a variety of corporate purposes, including future public
offerings to raise additional capital or to facilitate corporate acquisitions
and could be utilized, under certain circumstances, as a method of preventing
or making more difficult a takeover or change in control of New Pulitzer.
In addition, certain other charter provisions, which are described below,
may have the effect, alone or in combination with each other or with the
existence of authorized but unissued stock, of rendering more difficult or
discouraging an acquisition of New Pulitzer deemed undesirable by its Board.
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Classification of the Board of Directors. It is anticipated that, upon
consummation of the Merger, the New Pulitzer Board will consist initially of
nine directors. The New Pulitzer Charter provides for a classified Board
divided into three equal classes serving staggered three-year terms. If at any
time the size of the Board is changed, the increase or decrease in the number
of directors would be apportioned among the three classes to make all classes
as nearly equal as possible.
Business Combination Provision. The New Pulitzer Charter requires the
affirmative vote of the holders of at least 66 2/3% of the aggregate voting
power of the outstanding shares of New Pulitzer's voting stock, voting
together as a single class (with each share of New Pulitzer Class B Common
Stock entitled to 10 votes), as a condition for any merger (other than certain
mergers with subsidiaries), consolidation or sale of all or substantially all
the property and assets of New Pulitzer and for certain Business Combinations
(as defined herein) with, or proposed by or on behalf of, any Interested
Stockholder (as defined herein) unless such transaction shall have been
approved by a majority of the entire New Pulitzer Board. This voting
requirement applies even though the DGCL requires a simple majority or no
stockholder vote to approve the transaction. An Interested Stockholder is
defined as any person or group (other than New Pulitzer or any of its
subsidiaries or employee benefit plans) (i) that is, or was at any time within
the two-year period immediately prior to the date in question, the beneficial
owner of 10% or more of the voting stock of New Pulitzer, but excludes any
person (including any Permitted Transferee of such person) who or which,
immediately prior to the Effective Time, is the beneficial owner of 10% or
more of the outstanding New Pulitzer Class B Common Stock, or (ii) is an
assignee of, or has otherwise succeeded to, any shares of New Pulitzer voting
stock of which an Interested Stockholder was the beneficial owner at any time
within the two year period immediately prior to the date in question, provided
such assignment or succession shall not have occurred in the course of a
transaction or series of transactions involving a public offering. The term
"beneficial owner" includes persons directly and indirectly owning or having
the right to acquire or vote shares. Under certain circumstances, an
Interested Stockholder could include persons or entities affiliated or
associated with the Interested Stockholder. A Business Combination includes:
(i) a merger or consolidation of New Pulitzer or any subsidiary with an
Interested Stockholder or an affiliate or associate of an Interested
Stockholder; (ii) the sale, lease, exchange, mortgage, pledge, transfer or
other disposition by New Pulitzer or a subsidiary to or with, or proposed by
or on behalf of, an Interested Stockholder or an affiliate or associate of an
Interested Stockholder of assets having an aggregate fair market value equal
to or greater than 1% of the total assets of New Pulitzer; (iii) the issuance
or transfer of stock or other securities of New Pulitzer or of a subsidiary
to, or proposed by or on behalf of, an Interested Stockholder or an affiliate
or associate of an Interested Stockholder in exchange for cash or property
(including stock or other securities) having an aggregate fair market value
equal to or greater than 1% of the total assets of New Pulitzer; (iv) the
adoption of any plan or proposal for the liquidation or dissolution of New
Pulitzer, or any spin-off or split-up of any kind of New Pulitzer or any
subsidiary, proposed by or on behalf of an Interested Stockholder or an
affiliate or associate of an Interested Stockholder; (v) any reclassification
of securities, recapitalization of New Pulitzer, or merger or consolidation
with a subsidiary or other transaction that has the effect, directly or
indirectly, of increasing the percentage of the outstanding stock of any class
of New Pulitzer or a subsidiary owned, directly or indirectly, by an
Interested Stockholder or an affiliate or an associate of an Interested
Stockholder; (vi) any other transaction with an Interested Stockholder or an
affiliate or an associate of an Interested Stockholder that requires the
approval of the stockholders under Delaware law; or, (vii) any agreement,
contract or other arrangement providing for any one or more of the foregoing
actions.
The New Pulitzer Charter provides that the New Pulitzer Board, when
evaluating any offer of another party to make a tender or exchange offer for
any equity security of New Pulitzer, to merge or consolidate New Pulitzer with
another company or to purchase or otherwise acquire all or substantially all
the properties and assets of New Pulitzer, shall, in connection with the
exercise of its judgment in determining what is in the best interest of New
Pulitzer and its stockholders, give due consideration to the effect of such a
transaction on the editorial and publishing integrity and the character and
quality of New Pulitzer's newspaper and other operations, all other relevant
factors, including, without limitation, the social, legal and economic effects
on the employees, customers, suppliers and other affected persons, firms and
companies and on the communities and geographical areas in which New Pulitzer
and its subsidiaries operate or are located and on any of the businesses and
properties of New Pulitzer or any of its subsidiaries, as well as such other
factors as the directors deem relevant.
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Supermajority Voting Provision. The affirmative vote of the holders of
record of at least 66 2/3% of the aggregate voting power of all outstanding
New Pulitzer voting stock, voting together as a single class, is required for
the amendment or repeal of, or the adoption of any provision inconsistent with
the provisions of the New Pulitzer Charter, relating to: (i) Business
Combination; (ii) the specific voting rights of the New Pulitzer Common Stock
and New Pulitzer Preferred Stock and the required stockholder approval
necessary to effect (A) the consolidation or merger of New Pulitzer with or
into another corporation or of a corporation with or into New Pulitzer (other
than with a corporation of which at least 90% of the outstanding capital stock
is owned by New Pulitzer); and (B) the sale, lease or exchange of all or
substantially all of New Pulitzer's property and assets; (iii) the power,
number, qualification, classification, nomination and removal of directors;
(iv) the terms of the New Pulitzer Common Stock and the New Pulitzer Class B
Common Stock; (v) the terms of the New Pulitzer Preferred Stock; (vi) meetings
of stockholders; (vii) the indemnification of directors, officers, employees
and agents for liability incurred as a result of their activities on behalf of
New Pulitzer; (viii) the amendment of the New Pulitzer Charter or the New
Pulitzer By-Laws; or, (ix) the issuance of New Pulitzer Common Stock and New
Pulitzer Preferred Stock. This supermajority provision, however, is
inapplicable where the proposed amendment is approved by a majority of the
entire New Pulitzer Board. The By-Laws of New Pulitzer may only be amended by
a majority of the entire New Pulitzer Board or by the affirmative vote of the
holders of record of at least 66 2/3% of the aggregate voting power of all
outstanding New Pulitzer voting stock, voting together as a single class.
Liability of Directors. The New Pulitzer Charter limits a director's
liability for monetary damages for breach of fiduciary duty to the fullest
extent permitted by Delaware law, as now in effect or hereafter amended,
including breach of fiduciary duty of care and a breach resulting from gross
negligence, except in circumstances involving certain wrongful acts, such as
the breach of a director's duty of loyalty or acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law.
The Delaware statute does not eliminate a director's duty of care and has no
effect on the availability of equitable remedies such as injunction or
rescission based upon a director's breach of the duty of care.
New Pulitzer Voting Trust Agreement
Following the consummation of the Spin-Off and pursuant to the New Pulitzer
Voting Trust Agreement, certain holders of New Pulitzer Class B Common Stock,
including the Pulitzer Parties, individually or as trustees of certain holders
of New Pulitzer Class B Common Stock, will deposit their shares of New
Pulitzer Class B Common Stock into the New Pulitzer Trust and will receive
from the New Pulitzer Trust certificates (each, a "New Pulitzer Voting Trust
Certificate") evidencing their interests in the shares so deposited.
It is contemplated that the trustees of the New Pulitzer Trust will be Cole
C. Campbell, David E. Moore, Emily Rauh Pulitzer, Michael E. Pulitzer, Ronald
H. Ridgway and Robert C. Woodworth (collectively, the "New Pulitzer
Trustees"). It is contemplated that pursuant to the New Pulitzer Voting Trust
Agreement, the New Pulitzer Trustees will generally have all voting rights
with respect to the shares of New Pulitzer Class B Common Stock subject to the
New Pulitzer Trust; however, in connection with certain matters, including any
proposal for a merger, consolidation, recapitalization or dissolution of New
Pulitzer or disposition of all or substantially all New Pulitzer's assets, the
calling of a special meeting of stockholders and the removal of directors, the
New Pulitzer Trustees may not vote the shares of New Pulitzer Class B Common
Stock deposited in the New Pulitzer Trust except in accordance with written
instructions from the holders of the New Pulitzer Voting Trust Certificates.
It is contemplated that the New Pulitzer Voting Trust Agreement will also
permit the conversion of the New Pulitzer Class B Common Stock deposited in
the New Pulitzer Trust into New Pulitzer Common Stock in connection with
certain permitted events, including, without limitation, sales exempt from the
registration requirements of the Securities Act, sales which meet the volume
and manner of sale requirements of Rule 144 promulgated thereunder, and sales
pursuant to registered public offerings. It is contemplated that the New
Pulitzer Trust will terminate with the written consent of holders of two-
thirds in interest of all outstanding New Pulitzer Voting Trust Certificates.
Unless extended or terminated by the parties thereto, the New Pulitzer Voting
Trust Agreement will expire on or about the tenth anniversary of the Spin-Off.
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New Pulitzer Registration Rights Agreement
It is contemplated that upon consummation of the Merger, New Pulitzer will
enter into a registration rights agreement (the "New Pulitzer Registration
Rights Agreement") with certain holders of its Class B Common Stock, including
the Pulitzer Parties, individually or as trustees or controlling persons of
certain holders of New Pulitzer Stock. Subject to certain terms and
conditions, the New Pulitzer Registration Rights Agreement will grant the
parties thereto the right to cause New Pulitzer to register under the
Securities Act for sale to the public all or part of the shares of New
Pulitzer Common Stock issuable upon conversion of their shares of New Pulitzer
Class B Common Stock. The New Pulitzer Registration Rights Agreement will also
grant the parties thereto the right, subject to certain terms and conditions,
to include such shares of New Pulitzer Common Stock in other registrations
made by New Pulitzer. New Pulitzer will bear the Registration Expenses (as
defined therein) related to any such registration.
Transfer Agent
The transfer agent for the New Pulitzer Common Stock is First Chicago Trust
Company of New York.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF PULITZER AND NEW PULITZER
New Pulitzer and Pulitzer are both organized under the laws of the State of
Delaware. Any differences, therefore, in the rights of holders of Pulitzer
Common Stock and Pulitzer Class B Common Stock and New Pulitzer Common Stock
and New Pulitzer Class B Common Stock will arise primarily from differences in
their respective certificates of incorporation and by-laws. The New Pulitzer
Charter and the New Pulitzer By-Laws are substantially similar to the Pulitzer
Charter and the Pulitzer By-Laws, respectively.
COMPARISON OF RIGHTS OF HOLDERS OF HEARST-ARGYLE
SERIES A COMMON STOCK AND HOLDERS OF PULITZER COMMON STOCK
Upon consummation of the Merger, the holders of Pulitzer Stock will become
holders of Hearst-Argyle Series A Common Stock and their rights will be
governed by the Hearst-Argyle Charter and the Hearst-Argyle By-Laws. The
following discussion is not complete and is qualified in its entirety by
reference to the DGCL and to the Hearst-Argyle Charter and Hearst-Argyle By-
Laws, which are incorporated herein by reference.
Since both Hearst-Argyle and Pulitzer are organized under the laws of the
State of Delaware, any differences in the rights of the stockholders of
Hearst-Argyle and Pulitzer would arise solely from differences in their
respective certificates of incorporation and by-laws. Among the differences
between the rights of the holders of Hearst-Argyle Series A Common Stock and
Pulitzer Stock are the following:
Capital Stock. The total number of authorized shares of capital stock of
Hearst-Argyle is 201 million shares, consisting of 100 million shares of
Series A Common Stock, with a par value of $.01 per share, 100 million shares
of Series B Common Stock, with a par value of $.01 per share, and 1 million
shares of Preferred Stock, with a par value of $.01 per share, of which 12,500
shares have been designated Series A Preferred Stock and 12,500 shares have
been designated Series B Preferred Stock. The total number of authorized
shares of capital stock of Pulitzer is 175 million shares, consisting of 100
million shares of Common Stock with a par value of $.01 per share, 50 million
shares of Class B Common Stock with a par value of $.01 per share, and 25
million shares of Preferred Stock with a par value of $.01 per share.
Voting Rights. Under the Hearst-Argyle Charter, each share of Hearst-Argyle
Common Stock is entitled to one vote on all matters submitted to a vote of the
stockholders. Each share of Hearst-Argyle Series A Preferred Stock is entitled
to the number of votes on all matters submitted to a vote of holders of
Hearst-Argyle Series A Common Stock equal to a quotient determined by dividing
$1,000 by the Series A Conversion Price, which is $35 on or before December
31, 2000, and, during each calendar year after December 31, 2000, the product
of
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1.1 times the Series A Conversion Price for the immediately preceding calendar
year. Each share of Hearst-Argyle Series B Preferred Stock is entitled to 29
votes on all matters submitted to a vote of holders of Hearst-Argyle Series A
Common Stock before July 11, 2001, and, on or after July 11, 2001, to the
number of votes equal to a quotient determined by dividing $1,000 by the
average of the closing prices for the Hearst-Argyle Series A Common Stock as
reported by the NYSE for each of the 10 trading days prior to the last day of
the month immediately preceding the record date for the stockholder meeting at
which such votes are to be cast. Under the Pulitzer Charter, each share of
Pulitzer Common Stock is entitled to one vote and each share of Pulitzer Class
B Common Stock is entitled to 10 votes on all matters upon which stockholders
are entitled to vote.
Except with respect to the election of Hearst-Argyle directors as described
below and as required by the DGCL, each series of Hearst-Argyle Common Stock
entitles the holders thereof to vote separately as a class only with respect
to amendments to the Hearst-Argyle Charter that alter or change the powers,
preferences, or special rights of their respective series so as to affect them
adversely. Except as required by the DGCL, the holders of Pulitzer Common
Stock are entitled to vote separately as a class with respect to the approval
of any consolidation or merger involving Pulitzer, unless the consideration to
be received by each of the holders of Pulitzer Common Stock and Pulitzer Class
B Common Stock is a type identical and equal in value.
With respect to any election of directors by the Hearst-Argyle stockholders,
the holders of Hearst-Argyle Series A Common Stock are entitled to vote
separately as a class in order to elect two directors of the Hearst-Argyle
Board and the holders of Hearst-Argyle Series B Common Stock are entitled to
vote separately as a class in order to elect the balance of the Hearst-Argyle
Board provided, however, that such number shall not be less than the number of
directors that will constitute a majority of the Hearst-Argyle Board. A
Hearst-Argyle director may only be removed for cause by the vote of a majority
of the holders of Hearst-Argyle Common Stock voting together as a class. With
respect to any election of directors by the Pulitzer stockholders, the holders
of Pulitzer Stock voting together as a class elect the Pulitzer directors. A
Pulitzer director may be removed, with or without cause, by the affirmative
vote of the holders of record of at least two-thirds of the aggregate voting
power of all outstanding shares of Pulitzer Stock then entitled to vote
generally in the election of directors, voting together as a single class. Any
Pulitzer director may be removed by the affirmative vote of a majority of the
entire Pulitzer Board in the event a director fails to meet the qualifications
stated in the Pulitzer By-Laws for election as a director or in the event such
Pulitzer director is in breach of any agreement between such Pulitzer director
and Pulitzer relating to such director's services as a Pulitzer director or
employee of Pulitzer.
Supermajority Voting Rights. The Hearst-Argyle Charter only grants
supermajority voting rights in connection with amendments to the Hearst-Argyle
Charter that affect the provisions on directors, voting rights and transfers
of Hearst-Argyle Series B Common Stock. In these cases approval of the holders
of the Hearst-Argyle Stock representing at least two-thirds of the Hearst-
Argyle Stock then entitled to vote is required. The Pulitzer Charter grants
supermajority voting rights in connection with the following matters unless
approved by the affirmative vote of not less than a majority of the entire
Pulitzer Board: (i) any merger, consolidation or other Business Combination
(as defined herein) involving Pulitzer; (ii) amendments to the Pulitzer
Charter that affect the provisions on Business Combinations, voting rights,
directors, stockholders' meetings, or Pulitzer By-Laws; (iii) amendment of the
Pulitzer By-Laws; and, (iv) the sale, lease or exchange of substantially all
of Pulitzer's assets. A "Business Combination" is defined in the Pulitzer
Charter, as, among other things, any merger or consolidation of Pulitzer or
any of Pulitzer's subsidiaries; any sale, lease or exchange of substantially
all of Pulitzer's assets; the adoption of any plan or proposal for the
liquidation or dissolution of Pulitzer; or, any similar transaction. In these
cases approval by the affirmative vote of the holders of record of at least
two-thirds of the aggregate voting power of all outstanding shares of Pulitzer
stock is required. In addition, the Pulitzer Charter permits removal of any
Pulitzer director or the entire Pulitzer Board at any time, with or without
cause, only by the affirmative vote of the holders of record of at least two-
thirds of the aggregate voting power of all outstanding shares of Pulitzer
Stock.
Directors. The Hearst-Argyle Charter states that the number of directors of
Hearst-Argyle shall be no fewer than seven and shall be fixed and may be
altered from time to time as provided in the Hearst-Argyle By-
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Laws. Currently, the Hearst-Argyle By-Laws designates the number of directors
at 11 and sets the minimum number of directors as seven and the maximum number
of directors as 15. For as long as there are no more than two directors
elected by the holders of Hearst-Argyle Series A Common Stock, the Hearst-
Argyle directors are divided, as equally as possible, into two classes. For as
long as there are three or more directors elected by the Hearst-Argyle Series
A Common Stock, the Hearst-Argyle directors are divided, as equally as
possible, into three classes. Each Hearst-Argyle director generally serves for
two years from the date of the annual meeting at which such director was
elected, with the term of office of a class of Hearst-Argyle directors
expiring each year. The Pulitzer Charter states that the number of Pulitzer
directors shall be fixed at a number not less than six by, or in a manner
provided in, the Pulitzer By-Laws. Currently, the Pulitzer By-Laws set the
number of Pulitzer directors as nine. The Pulitzer directors are divided, as
equally as possible, into three classes and serve for terms of three years,
with the term of office of one class of Pulitzer directors expiring each year.
Nomination of Directors. The Pulitzer Charter provides that a stockholder's
notice in connection with the nomination of directors is timely if received by
Pulitzer not less than 50 days nor more than 75 days prior to any meeting of
stockholders called for the election of directors; provided, however, that if
less than 60 days' notice of the meeting is given to stockholders, such
nomination shall have been mailed or delivered to the secretary or the
assistant secretary of Pulitzer not later than the close of business on the
10th day following the day on which the notice of meeting was mailed, while
the Hearst-Argyle Charter and By-Laws are silent on this issue.
Restrictions on Stock Transfers. The Hearst-Argyle Charter restricts the
transfer of the Hearst-Argyle Series B Common Stock. Unless all necessary FCC
approvals have been obtained and the transfer of Hearst-Argyle Series B Common
Stock is to Hearst or any other entity majority owned or controlled by Hearst,
no shares of Hearst-Argyle Series B Common Stock may be transferred. The
Pulitzer Charter also restricts transfers of Pulitzer Class B Common Stock
except in accordance with its terms. In addition, both the Hearst-Argyle
Charter and the Pulitzer Charter contain restrictions on the transfer and/or
ownership of their stock by individuals or entities that may violate
provisions of the Federal communications laws.
Conversion Rights. The Hearst-Argyle Charter grants each holder of Hearst-
Argyle Series B Common Stock the right to convert all or a portion of such
shares into shares of Hearst-Argyle Series A Common Stock at any time on a
share-for-share basis and subject to certain restrictions. The Pulitzer
Charter contains a similar provision permitting conversion of Pulitzer Class B
Common Stock into Pulitzer Common Stock. In addition, the Hearst-Argyle
Charter grants each holder of Hearst-Argyle Series A and Series B Preferred
Stock the right to convert all or a portion of such shares into Hearst-Argyle
Series A Common Stock. Subject to certain restrictions, holders of Hearst-
Argyle Series A Preferred Stock may convert such shares into a number of
Hearst-Argyle Series A Common Shares equal to a quotient determined by
dividing $1,000 by the Series A Conversion Price, which is $35 on or before
December 31, 2000, and, during each calendar year after December 31, 2000, the
product of 1.1 times the Series A Conversion Price for the immediately
preceding calendar year. Subject to certain restrictions, holders of Hearst-
Argyle Series B Preferred Stock may convert such shares into a number of
Hearst-Argyle Series A Common Shares equal to a quotient determined by
dividing $1,000 by the average of the closing prices for the Hearst-Argyle
Series A Common Stock as reported by the NYSE for each of the 10 trading days
prior to the conversion date. In addition, the Hearst-Argyle Charter contains
a provision mandating the automatic conversion of all outstanding shares of
Hearst-Argyle Series B Common Stock into an equal number of shares of Hearst-
Argyle Series A Common Stock in the event that Hearst and any entity owned or
controlled by Hearst first hold less than 20% of all shares of Hearst-Argyle
Common Stock then outstanding. The Pulitzer Charter mandates automatic
conversion of Pulitzer Class B Common Stock into Pulitzer Common Stock when
the aggregate voting power of all outstanding shares of Pulitzer Class B
Common Stock falls below 20% of the aggregate voting power of all outstanding
shares of Pulitzer Common Stock and Pulitzer Class B Common Stock.
Controlling Stockholder. As of the Hearst-Argyle Record Date, Hearst
Broadcasting owned 100% of the issued and outstanding shares of Hearst-Argyle
Series B Common Stock, and 4,036,725 of the issued and outstanding shares of
Hearst-Argyle Series A Common Stock, representing in the aggregate
approximately 87.1% of the outstanding voting power of the Hearst-Argyle
Common Stock and 86.0% of the outstanding voting power
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of the Hearst-Argyle Stock. Based on the 37,096,774 shares of Hearst-Argyle
Merger Stock being delivered to holders of Pulitzer Stock and the number of
shares of Pulitzer Stock outstanding on the Pulitzer Record Date, if the
Merger were consummated as of February 9, 1999, Hearst Broadcasting would own
approximately 51.8% of the outstanding shares of Hearst-Argyle Common Stock.
Through its ownership of Hearst-Argyle Series B Common Stock, Hearst
Broadcasting is entitled to elect as a class all but two members of the
Hearst-Argyle Board. Currently, Hearst Broadcasting elects 9 of the eleven
Hearst-Argyle directors. As a result, Hearst Broadcasting is able to control
substantially all actions to be taken by Hearst-Argyle stockholders, and is
able to maintain control over the operations and business of Hearst-Argyle. As
of the Pulitzer Record Date, the Pulitzer Principal Stockholders,
collectively, had the power to direct the vote of 14,443,209 shares of
Pulitzer Class B Common Stock, representing in the aggregate (i) approximately
94.4% of the issued and outstanding shares of Pulitzer Class B Common Stock
and (ii) approximately 90.1% of the outstanding voting power of Pulitzer Stock
with respect to the Pulitzer Merger Proposal. As of the Pulitzer Record Date,
the Pulitzer Principal Stockholders did not own any shares of Pulitzer Common
Stock. As a result, the Pulitzer Principal Stockholders are able to control
substantially all actions to be taken by the Pulitzer stockholders and are
able to maintain control over the operations and business of Pulitzer. See
"Risk Factors--Risk Factors Related to the Hearst-Argyle Merger Stock--Control
by Majority Stockholder."
Indemnification. The Hearst-Argyle Charter provides that Hearst-Argyle shall
indemnify any and all of its directors and officers, or former directors and
officers, or any person who may have served at Hearst-Argyle's request as a
director or officer of another corporation, partnership, limited liability
company, joint venture, trust or other entity or enterprise. In addition, the
Hearst-Argyle Charter provides that no director or former director of Hearst-
Argyle shall be liable to Hearst-Argyle or its stockholders for monetary
damages for breach of fiduciary duty as a director to the fullest extent
permitted by the DGCL. The Hearst-Argyle By-Laws provide that officers,
directors, former directors and officers, and any person who is serving or has
served as a director or officer of another enterprise at Hearst-Argyle's
request shall be indemnified by Hearst-Argyle to the fullest extent permitted
by applicable law. The Pulitzer By-Laws contain a provision that limits a
director's, officer's and any Pulitzer agent's liability to the fullest extent
permitted by the DGCL. The Pulitzer Charter provides that any person who is or
was a director, officer, or agent of Pulitzer, or served in such capacity at
another enterprise at Pulitzer's request shall be indemnified against
judgments, and amounts paid in settlement and expenses (including attorneys'
fees), actually and reasonably incurred in connection with any threatened,
pending or completed action (other than an action by or in the right of
Pulitzer) by reason of the fact that any such individual is or was a director,
officer, or agent of Pulitzer if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Pulitzer.
NO RIGHTS OF DISSENTING HEARST-ARGYLE STOCKHOLDERS
Holders of Hearst-Argyle Stock will not be entitled to dissenters' rights of
appraisal in connection with the Merger.
RIGHTS OF DISSENTING PULITZER STOCKHOLDERS
Pulitzer Class B Common Stock
Holders of record of Pulitzer Class B Common Stock are entitled to
dissenters' appraisal rights under Section 262 of the DGCL, provided that they
comply with the conditions established by Section 262. Section 262 is
reprinted in its entirety as Annex IV to this Joint Proxy
Statement/Prospectus. The following discussion is not a complete statement of
the law relating to appraisal rights and is qualified in its entirety by
reference to Annex IV. This discussion and Annex IV should be reviewed
carefully by any Pulitzer stockholder who owns Pulitzer Class B Common Stock
and wishes to exercise statutory appraisal rights or who wishes to preserve
the right to do so, since failure to comply with the procedures set forth
herein or therein will result in the loss of appraisal rights.
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A record holder of Pulitzer Class B Common Stock who makes the demand
described below with respect to such shares, who continuously is the record
holder of such shares through the Effective Time, who otherwise complies with
the statutory requirements of Section 262 and who neither votes in favor of
the Merger nor consents thereto in writing will be entitled to an appraisal by
the Delaware Court of Chancery of the fair value of his Pulitzer Class B
Common Stock. All references in Section 262 and in this summary of appraisal
rights to a "Pulitzer stockholder" or "holders" of shares are to the record
holder or holders of Pulitzer Class B Common Stock.
Holders of record of Pulitzer Class B Common Stock who desire to exercise
their appraisal rights must deliver a separate written demand for appraisal to
Pulitzer prior to the vote by the Pulitzer stockholders on the Merger. A
demand for appraisal must be executed by or on behalf of the holder of record,
fully and correctly, as such holder's name appears on the certificate or
certificates representing Pulitzer Class B Common Stock. A person having a
beneficial interest in Pulitzer Class B Common Stock that is of record in the
name of another person, such as a broker, fiduciary or other nominee, must act
promptly to cause the record holder to follow the steps summarized herein
properly and in a timely manner to perfect whatever appraisal rights are
available. If Pulitzer Class B Common Stock is owned of record by a person
other than the beneficial owner, including a broker, fiduciary (such as a
trustee, guardian or custodian) or other nominee, such demand must be executed
by or for the record owner. If Pulitzer Class B Common Stock is owned of
record by more than one person, as in a joint tenancy or tenancy in common,
such demand must be executed by or for all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
such person is acting as agent for the record owner.
A record owner, such as a broker, fiduciary or other nominee, who holds
Pulitzer Class B Common Stock as a nominee for others, may exercise appraisal
rights with respect to the shares held for all or less than all beneficial
owners of shares as to which such person is the record owner. In such case,
the written demand must set forth the number of shares covered by such demand.
Where the number of shares is not expressly stated, the demand will be
presumed to cover all Pulitzer Class B Common Stock outstanding in the name of
such record owner.
A Pulitzer stockholder who elects to exercise appraisal rights should mail
or deliver his or her written demand to: 900 North Tucker Boulevard, St.
Louis, Missouri 63101, Attention: Secretary. The written demand for appraisal
should specify the Pulitzer stockholder's name and mailing address, the number
of shares of Pulitzer Class B Common Stock owned, and that the holder is
thereby demanding appraisal of his or her shares. A proxy or vote against the
Merger will not constitute such a demand. Within 10 days after the Effective
Time, Hearst-Argyle as the surviving corporation (the "Surviving Corporation")
must provide notice to all holders who have complied with Section 262 that the
Merger has become effective.
Within 120 days after the Effective Time, Hearst-Argyle or any holder who
has complied with the required conditions of Section 262, may file a petition
in the Delaware Court of Chancery, with a copy served on Hearst-Argyle in the
case of a petition filed by a holder, demanding a determination of the fair
value of the shares of all dissenting holders. Hearst-Argyle does not
presently intend to file an appraisal petition and holders seeking to exercise
appraisal rights should not assume that Hearst-Argyle will file such a
petition or that Hearst-Argyle will initiate any negotiations with respect to
the fair value of such shares. Accordingly, Pulitzer stockholders who desire
to have their shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262. Within 120 days after the Effective Time, any
Pulitzer stockholder who has theretofore complied with the applicable
provisions of Section 262 will be entitled, upon written request, to receive
from Hearst-Argyle a statement setting forth the aggregate number of shares of
Pulitzer Class B Common Stock not voted in favor of the Merger and with
respect to which demands for appraisal were received by Pulitzer and the
number of holders of such shares. Such statement must be mailed within 10 days
after the written request therefor has been received by Hearst-Argyle or
within 10 days after expiration of the time for delivery of demands for
appraisal under Section 262, whichever is later.
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If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court of Chancery will determine which holders are
entitled to appraisal rights and will appraise Pulitzer Class B Common Stock
owned by such holders, determining the fair value of such shares exclusive of
any element of value arising from the accomplishment or expectation of the
Merger (and after giving effect to the Spin-Off), together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
In determining fair value, the Delaware Court of Chancery is to take into
account all relevant factors. In Weinberger v. UOP Inc., the Delaware Supreme
Court discussed the factors that could be considered in determining fair value
in an appraisal proceeding, stating that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered, and that "fair price
obviously requires consideration of all relevant factors involving the value
of a company." The Delaware Supreme Court stated that in making this
determination of fair value the court must consider market value, asset value,
dividends, earning prospects, the nature of the enterprise and any other facts
that could be ascertained as of the date of the merger that throw light on
future prospects of the merged corporation. In Weinberger, the Delaware
Supreme Court stated that "elements of future value, including the nature of
the enterprise, which are known or susceptible of proof as of the date of the
merger and not the product of speculation, may be considered." Section 262,
however, provides that fair value is to be "exclusive of any element of value
arising from the accomplishment or expectation of the merger."
Pulitzer stockholders considering seeking appraisal should recognize that
the fair value of their shares determined under Section 262 could be more
than, the same as or less than the consideration they are to receive pursuant
to the Merger Agreement if they do not seek appraisal of their shares. The
cost of the appraisal proceeding may be determined by the Delaware Court of
Chancery and taxed against the parties as the Delaware Court of Chancery deems
equitable in the circumstances. Upon application of a dissenting Pulitzer
stockholder, the Delaware Court of Chancery may order that all or a portion of
the expenses incurred by any dissenting holder in connection with the
appraisal proceeding, including without limitation reasonable attorney's fees
and the fees and expenses of experts, be charged pro rata against the value of
all shares entitled to appraisal.
Any record holder of Pulitzer Class B Common Stock who has duly demanded
appraisal in compliance with Section 262 will not, after the Effective Time,
be entitled to vote for any purpose any shares subject to such demand or to
receive payment of dividends or other distributions on such shares, except for
dividends or distributions (including the distribution of the New Pulitzer
Class B Common Stock thereon) payable to stockholders of record at a date
prior to the Effective Time.
At any time within 60 days after the Effective Time, any Pulitzer
stockholder will have the right to withdraw such demand for appraisal and to
accept the terms offered in the Merger. After this period, such stockholder
may withdraw such demand for appraisal only with the consent of Hearst-Argyle.
If no petition for appraisal is filed with the Delaware Court of Chancery
within 120 days after the Effective Time, holders' rights to appraisal shall
cease, and all holders of Pulitzer Class B Common Stock will be entitled to
receive the consideration offered pursuant to the Merger Agreement. Inasmuch
as Hearst-Argyle has no obligation to file such a petition and has no present
intention to do so, any holder of Pulitzer Class B Common Stock who desires
such a petition to be filed is advised to file it on a timely basis.
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF DELAWARE LAW, ANY HOLDER OF
PULITZER CLASS B COMMON STOCK WHO IS CONSIDERING DISSENTING FROM THE MERGER
AND EXERCISING DISSENTERS' RIGHTS OF APPRAISAL MAY WISH TO CONSULT HIS OR HER
LEGAL ADVISOR.
Pulitzer Common Stock
Pursuant to Section 262 of the DGCL, holders of Pulitzer Common Stock will
not have the right to dissent from the Merger and elect to have the fair value
of their shares of Pulitzer Common Stock judicially determined and paid to
them in cash.
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Under Section 262 of the DGCL, dissenters' rights of appraisal are not
available to the stockholders of a corporation that is a party to a merger if
the following conditions are satisfied: (i) as of the record date of the
meeting of stockholders to approve the merger, a corporation's stock is either
(a) listed on a national securities exchange or (b) held of record by more
than 2,000 stockholders and (ii) the consideration to be received by such
stockholders in the merger consists only of (A) shares of the capital stock of
the surviving corporation in the merger; (B) shares of the capital stock of
any other corporation provided that such stock, as of the date on which the
merger becomes effective, is either (1) listed on a national securities
exchange or (2) held of record by more than 2,000 stockholders; (C) cash in
lieu of a fractional share; or, (D) a combination of the foregoing. As of the
Pulitzer Record Date, the Pulitzer Common Stock was listed on the NYSE and
held of record by more than 2,000 stockholders. In the Merger, the holders of
Pulitzer Common Stock will receive shares of capital stock of Hearst-Argyle,
which is the Surviving Corporation. As a result, holders of Pulitzer Common
Stock will not have the right to dissent from the Merger and elect to have the
fair value of their shares of Pulitzer Common Stock judicially determined and
paid to them in cash.
PAYMENTS AND DISTRIBUTIONS TO STOCKHOLDERS
No payment will be made to holders of, and no exchange or distribution will
be made in respect of, Hearst-Argyle Stock in connection with the Spin-Off,
the Merger or the other transactions contemplated herein.
Pursuant to the Spin-Off, Pulitzer will cause to be distributed to each
holder of record of Pulitzer Stock (other than Pulitzer, New Pulitzer or any
of their respective subsidiaries) certificates evidencing the shares of New
Pulitzer Stock to which such holder has become entitled by reason of the Spin-
Off.
In order to receive shares of Hearst-Argyle Merger Stock, together with any
cash in lieu of fractional interests, pursuant to the Merger, each stockholder
of Pulitzer will be required to surrender the certificates evidencing such
stockholder's shares of Pulitzer Stock to the Exchange Agent. Promptly after
the Effective Time, the Exchange Agent will mail or make available to each
stockholder a notice and letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the shares of
Pulitzer Stock shall pass, only upon proper delivery of the shares to the
Exchange Agent) advising such stockholder of the effectiveness of the Merger
and the procedures to be used in effecting the surrender of shares in
connection therewith. Promptly after surrender of such shares the stockholder
will receive Hearst-Argyle Merger Stock, together with any cash in lieu of a
fractional share. Pulitzer stockholders should surrender shares only with a
letter of transmittal. Please do not send shares with the enclosed proxy.
If payment of the Hearst-Argyle Merger Stock, together with any cash in lieu
of a fractional share, is to be made to a person other than a person in whose
name shares of Pulitzer Stock are registered, it shall be a condition of
payment that the shares so surrendered be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such payment shall pay
any transfer or other taxes required by reason of the payment to a person
other than the registered holder of the shares, or shall establish to the
satisfaction of New Pulitzer and Hearst-Argyle that such tax either has been
paid or is not applicable.
Until surrendered and exchanged in accordance with the Merger Agreement,
after the Effective Time each share of Pulitzer Stock shall represent only the
right to receive Hearst-Argyle Merger Stock, together with any cash in lieu of
a fractional share, to which such shares are entitled. At the close of
business on the day prior to the date of the Effective Time, the stock
transfer books of Pulitzer shall be closed and no further transfers shall be
made. If, thereafter, any shares are presented for transfer, such shares shall
be canceled and exchanged for Hearst-Argyle Merger Stock, together with any
cash in lieu of a fractional share. No party shall be liable to any holder of
certificates formerly representing Pulitzer Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
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LEGAL MATTERS
Certain tax matters will be passed upon by Fulbright & Jaworski L.L.P., New
York, New York, counsel to Pulitzer and New Pulitzer. Certain legal matters
relating to the validity of the shares of Hearst-Argyle Series A Common Stock
and certain tax matters will be passed upon by Rogers & Wells LLP, New York,
New York, counsel to Hearst-Argyle.
EXPERTS
The consolidated financial statements and the related financial statement
schedule of Hearst-Argyle for each of the three years in the period to
December 31, 1997 incorporated in this prospectus by reference from Hearst-
Argyle's Annual Report on Form 10-K, as amended by the Form 10-K/A, filed on
December 16, 1998 and the Form 10-K/A filed on January 15, 1999 and the Form
10-K/A filed on February 11, 1999, for the year ended December 31, 1997 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements and schedule of Argyle Television, Inc. included in
Argyle Television, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996, as set forth in their report, which is incorporated in this
prospectus by reference. The consolidated financial statements and schedule of
Argyle Television, Inc. are incorporated by reference in reliance on their
report given on their authority as experts in accounting and auditing.
The financial statements of Kelly for the years ended December 31, 1997,
1996 and 1995 incorporated in this Joint Proxy Statement/Prospectus by
reference from Hearst-Argyle's Current Report on Form 8-K, dated September 17,
1998, as amended by the Form 8-K/A filed on December 7, 1998, have been
audited by PricewaterhouseCoopers LLP, independent accountants, as stated in
their report, which is incorporated herein by reference, and has been so
incorporated in reliance upon the report given on the authority of said firm
as experts in accounting and auditing.
The financial statements and the related financial statement schedule of
Pulitzer as of December 31, 1997 and 1996 and for each of the three years in
the period ended December 31, 1997 incorporated in this Joint Proxy
Statement/Prospectus by reference from Pulitzer's Current Report on Form 8-K,
dated January 22, 1999, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated
herein by reference, and have been so incorporated in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. The financial statements of Pulitzer Broadcasting and the
Broadcasting Subsidiaries as of December 31, 1997 and 1996 and for each of the
three years in the period ended December 31, 1997 incorporated in this Joint
Proxy Statement/Prospectus by reference from Pulitzer's Current Report on Form
8-K, dated January 22, 1999 and Hearst-Argyle's Current Report on Form 8-K,
dated December 16, 1998, as amended, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
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FUTURE STOCKHOLDER PROPOSALS
Hearst-Argyle. All stockholder proposals that are intended to be presented
at the 1999 Annual Meeting of Hearst-Argyle's stockholders, must have been
received by Hearst-Argyle at its offices in New York, New York, addressed to
the Secretary of Hearst-Argyle, not later than December 10, 1998, for
inclusion in Hearst-Argyle's proxy statement and form of proxy relating to
such meeting. Such proposals must comply with the Hearst-Argyle By-Laws and
the requirements of Regulation 14A of the Exchange Act.
New Pulitzer. If the Merger and related transactions are consummated, the
first Annual Meeting of New Pulitzer's stockholders after such consummation is
expected to be held in May 1999. All stockholder proposals that are intended
to be presented at the 1999 Annual Meeting of New Pulitzer's stockholders must
be received by New Pulitzer at its offices in St. Louis, Missouri, addressed
to the Secretary of New Pulitzer, not later than March 15, 1999 for inclusion
in New Pulitzer's proxy statement and form of proxy relating to such meeting.
Such proposals must comply with the New Pulitzer By-Laws and the requirements
of Regulation 14A of the Exchange Act.
Pulitzer. If the Merger and related transactions are not consummated, all
stockholder proposals that are intended to be presented at the 1999 Annual
Meeting of Pulitzer's stockholders must have been received by Pulitzer at its
offices in St. Louis, Missouri, addressed to the Secretary of Pulitzer, not
later than December 15, 1998 for inclusion in Pulitzer's proxy statement and
form of proxy relating to such meeting. Such proposals must comply with the
Pulitzer By-Laws and the requirements of Regulation 14A of the Exchange Act.
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ANNEX I
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
By and Among
PULITZER PUBLISHING COMPANY,
PULITZER INC.,
and
HEARST-ARGYLE TELEVISION, INC.
dated as of May 25, 1998
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TABLE OF CONTENTS
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ARTICLE I THE MERGER
1.01. THE MERGER.......................................................... 6
1.02. EFFECT OF THE MERGER ON CAPITAL STOCK............................... 6
1.03. EFFECTIVE TIME OF THE MERGER........................................ 7
1.04. EXCHANGE OF CERTIFICATES............................................ 7
1.05. DISTRIBUTION WITH RESPECT TO SHARES REPRESENTED BY UNEXCHANGED
CERTIFICATES......................................................... 8
1.06. NO FRACTIONAL SHARES................................................ 9
1.07. NO LIABILITY........................................................ 9
1.08. LOST CERTIFICATES................................................... 9
ARTICLE II CERTAIN PRE-MERGER TRANSACTIONS
2.01. AMENDMENTS TO CHARTERS; FINANCING................................... 9
2.02. CONTRIBUTION OF ASSETS TO AND ASSUMPTION OF LIABILITIES BY NEWCO;
DISTRIBUTION OF NEWCO STOCK.......................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
AND NEWCO
3.01. ORGANIZATION AND AUTHORITY.......................................... 11
3.02. NO BREACH........................................................... 12
3.03. CONSENTS AND APPROVALS.............................................. 12
3.04. APPROVALS OF THE BOARDS; FAIRNESS OPINION; VOTE REQUIRED............ 12
3.05. CAPITALIZATION...................................................... 13
3.06. SEC REPORTS......................................................... 13
3.07. FINANCIAL STATEMENTS................................................ 14
3.08. ABSENCE OF CERTAIN CHANGES.......................................... 14
3.09. ABSENCE OF UNDISCLOSED LIABILITIES.................................. 14
3.10. COMPLIANCE WITH LAW................................................. 14
3.11. TAXES............................................................... 14
3.12. LITIGATION.......................................................... 15
3.13. BROKERS AND FINDERS................................................. 15
3.14. ENVIRONMENTAL MATTERS............................................... 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING BROADCASTING
4.01. ORGANIZATION AND AUTHORITY.......................................... 15
4.02. CAPITALIZATION...................................................... 16
4.03. FINANCIAL STATEMENTS................................................ 16
4.04. ABSENCE OF CERTAIN CHANGES.......................................... 16
4.05. ABSENCE OF UNDISCLOSED LIABILITIES.................................. 16
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4.06. COMPLIANCE WITH LAW................................................. 16
4.07. STATION NETWORK AFFILIATION AGREEMENTS.............................. 16
4.08. CONDITION OF ASSETS; TITLE TO PROPERTIES; ENCUMBRANCES.............. 17
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4.09. LITIGATION......................................................... 18
4.10. EMPLOYEE BENEFIT MATTERS........................................... 18
4.11. LABOR MATTERS...................................................... 19
4.12. ENVIRONMENTAL MATTERS.............................................. 20
4.13. COMPLAINTS......................................................... 20
4.14. REPORTS............................................................ 20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR
5.01. ORGANIZATION AND AUTHORITY......................................... 20
5.02. NO BREACH.......................................................... 21
5.03. CONSENTS AND APPROVALS............................................. 21
5.04. APPROVAL OF THE BOARD; VOTE REQUIRED............................... 21
5.05. CAPITALIZATION..................................................... 22
5.06. SEC REPORTS........................................................ 22
5.07. FINANCIAL STATEMENTS............................................... 22
5.08. ABSENCE OF CERTAIN CHANGES......................................... 23
5.09. ABSENCE OF UNDISCLOSED LIABILITIES................................. 23
5.10. COMPLIANCE WITH LAW................................................ 23
5.11. TAXES.............................................................. 23
5.12. LITIGATION......................................................... 23
5.13. BROKERS AND FINDERS................................................ 23
5.14. SOLVENCY........................................................... 24
5.15. FCC QUALIFICATION.................................................. 24
ARTICLE VI OTHER AGREEMENTS
6.01. NO SOLICITATION.................................................... 24
6.02. CONDUCT OF BUSINESS OF THE COMPANY................................. 25
6.03. CONDUCT OF BUSINESS OF BROADCASTING................................ 26
6.04. CONDUCT OF BUSINESS OF ACQUIROR.................................... 27
6.05. ACCESS TO INFORMATION.............................................. 27
6.06. SEC FILINGS........................................................ 28
6.07. REASONABLE BEST EFFORTS............................................ 30
6.08. PUBLIC ANNOUNCEMENTS............................................... 30
6.09. TAX MATTERS........................................................ 30
6.10. NOTIFICATION....................................................... 35
6.11. EMPLOYEE BENEFIT MATTERS........................................... 35
6.12. EMPLOYEE STOCK OPTIONS............................................. 38
6.13. MEETINGS OF STOCKHOLDERS........................................... 38
6.14. REGULATORY AND OTHER AUTHORIZATIONS................................ 38
6.15. FURTHER ASSURANCES................................................. 40
6.16. IRS RULING......................................................... 40
6.17. RECORDS RETENTION.................................................. 40
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6.18. STOCK EXCHANGE LISTING............................................. 41
6.19. COMPANY NAMES...................................................... 41
6.20. OTHER AGREEMENTS................................................... 41
6.21. FORM 8-K; PROVISION OF FINANCIAL STATEMENTS........................ 41
6.22. WORKING CAPITAL ADJUSTMENT......................................... 41
6.23. CAPITAL EXPENDITURES............................................... 42
6.24. EXCESS CASH........................................................ 42
6.25. INDEMNITY RELATING TO CERTAIN LITIGATION........................... 43
6.26. CANCELLATION OF INTERCOMPANY ARRANGEMENTS.......................... 43
6.27. NETWORK AFFILIATION AGREEMENTS..................................... 43
6.28. GROSS-UP MATTERS................................................... 43
6.29. AFFILIATE LETTERS; FCC LETTERS..................................... 44
ARTICLE VII CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
7.01. CLOSING AND CLOSING DATE........................................... 44
7.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY, NEWCO AND ACQUIROR... 44
7.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND NEWCO............. 45
7.04. CONDITIONS TO OBLIGATIONS OF ACQUIROR.............................. 46
ARTICLE VIII TERMINATION
8.01. TERMINATION........................................................ 46
8.02. EFFECT OF TERMINATION.............................................. 47
8.03. FEES AND EXPENSES.................................................. 47
ARTICLE IX MISCELLANEOUS
9.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................... 48
9.02. ENTIRE AGREEMENT................................................... 48
9.03. NOTICES............................................................ 48
9.04. GOVERNING LAW...................................................... 49
9.05. KNOWLEDGE OF THE COMPANY........................................... 49
9.06. PARTIES IN INTEREST................................................ 49
9.07. COUNTERPARTS....................................................... 49
9.08. PERSONAL LIABILITY................................................. 49
9.09. BINDING EFFECT; ASSIGNMENT......................................... 49
9.10. AMENDMENT.......................................................... 50
9.11. EXTENSION; WAIVER.................................................. 50
9.12. LEGAL FEES; COSTS.................................................. 50
9.13. DRAFTING........................................................... 50
9.14. CONSENT TO JURISDICTION AND SERVICE OF PROCESS..................... 50
ARTICLE X DEFINITIONS
10.01 DEFINITIONS....................................................... 50
10.02 INTERPRETATION.................................................... 58
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EXHIBITS AND SCHEDULES
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Exhibit A Form of Company Charter Amendment
Exhibit B Form of Newco Charter Amendment
Exhibit C Form of Contribution and Assumption Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of FCC Agreement
Exhibit F Form of Board Representation Agreement
Exhibit G Form of Arizona Diamondbacks Agreement
Exhibit H Form of Acquiror Voting Agreement
Exhibit I Form of Pulitzer Voting Agreement
Exhibit J Form of Affiliate Letter
Schedule 1.01 Directors of Surviving Corporation
Schedule 3.02 Right of Termination, Cancellation, Modification or
Acceleration and Requirement of Notice or Approval
Schedule 3.09 Additional Company Liabilities
Material Claims and Investigations for Taxes of Company
Schedule 3.11(b) or Its Subsidiaries
Schedule 3.12 Company Litigation
Schedule 3.14 Environmental Liabilities of Company
Schedule 4.03 Broadcasting Financial Statements
Schedule 4.05 Additional Broadcasting Liabilities
Schedule 4.06 Material Licenses and Authorizations held by Broadcasting
Schedule 4.07 Station Network Affiliation Agreements
Schedule 4.08(b) Personal Property Permitted Exceptions
Schedule 4.08(c) Personal Property Leases
Schedule 4.08(d)(1) Real Property
Schedule 4.08(d)(2) Real Estate Exceptions
Schedule 4.09 Broadcasting Litigation
Schedule 4.10(a) Employee Plans Currently Maintained or Contributed to by
the Company or PBC for the Benefit of any Broadcasting
Employee
Schedule 4.11(a) Labor or Collective Bargaining Agreements of Broadcasting
Schedule 4.11(b) Broadcasting Employees Represented by Labor Organizations
Schedule 4.12(a) Environmental Liabilities of Broadcasting
Schedule 5.02(a) Right of Termination, Cancellation, Modification or
Acceleration and Requirement of Notice or Approval
Relating to Agreements or Obligations of Acquiror
Schedule 5.02(b) Restrictions
Schedule 5.05(a) Existing Options, Warrants, Etc. of Acquiror
Schedule 5.09 Additional Acquiror Liabilities
Schedule 5.11(b) Material Claims and Investigations for Taxes of Acquiror
Schedule 5.15 Acquiror FCC Qualifications
Schedule 6.03(a)(v) 1998 Broadcasting Budget
Schedule 6.11(f)(2) Employment and Related Agreements of the Company
Broadcasting Employees Plans Maintained Exclusively for
Schedule 6.11(f)(3) Broadcasting Employees
Post-Retirement Medical or Other Welfare Benefits Payable
Schedule 6.11(f)(4) to Transferring Employees
Schedule 6.11(g) Participation and Severance Agreements
</TABLE>
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (this "Agreement"),
dated as of May 25, 1998, is made by and among Pulitzer Publishing Company, a
Delaware corporation (the "Company"), Pulitzer Inc., a Delaware corporation
and wholly owned subsidiary of the Company ("Newco"), and Hearst-Argyle
Television, Inc., a Delaware corporation ("Acquiror").
RECITALS
WHEREAS, the Boards of Directors of the Company, Newco and Acquiror have
determined that it is in the best interests of their respective stockholders
to enter into this Agreement which, among other things, provides for (i) the
Company to contribute to Newco or its wholly-owned Subsidiary certain assets
of the Company (other than those assets described in the Contribution
Agreement as being retained by the Company) and to distribute to its
stockholders shares of capital stock of Newco so that the stockholders of the
Company will become the stockholders of Newco; and (ii) the Company
(immediately following such contribution and distribution) to merge with and
into Acquiror, as a result of which the stockholders of the Company
immediately prior to such merger will become stockholders of Acquiror; and
WHEREAS, for federal income tax purposes, it is intended that such
transactions will qualify as reorganizations within the meaning of Sections
368(a)(1)(D) and 368(a)(1)(A) of the Code, respectively; and
WHEREAS, the parties hereto have determined to amend certain provisions of
this Agreement and to amend and restate this Agreement in accordance herewith.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements set forth below, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.01. THE MERGER. Subject to the terms and conditions hereof, at the
Effective Time: (i) the Company shall be merged with and into Acquiror (the
"Merger") and the separate existence of the Company shall cease and Acquiror
shall continue as the surviving corporation in the Merger (the "Surviving
Corporation"); (ii) the Articles of Incorporation of Acquiror, as in effect
immediately prior to the Effective Time, shall continue as the Articles of
Incorporation of the Surviving Corporation; (iii) the Bylaws of Acquiror, as
in effect immediately prior to the Effective Time, shall continue as the
Bylaws of the Surviving Corporation; (iv) the Persons listed on Schedule 1.01
shall be the directors of the Surviving Corporation; and (v) the officers of
Acquiror immediately prior to the Effective Time shall continue as the
officers of the Surviving Corporation. From and after the Effective Time, the
Merger will have all the effects provided by applicable law.
1.02. EFFECT OF THE MERGER ON CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock:
(a) Subject to Sections 1.02(b) and 1.02(e) hereof, each share of Company
Stock issued and outstanding immediately prior to the Merger shall be
converted into and shall become that number of fully paid and nonassessable
shares of Acquiror Common Stock equal to the Common Stock Conversion
Number.
(b) Each share of Company Stock issued and outstanding immediately prior
to the Merger and owned directly or indirectly by the Company as treasury
stock, by Newco or by any of the Company's or Newco's respective
Subsidiaries shall be cancelled, and no consideration shall be delivered in
exchange therefor.
(c) Each share of the capital stock of Acquiror issued and outstanding
immediately prior to the Merger shall remain outstanding.
(d) "Common Stock Conversion Number" shall mean the quotient obtained by
dividing (i) the aggregate number of shares of Acquiror Common Stock into
which Company Stock shall be converted (the
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"Aggregate Shares Delivered") by (ii) the number of shares of Company Stock
outstanding immediately prior to the Effective Time (the "Outstanding
Company Stock").
For purposes hereof, the Aggregate Shares Delivered shall equal the quotient
obtained by dividing the Aggregate Consideration by $31.00.
For purposes hereof, the "Aggregate Consideration" shall be $1,150,000,000.
Without limiting the provisions of Section 6.04, if, between the date hereof
and the Effective Time, the outstanding shares of Acquiror Common Stock shall
have been changed into a different number of shares or a different class, by
reason of any stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, or if any extraordinary dividend or
distribution is made with respect to the Acquiror Common Stock, then the
Aggregate Shares Delivered shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, extraordinary dividend or distribution or
other similar event.
(e) The holder of any shares ("Dissenting Shares") of Company Stock
outstanding immediately prior to the Merger that has validly exercised such
holder's appraisal rights, if any, under the Delaware General Corporation
Law (the "DGCL") shall not be entitled to receive, in respect of the shares
of Company Stock as to which such holder has validly exercised appraisal
rights, shares of Acquiror Common Stock unless and until such holder shall
have failed to perfect, or shall have effectively withdrawn or lost, such
holder's right to payment for such holder's shares of Company Stock under
the DGCL. In such event, such holder shall be entitled to receive the
Acquiror Common Stock (in addition to the shares of either Newco Common
Stock or Newco Class B Common Stock received pursuant to the Distribution)
which such holder would have been entitled to receive had such holder not
exercised appraisal rights. The Company shall give Acquiror prompt notice
upon receipt by the Company (i) prior to or at the meeting of stockholders
at which the Merger, this Agreement and the Company Charter Amendment are
voted upon, of any written objection thereto or written demand for
appraisal of shares (any stockholder duly making such objection being
hereinafter called a "Dissenting Stockholder") and (ii) any other notices
or communications made after such time by a Dissenting Stockholder which
pertains to appraisal rights. The Company agrees that, prior to the
Effective Time, except with the written consent of Acquiror, it will not
voluntarily make any payment with respect to, or settle or offer to settle,
any such demand. Each Dissenting Stockholder who becomes entitled under the
DGCL to payment for such holder's shares of Company Stock shall receive
payment therefor after the Effective Time from the Surviving Corporation.
1.03. EFFECTIVE TIME OF THE MERGER. Subject to the terms and conditions set
forth in this Agreement, a certificate of merger shall be duly prepared,
executed and acknowledged by Acquiror and the Company and thereafter delivered
to the Secretary of State of the State of Delaware (the "Certificate of
Merger") for filing pursuant to the DGCL on the Closing Date. The Merger shall
become effective upon the filing of the Certificate of Merger with such
Secretary of State on the Closing Date (the "Effective Time").
1.04. EXCHANGE OF CERTIFICATES.
(a) Prior to the Closing Date, the Company shall retain a bank or trust
company reasonably acceptable to Acquiror to act as exchange agent (the
"Exchange Agent") in connection with the surrender of certificates evidencing
shares of Company Stock converted into shares of Acquiror Common Stock
pursuant to the Merger. Prior to the Effective Time, Acquiror shall deposit
with the Exchange Agent the shares of Acquiror Common Stock to be issued in
the Merger, which shares (collectively, the "Merger Stock") shall be deemed to
be issued at the Effective Time. At and following the Effective Time, the
Surviving Corporation shall deliver to the Exchange Agent such cash as may be
required, from time to time, to make payments of cash in lieu of fractional
shares in accordance with Section 1.06 hereof.
(b) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each person who was, at the Effective Time, a holder of record
of a certificate or certificates that immediately prior to the Effective Time
evidenced Outstanding Company Stock (collectively, the "Certificates"), other
than the Company, Newco or any of their respective Subsidiaries, (i) a letter
of transmittal (which shall specify that delivery of the
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Certificates shall be effective, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and which shall be in such form and shall have such other
provisions as Acquiror and Newco shall reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing the Merger Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal duly executed and such other documents as may be required by
the Exchange Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor certificates representing the shares of Merger
Stock that such holder has the right to receive pursuant to the terms hereof
(together with any dividend or distribution with respect thereto made after
the Effective Time to the extent provided in Section 1.05 hereof and any cash
paid in lieu of fractional shares pursuant to Section 1.06), and the
Certificate so surrendered shall be canceled. In the event of a transfer of
ownership of Company Stock that is not registered in the stock transfer
records of the Company, a certificate representing the proper number of shares
of Merger Stock may be issued to a transferee if the Certificate representing
such Company Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
reasonably satisfactory to Acquiror and Newco that any applicable stock
transfer tax has been paid.
(c) After the Effective Time, each outstanding Certificate which theretofore
represented shares of Company Stock shall, until surrendered for exchange in
accordance with this Section 1.04, be deemed for all purposes to evidence the
number of full shares of Merger Stock into which the shares of Company Stock
(which, prior to the Effective Time, were represented thereby) shall have been
so converted.
(d) Except as otherwise expressly provided herein, the Surviving Corporation
shall pay all charges and expenses, including those of the Exchange Agent, in
connection with the exchange of shares of Merger Stock for shares of Company
Stock. Any Merger Stock deposited with the Exchange Agent that remains
unclaimed by the former stockholders of the Company after six months following
the Effective Time shall be delivered to the Surviving Corporation, upon
demand, and any former stockholders of the Company who have not then complied
with the instructions for exchanging their Certificates shall thereafter look
only to the Surviving Corporation for the exchange of Certificates.
(e) Effective upon the Closing Date, the stock transfer books of the Company
shall be closed, and there shall be no further registration of transfers of
shares of Company Stock thereafter on the records of the Company.
(f) All Merger Stock issued upon conversion of shares of Company Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Stock.
1.05. DISTRIBUTION WITH RESPECT TO SHARES REPRESENTED BY UNEXCHANGED
CERTIFICATES. No dividend or other distribution declared or made after the
Effective Time with respect to the Merger Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Merger Stock issuable upon surrender of a
Certificate until the holder of such Certificate shall surrender such
Certificate in accordance with Section 1.04. Subject to the effect of
applicable law, following surrender of any such Certificate the Surviving
Corporation shall pay, without interest, to the record holder of certificates
representing shares of Merger Stock issued in exchange therefor (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
shares of Merger Stock, and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective
Time but prior to surrender of such Certificate and a payment date subsequent
to such surrender payable with respect to such shares of Merger Stock. In no
event shall the stockholders entitled to receive dividends or distributions be
entitled to receive interest thereon. All such dividends or other
distributions held by the Exchange Agent for payment or delivery to the
holders of unsurrendered Certificates and unclaimed at the end of one year
from the Effective Time shall be repaid or redelivered by the Exchange Agent
to the Surviving Corporation, after which time any holder of Certificates who
has not theretofore surrendered such Certificates to the Exchange Agent,
subject to applicable law, shall look as a general creditor only to the
Surviving Corporation for payment or delivery of such dividends or
distributions, as the case may be.
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1.06. NO FRACTIONAL SHARES.
(a) No certificates or scrip representing fractional shares of Acquiror
Common Stock shall be issued upon the surrender of Certificates pursuant to
Section 1.04. Such fractional share interests shall not entitle the owner
thereof to any rights as a security holder of Acquiror. In lieu of any such
fractional shares of Acquiror Common Stock, each holder of Outstanding Company
Stock entitled to receive shares of Acquiror Common Stock in the Merger, upon
surrender of a Certificate for exchange pursuant to Section 1.04, shall be
entitled to receive an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying the fractional interest in Acquiror
Common Stock to which such holder would otherwise be entitled (after taking
into account all shares of Company Stock then held of record by such holder)
by the closing sale price of a share of Acquiror Common Stock as reported on
the NASDAQ or the NYSE, as the case may be, on the Closing Date.
(b) As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Company Stock in lieu of any fractional share
interests, Acquiror shall promptly deposit with the Exchange Agent cash in the
required amounts and the Exchange Agent will mail such amounts, without
interest, to such holders; PROVIDED, HOWEVER, that no such amount will be paid
to any holder of Certificates prior to the surrender by such holder of the
Certificates which formerly represented such holder's Company Stock. Any such
amounts that remain unclaimed by the former stockholders of the Company after
six months following the Effective Time shall be delivered to the Surviving
Corporation by the Exchange Agent, upon demand, and any former stockholders of
the Company who have not then surrendered their Certificates shall thereafter
look only to the Surviving Corporation for payment in lieu of any fractional
interests.
1.07. NO LIABILITY. Any amounts remaining unclaimed by holders of shares on
the day immediately prior to such time as such amounts would otherwise escheat
to or become the property of any governmental entity shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation
(or Newco in the case of Newco Common Stock or Newco Class B Common Stock and
dividends or distributions with respect thereto) free and clear of any claims
or interest of any holder previously entitled thereto. None of the Surviving
Corporation, Newco or the Exchange Agent will be liable to any holder of
shares of Company Stock for any shares of Merger Stock or any Newco Common
Stock or Newco Class B Common Stock, dividends or distributions with respect
thereto or cash payable in lieu of fractional shares delivered to a state
abandoned property administrator or other public official pursuant to any
applicable abandoned property, escheat or similar law.
1.08. LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the shares of
Merger Stock (and any dividend or distribution with respect thereto made after
the Effective Time and prior to such issuance and any cash payable in lieu of
fractional shares pursuant to Section 1.06) deliverable in respect thereof as
determined in accordance with the terms hereof. When authorizing such payment
in exchange for any lost, stolen or destroyed Certificate, the person to whom
the Merger Stock is to be issued, as a condition precedent to the issuance
thereof, shall give the Surviving Corporation a bond satisfactory to the
Surviving Corporation against any claim that may be made against the Surviving
Corporation with respect to the Certificate alleged to have been lost, stolen
or destroyed.
ARTICLE II
CERTAIN PRE-MERGER TRANSACTIONS
The following transactions shall occur prior to the Effective Time:
2.01. AMENDMENTS TO CHARTERS; FINANCING.
(a) Prior to the Contribution, the Distribution and the Effective Time, the
Company shall amend its Certificate of Incorporation substantially as set
forth in Exhibit A hereto (the "Company Charter Amendment") and Newco shall
amend and restate its Certificate of Incorporation substantially as set forth
in Exhibit B hereto (the "Newco Charter Amendment").
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(b) Prior to the Contribution, the Distribution and the Effective Time, the
Company shall use commercially reasonable efforts to obtain financing in the
amount of $700,000,000 on terms reasonably and mutually acceptable to the
Company and Acquiror, which may be secured by the cash proceeds thereof, the
Broadcasting Assets or the issued and outstanding shares of capital stock of
PBC and/or the Broadcasting Subsidiaries (the "New Company Debt"). Out of the
proceeds of the New Company Debt, the Company, on or before the Closing Date,
shall pay or provide for the Existing Company Debt and the Deal Expenses, and
the balance of the proceeds of the New Company Debt, along with any other
remaining cash and cash equivalents then owned by the Company, shall be
contributed by the Company to Newco pursuant to the Contribution and
Assumption Agreement to be entered into by the Company and Newco in
substantially the form attached hereto as Exhibit C (the "Contribution
Agreement"). The Acquiror shall assist the Company in any manner reasonably
requested by the Company in connection with obtaining the New Company Debt.
The New Company Debt shall remain outstanding following the Effective Time,
and the Transactions contemplated hereby shall not result in a breach or event
of default or an event, which with notice or lapse of time or both, would be a
breach or event of default, or would require the repayment of the New Company
Debt.
2.02. CONTRIBUTION OF ASSETS TO AND ASSUMPTION OF LIABILITIES BY NEWCO;
DISTRIBUTION OF NEWCO STOCK.
(a) Prior to the Effective Time and pursuant to the terms of the
Contribution Agreement, the Company shall contribute and transfer (together
with the transactions described in Section 2.02(b) below, the "Contribution")
to Newco or its wholly-owned Subsidiary all of the Company's right, title and
interest in and to any and all assets of the Company, whether tangible or
intangible and whether fixed, contingent or otherwise; PROVIDED, HOWEVER, that
the Company shall not contribute to Newco or its wholly-owned Subsidiary (i)
the issued and outstanding capital stock of, Pulitzer Broadcasting Company
("PBC") or WESH Television, Inc., KCCI Television, Inc. and WDSU Television,
Inc. (collectively, the "Broadcasting Subsidiaries"); (ii) any of the assets
of PBC or the Broadcasting Subsidiaries, whether real or personal, tangible or
intangible, and whether fixed, contingent or otherwise and any other assets
used or held for use primarily in the business conducted by Broadcasting or
the Stations (collectively, the "Broadcasting Assets"); and (iii) the
Company's rights created pursuant to this Agreement, the Contribution
Agreement and the Transaction Agreements.
(b) In consideration for the transactions described in Section 2.02(a)
above, concurrently therewith and pursuant to the Contribution Agreement,
Newco shall (A) assume any and all liabilities of the Company of every kind
whatsoever, whether absolute, known, unknown, fixed, contingent or otherwise
and cause the Company and Broadcasting to be released from the Existing
Company Debt; PROVIDED, HOWEVER, that the Company shall retain, and Newco or
its wholly-owned Subsidiary will not assume and will have no liability with
respect to, (i) the New Company Debt, (ii) any liabilities associated with the
radio and/or television business operations of Broadcasting or the
Broadcasting Assets except as otherwise specifically provided herein,
including Sections 6.06(g), 6.09, 6.11, 6.25 and 6.28, and (iii) the Company's
obligations created pursuant to this Agreement, the Contribution Agreement and
the Transaction Agreements and (B) issue and deliver to the Company shares of
Newco Common Stock as set forth in the Contribution Agreement. Newco
acknowledges that the liabilities to be assumed by it pursuant to the first
sentence of this Section 2.02(b) include any and all liabilities associated
with any claim, action or proceeding brought by or on behalf of the holders of
Company Stock in connection with the Transactions other than liabilities with
respect to which Acquiror is obligated to indemnify Newco pursuant to Sections
6.06, 6.09 and 6.25 hereof.
(c) Following the Contribution and immediately prior to the Effective Time,
the Company shall distribute (the "Distribution") certificates representing
one fully paid and nonassessable share of Newco Common Stock to the holder of
each share of Company Common Stock outstanding on the record date designated
for the Distribution by or pursuant to an authorization of the Board of
Directors of the Company (the "Record Date"), and certificates representing
one fully paid and nonassessable share of Newco Class B Common Stock to the
holder of each share of Company Class B Common Stock outstanding on the Record
Date. Each share of the capital stock of Newco issued and outstanding on the
Record Date and owned directly or indirectly by the Company or any of its
Subsidiaries (other than those to be distributed in accordance with the first
sentence of this paragraph) shall be cancelled at the time of the
Distribution.
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(d) The Board of Directors of the Company shall formally declare the
Distribution and shall authorize the Company to pay the Distribution
immediately prior to the Effective Time, subject to the satisfaction or waiver
of the conditions set forth in subsection (e) below by delivery of
certificates for Newco Common Stock and Newco Class B Common Stock to the
Transfer Agent for delivery to the Persons entitled thereto. The Distribution
shall be deemed effective upon notification by the Company to the Transfer
Agent that the Distribution has been declared, that the conditions thereto
have been waived or satisfied and that the Transfer Agent is authorized to
proceed with the distribution of Newco Common Stock and Newco Class B Common
Stock.
(e) The obligations of the Company to consummate the Contribution and the
Distribution hereunder shall be subject to the fulfillment of each of the
following conditions:
(i) All of the transactions contemplated by Sections 2.01(a) and (b) and
Sections 2.02(a) and (b) shall have been consummated.
(ii) Each condition to the Closing set forth in Sections 7.02, 7.03 and
7.04 hereof, other than the condition set forth in Section 7.02(b) hereof,
as to the consummation of the Transactions contemplated by this Article II,
shall have been satisfied or waived.
(iii) The Board of Directors of the Company shall be reasonably satisfied
that, after giving effect to the Contribution, (i) the Company will not be
insolvent and will not have unreasonably small capital with which to engage
in its businesses, (ii) the Company will be able to pay its debts when they
come due, and (iii) the Company's surplus would be sufficient to permit,
without violation of Section 170 of the DGCL, the Distribution.
(f) Consummation of the Distribution is a condition precedent to Acquiror's
acquisition of the Retained Business pursuant to the Merger.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES REGARDING THE COMPANY AND NEWCO
The Company and Newco jointly and severally represent and warrant to
Acquiror as follows:
3.01. ORGANIZATION AND AUTHORITY. Each of the Company and Newco is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Each of the Company and Newco has all
requisite corporate power and authority to execute and deliver this Agreement
and, subject to the items referred to in Sections 3.02 and 3.03, to consummate
the Transactions. Subject to the items referred to in Sections 3.02 and 3.03,
all necessary action, corporate or otherwise, required to have been taken by
or on behalf of the Company and Newco by applicable law, their respective
charter documents or otherwise to authorize (i) the approval, execution and
delivery on behalf of the Company and Newco of this Agreement and (ii) the
performance by the Company and Newco of their respective obligations under
this Agreement and the consummation of the Transactions has been taken, except
that this Agreement and the Company Charter Amendment must be approved by the
stockholders of the Company. Assuming that this Agreement and each other
agreement contemplated hereby (each a "Transaction Agreement") constitutes or
will constitute, as the case may be, a legal, valid and binding agreement of
Acquiror, this Agreement and each other Transaction Agreement to which the
Company or Newco is or will be a party constitutes or will constitute, as the
case may be, a valid and binding agreement of each of the Company and Newco,
as the case may be, enforceable against each of them in accordance with its
terms, except (i) as the same may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws of general application relating to or
affecting creditors' rights, including the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, and (ii) for the
limitations imposed by general principles of equity. The foregoing exceptions
are hereinafter referred to as the "Enforceability Exceptions." The Company
has heretofore made available to Acquiror true and complete copies of the
Certificate of Incorporation and Bylaws of the Company and Newco as in effect
on the date hereof.
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3.02. NO BREACH. The execution and delivery of this Agreement by each of the
Company and Newco do not, and the consummation of the Transactions hereby by
each of the Company and Newco will not, (i) assuming that the requisite
stockholder approval is obtained, violate or conflict with the Certificate of
Incorporation or Bylaws of the Company or Newco, or (ii) except as set forth
on Schedules 3.02 hereto, or subject to obtaining the approvals and making the
filings described in Section 3.03, constitute a breach or default (or an event
that with notice or lapse of time or both would become a breach or default)
of, or give rise to any third-party right of termination, cancellation,
modification or acceleration under, or otherwise require notice or approval
under, any agreement, understanding or undertaking to which the Company or
Newco or any of their respective Subsidiaries is a party or by which any of
them is bound, or give rise to any Lien on any of their properties, except
where such breach, default, Lien, third-party right, cancellation,
modification or acceleration would not have a Material Adverse Effect on
Broadcasting or on the Retained Business taken as a whole or materially
interfere with or delay the Transactions, or (iii) subject to obtaining the
approvals and making the filings described in Section 3.03 hereof, constitute
a violation of any statute, law, ordinance, rule, regulation, judgment,
decree, order or writ of any judicial, arbitral, public, or governmental
authority having jurisdiction over the Company or any of its Subsidiaries or
Newco or any of its Subsidiaries or any of their respective properties or
assets except as would not have a Material Adverse Effect on Broadcasting or
on the Retained Business taken as a whole or materially interfere with or
delay the Transactions.
3.03. CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement nor the consummation of the Transactions by the Company and Newco
will require any License from, or filing with or notification to, any
governmental or regulatory authority, except (i) for filings required under
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), (ii) for filings required under
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), (iii) for filings under state
securities or "blue sky" laws, (iv) for filings and approvals required by the
rules and regulations of the NYSE, (v) for notification pursuant to, and
expiration or termination of the waiting period under, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), (vi) for the filing of the Certificate
of Merger as set forth in Article I hereof, (vii) for the filing of the
Company Charter Amendment and the Newco Charter Amendment with the Secretary
of State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company and Newco and their
respective Subsidiaries are qualified to do business, (viii) for consents or
waivers from the relevant governmental entities necessary to transfer
ownership of Broadcasting's Federal Communications Commission ("FCC") Licenses
to Acquiror, and (ix) where the failure to obtain such Licenses, or to make
such filings or notifications, would not prevent the Company or Newco from
performing its respective obligations under this Agreement without having a
Material Adverse Effect on Broadcasting or on the Retained Business taken as a
whole or materially interfere with or delay the Transactions; PROVIDED,
HOWEVER, that no representation or warranty is made with respect to the
foregoing relating to, or arising by reason of, the New Company Debt or the
legal or regulatory status of Acquiror or the facts pertaining specifically to
it.
3.04. APPROVALS OF THE BOARDS; FAIRNESS OPINION; VOTE REQUIRED. The Boards
of Directors of the Company and Newco have each, by resolutions duly adopted
at meetings duly called and held, unanimously approved and adopted this
Agreement, the Merger, the Contribution and the Distribution, and the other
Transactions on the material terms and conditions set forth herein. The
transactions contemplated by the Pulitzer Voting Agreement have been duly and
validly approved by the Board of Directors of the Company prior to the
execution and delivery of the Pulitzer Voting Agreement in accordance with
Section 203 of the DGCL. The Board of Directors of the Company has declared
the advisability of the Company Charter Amendment and recommended adoption of
the Company Charter Amendment and this Agreement by the stockholders of the
Company and directed that the Company Charter Amendment and this Agreement be
submitted to the stockholders of the Company for their consideration, and no
other corporate proceedings on the part of the Company or its stockholders are
necessary to authorize the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
Transactions, other than obtaining the approval of the Company's stockholders
described below. The Board of Directors of the Company has
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received the opinion, as of the date of this Agreement, of Goldman Sachs, one
of the financial advisors to the Company, that the consideration to be
received by the holders of shares of the Company Stock in the Merger and the
Distribution, taken as a whole, is fair to such holders from a financial point
of view. The vote of a majority of all outstanding shares of Company Stock
entitled to vote thereon, voting together as a single class, and the vote of a
majority of the outstanding shares of Company Common Stock entitled to vote
thereon, voting separately as a class, in favor of the Company Charter
Amendment are the only votes of the holders of any class or series of the
capital stock of the Company necessary to approve the Company Charter
Amendment under applicable law and the Company's Certificate of Incorporation
and Bylaws. The vote of a majority of all outstanding shares of Company Stock
entitled to vote thereon, voting together as a single class, in favor of the
adoption of this Agreement, are the only votes of the holders of any class or
series of the capital stock of the Company necessary to adopt this Agreement
and approve the Merger under applicable law and the Company's Certificate of
Incorporation and Bylaws.
3.05. CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of the
Company consists of (i) 100,000,000 shares of Company Common Stock, (ii)
50,000,000 shares of Company Class B Common Stock, and (iii) 25,000,000 shares
of preferred stock, par value $0.01 per share (the "Company Preferred Stock").
As of April 30, 1998, there were issued and outstanding 6,897,008 shares of
Company Common Stock and 15,423,859 shares of Company Class B Common Stock.
All such outstanding shares are duly authorized, validly issued and fully paid
and nonassessable. Since April 30, 1998 no shares of Company Stock have been
issued except upon exercise of options outstanding on such date or restricted
stock or purchases pursuant to the Employee Stock Purchase Plan. There are no
shares of Company Preferred Stock issued and outstanding. There are no
preemptive or other similar rights available to the existing holders of the
capital stock of the Company. Other than options, restricted stock and shares
granted or issuable pursuant to the Employee Stock Purchase Plan, the Company
Option Plans, and the Company's restricted stock plan, or other than as
contemplated by this Agreement, there are no outstanding options, warrants,
rights, puts, calls, commitments, or other Contracts issued by or binding upon
the Company or any of its Subsidiaries requiring or providing for, and there
are no outstanding debt or equity securities of the Company or its
Subsidiaries which, upon the conversion, exchange or exercise thereof, would
require or provide for, the issuance, transfer or sale by the Company or any
of its Subsidiaries of any new or additional equity interests in the Company,
PBC or the Broadcasting Subsidiaries (or any other securities of the Company
which, with notice, lapse of time or payment of monies, are or would be
convertible into or exercisable or exchangeable for equity interests in the
Company, PBC or the Broadcasting Subsidiaries). Except for the Voting Trust
Agreement, dated June 19, 1995 (as it may be amended to permit conversion of
Company Class B Common Stock to Company Common Stock in accordance with the
Company's certificate of incorporation), between certain holders of the
Company Class B Common Stock and the Trustees (as defined therein), and except
as otherwise contemplated by this Agreement, there are no voting trusts or
other agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the voting of capital stock of the
Company.
(b) As of the date of this Agreement, the authorized capital stock of Newco
consists of 1,000 common shares, par value $100 per share (the "Newco Common
Shares"). Upon the filing of the Newco Charter Amendment with the Secretary of
State of the State of Delaware, the authorized capital stock of Newco will
consist of (i) 100,000,000 shares of Newco Common Stock; (ii) 100,000,000
shares of Newco Class B Common Stock; and (iii) 100,000,000 shares of
preferred stock, par value $0.01 per share, (the "Newco Preferred Stock"). As
of the date of this Agreement, there are issued and outstanding 100 Newco
Common Shares, all of which are owned by the Company, and no other shares of
capital stock of Newco.
3.06. SEC REPORTS. The Company has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission (the
"SEC") since January 1, 1997 (collectively, the "Company's SEC Reports"). The
Company's SEC Reports have complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act. As of
their respective dates, none of the Company's SEC Reports, including any
financial statements or schedules included or incorporated by reference
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therein, contained any untrue statements of a material fact or omitted to
state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.07. FINANCIAL STATEMENTS. The (i) audited consolidated financial
statements of the Company contained in the Company's Annual Report on Form 10-
K for the fiscal year ended December 28, 1997 (the "Company 10-K"), and (ii)
unaudited condensed consolidated financial statements of the Company contained
in the Company's Quarterly Report on Form 10-Q for the three months ended
March 29, 1998 (the "Company 10-Q" and together with the Company 10-K, the
"Company Financial Statements"), present fairly, in all material respects, the
Company's consolidated financial position and the results of its consolidated
operations and its consolidated cash flows as of the relevant dates thereof
and for the periods covered thereby in accordance with GAAP (subject to normal
year-end adjustments in the case of the unaudited interim financial
statements).
3.08. ABSENCE OF CERTAIN CHANGES. Since the date of the balance sheet
included in the Company 10-Q, except as contemplated or disclosed by this
Agreement, the Company and its Subsidiaries have conducted their respective
businesses in the ordinary course of business consistent with past practice,
and there has not been any change, event or condition of any character that,
individually or in the aggregate, has or would reasonably be expected to have
a Material Adverse Effect on the Company and its Subsidiaries taken as a whole
or materially interfere with or delay the Transactions.
3.09. ABSENCE OF UNDISCLOSED LIABILITIES. To the knowledge of the Company,
except as set forth in Schedule 3.09 or otherwise disclosed in this Agreement,
neither the Company nor any of its Subsidiaries has any obligation or
liability of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, of a type required by GAAP to be
disclosed in a balance sheet of the Company or any of its Subsidiaries except
(i) such liabilities and obligations that are reflected in the Company
Financial Statements or disclosed in the notes thereto, (ii) liabilities and
obligations incurred in the ordinary course of business after March 29, 1998,
and (iii) liabilities and obligations that will not, individually or in the
aggregate, have a Material Adverse Effect on Broadcasting or on the Retained
Business taken as a whole or materially interfere with or delay the
Transactions.
3.10. COMPLIANCE WITH LAW. The Company and its Subsidiaries (other than the
Broadcasting Subsidiaries) hold all Licenses from all governmental authorities
necessary for the lawful conduct of their respective businesses, except where
the failure to hold any such License would not have a Material Adverse Effect
on Broadcasting or on the Retained Business taken as a whole or materially
interfere with or delay the Transactions. To the Company's knowledge, the
Company has not violated, and is not in violation of, any such Licenses or any
applicable Laws of any governmental authorities, except where such violations
do not and, insofar as reasonably can be foreseen, will not have a Material
Adverse Effect on Broadcasting or on the Retained Business taken as a whole or
materially interfere with or delay the Transactions.
3.11. TAXES.
(a) All Company Consolidated Income Tax Returns and any other material Tax
Returns of the Company and Broadcasting required to have been filed on or
before the date hereof have been filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns were required to have
been filed. All of such Tax Returns were true, correct and complete in all
material respects and all Taxes shown to be due on such Tax Returns have been
paid. All material Taxes payable by or with respect to the Company and its
Subsidiaries but not reflected on any Tax Return required to have been filed
prior to the date of the most recent balance sheet included in the Company 10-
Q have been fully paid or adequate provision therefor has been made and
reflected on such balance sheet.
(b) Except as set forth on Schedule 3.11(b) hereto, there is no claim or
investigation involving an amount greater than $1,000,000 pending or
threatened against the Company or any of its Subsidiaries for past Taxes, and
adequate provision for the claims or investigations set forth on Schedule
3.11(b) has been made as reflected on the Company Financial Statements. Except
as set forth on Schedule 3.11(b), neither the Company nor any of
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its Subsidiaries has waived or extended any applicable statute of limitations
relating to the assessment of federal, state or local Taxes of the Company or
any of its Subsidiaries, respectively.
(c) The Company is not, and on the Closing Date will not be, an investment
company within the meaning of Section 368(a)(2)(F)(iii) and (iv) of the Code.
(d) Except for the Technical Advice Request currently pending with the IRS
relating to the examination of the 1993 and 1994 Company Consolidated Income
Tax Returns and the Closing Agreement executed by the Company on May 11, 1994,
a copy of which has been furnished to Acquiror, neither the Company nor any
Broadcasting Subsidiary has pending a Tax Ruling Request (as defined below)
other than in connection with the Contribution, Distribution and Merger or
entered into a Closing Agreement (as defined below) with the IRS. "Tax Ruling
Request," as used in this Agreement, shall mean a request for a written ruling
of a Taxing authority relating to Taxes. "Closing Agreement," as used in this
Agreement, shall mean a material written and legally binding agreement with
the IRS relating to Taxes.
(e) Neither the Company nor any Broadcasting Subsidiary has, with regard to
any assets or property held or acquired by any of them, filed a consent to the
application of Section 341(f)(2) of the Code, or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by the Company or
any Broadcasting Subsidiary.
3.12. LITIGATION. Except as is set forth on Schedule 3.12, there is no suit,
action, proceeding or investigation pending against or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries (other than the Broadcasting Subsidiaries) or any of their
respective material properties nor, to the knowledge of the Company, is there
any judgment, decree, inquiry, rule or order outstanding against the Company
or any of its Subsidiaries (other than the Broadcasting Subsidiaries) that
would reasonably be expected to have a Material Adverse Effect on Broadcasting
or on the Retained Business taken as a whole, or materially interfere with or
delay the Transactions.
3.13. BROKERS AND FINDERS. Neither the Company, Newco nor any officer,
director or employee or Affiliate of the Company or Newco has employed any
investment banker, broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the
Transactions, except that the Company has employed Goldman Sachs and Huntleigh
as its financial advisors. The Company has previously provided to Acquiror a
written estimate of the Deal Expenses, which estimate was prepared in good
faith.
3.14. ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.14, to the
knowledge of the Company there are no Environmental Liabilities of the Company
or any of its Subsidiaries (other than the Broadcasting Subsidiaries) that,
individually or in the aggregate, may reasonably be expected to have a
Material Adverse Effect on Broadcasting or on the Retained Business taken as a
whole or may materially interfere with or delay the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING BROADCASTING
The Company represents and warrants to Acquiror as follows:
4.01. ORGANIZATION AND AUTHORITY. Each of PBC and the Broadcasting
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation. Each of PBC and the
Broadcasting Subsidiaries is qualified to do business as a corporation and is,
where applicable, in good standing, in each jurisdiction where such
qualification is necessary except where the failure to so qualify would not
reasonably be expected to have a Material Adverse Effect on Broadcasting. Each
of PBC and the Broadcasting Subsidiaries has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to have such power
or authority would not have a Material Adverse Effect on Broadcasting. The
Company has heretofore delivered to Acquiror true and complete copies of the
certificates of incorporation and bylaws of PBC and each Broadcasting
Subsidiary as currently in effect.
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4.02. CAPITALIZATION. All of the issued and outstanding shares of capital
stock of PBC are owned directly by the Company, free and clear of any Liens,
and are duly authorized, validly issued and fully paid and nonassessable. All
of the issued and outstanding shares of capital stock of the Broadcasting
Subsidiaries are owned, directly or indirectly, by PBC, free and clear of any
Liens, and are duly authorized, validly issued and fully paid and
nonassessable. Other than as contemplated by this Agreement, there are no
outstanding options, warrants, rights, puts, calls, commitments, or other
Contracts issued by or binding upon PBC or any Broadcasting Subsidiary
requiring or providing for, and there are no outstanding debt or equity
securities of PBC or any Broadcasting Subsidiary which upon the conversion,
exchange or exercise thereof would require or provide for, the issuance,
transfer or sale by PBC or any Broadcasting Subsidiary of any new or
additional equity interests in PBC or the Broadcasting Subsidiaries (or any
other securities of PBC or any Broadcasting Subsidiary which, with notice,
lapse of time or payment of monies, are or would be convertible into or
exercisable or exchangeable for equity interests in PBC or such Broadcasting
Subsidiary). There are no voting trusts or other agreements or understandings
to which the Company, PBC or any of the Broadcasting Subsidiaries is a party
with respect to the voting of the capital stock of PBC or the Broadcasting
Subsidiaries. PBC and the Broadcasting Subsidiaries have not engaged in any
material respect in any businesses or other activities except for the
ownership and operation of broadcast radio and/or television stations and
other activities incidental thereto.
4.03. FINANCIAL STATEMENTS. The unaudited "Summary Financial Data,"
"Consolidated Income Statement," "Statement of Net Assets" and "1998 Four
Period Results" (collectively, the "Broadcasting Unaudited Financial
Statements") contained in Schedule 4.03 were prepared from the books and
records of Broadcasting which books and records were maintained in accordance
with accounting principles consistently applied and present fairly, in all
material respects, the financial position of Broadcasting as at the dates
thereof and the results of operations and cash flows for the periods covered
thereby.
4.04. ABSENCE OF CERTAIN CHANGES. Since March 29, 1998, except as
contemplated or disclosed by this Agreement, Broadcasting has conducted its
business in the ordinary course consistent with past practice and there has
not been any change, event or condition of any character that, individually or
in the aggregate, has or would reasonably be expected to have a Material
Adverse Effect on Broadcasting or materially interfere with or delay the
Transactions.
4.05. ABSENCE OF UNDISCLOSED LIABILITIES. To the knowledge of the Company,
except as set forth in Schedule 4.05 or as otherwise disclosed in this
Agreement, Broadcasting has no obligations or liabilities except (i) such
liabilities and obligations that are reflected in the Broadcasting Unaudited
Financial Statements or disclosed in the notes thereto, (ii) liabilities and
obligations incurred in the ordinary course of business after March 29, 1998,
and (iii) liabilities and obligations that will not, individually or in the
aggregate, have a Material Adverse Effect on Broadcasting or materially
interfere with or delay the Transactions.
4.06. COMPLIANCE WITH LAW. Subject to the renewal of certain Licenses as
indicated on Schedule 4.06, PBC and the Broadcasting Subsidiaries hold all
Licenses from all governmental authorities necessary for the lawful conduct of
Broadcasting's business, including any activity ancillary or incidental to the
ownership or operations of the Stations, except where the failure to hold any
such License would not have a Material Adverse Effect on Broadcasting or
materially interfere with or delay the Transactions. The material Licenses
held by Broadcasting are set forth on Schedule 4.06. To the Company's
knowledge, neither PBC nor any of the Broadcasting Subsidiaries has violated,
or is in violation of, any such Licenses or any Laws of any governmental
authorities that are applicable to Broadcasting or to the operation of the
Stations or the other Broadcasting Assets, except where such violations do
not, and insofar as reasonably can be foreseen will not, have a Material
Adverse Effect on Broadcasting or materially interfere with or delay the
Transactions.
4.07. STATION NETWORK AFFILIATION AGREEMENTS. Each Station Network
Affiliation Agreement listed on Schedule 4.07 hereto is the validly existing,
legally enforceable obligation of each Broadcasting party thereto and, to the
knowledge of the Company, each other party thereto, subject to the
Enforceability Exceptions. PBC and each Broadcasting Subsidiary are validly
and lawfully operating under each Station Network Affiliation Agreement to
which it is a party, and PBC and each Broadcasting Subsidiary have
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duly complied in all material respects with all of the terms and conditions of
each Station Network Affiliation Agreement to which it is a party. The Company
is not aware of any third party breach or default (or other act or omission
that with notice, passage of time or both would constitute a default) under
any Station Network Affiliation Agreement.
4.08. CONDITION OF ASSETS; TITLE TO PROPERTIES; ENCUMBRANCES.
(a) The material tangible personal Broadcasting Assets are in the possession
of PBC and the Broadcasting Subsidiaries and, taking into account the age of
such Broadcasting Assets, are in good operating condition and repair,
structurally sound, adequate for the uses and purposes for which they are
being used or intended, and are available for immediate use in the operation
of the Stations, and, except as would be natural taking into account the age
of such Broadcasting Assets, none of such Broadcasting Assets requires
maintenance or repairs other than ordinary, routine maintenance and repairs.
Except for the representations and warranties expressly stated in Articles III
and IV of this Agreement, the Company disclaims all representations and
warranties, express or implied, with respect to the Broadcasting Assets
described in this Section 4.08(a), including all implied warranties of
merchantability or fitness for a particular purpose.
(b) PBC and the Broadcasting Subsidiaries are the exclusive holders of all
(and none of the Company or its Newspaper Subsidiaries holds any) rights (or
leasehold interests, as the case may be) in or to all Real Property and
personal, tangible and intangible property and assets primarily used or held
for use in the ownership and operation of the Stations owned or operated by
Broadcasting except in the case of title to Real Property which is covered in
Section 4.08(d). PBC and each Broadcasting Subsidiary has good and valid title
(or valid leasehold interest in, in the case of leased personal property) to
their respective personal property, free and clear of all Liens except the
following (collectively, the "Permitted Exceptions"): (i) materialmen's,
mechanics', carriers', workmen's, warehousemen's, repairmen's, or other like
Liens arising in the ordinary course of business, or deposits to obtain the
release of such Liens; (ii) Liens for current taxes not yet due and payable or
to the extent the taxpayer is contesting such taxes in good faith through
appropriate proceedings; (iii) Liens or minor imperfections of title that do
not materially impair the continued use and operation of the assets to which
they relate and do not have a Material Adverse Effect on Broadcasting; (iv) in
the case of leased personal property, the terms and conditions of such lease;
and (v) the exceptions set forth on Schedules 4.08(b) and 4.08(d)(2) hereto.
Except as would not result in any Material Adverse Effect on Broadcasting, PBC
and each Broadcasting Subsidiary owns or has the lawful right to use all
property necessary to operate their businesses lawfully and to maintain the
same as presently conducted.
(c) Schedule 4.08(c) lists all leases of personal property leased by PBC or
the Broadcasting Subsidiaries, including all such leases with related parties
or Affiliates, pursuant to which PBC or a Broadcasting Subsidiary is obligated
to make lease payments in excess of $100,000 per year. Correct and complete
copies of such leases have heretofore been made available to Acquiror. Except
as would not result in a Material Adverse Effect on Broadcasting, (i) all of
such leases are valid and in full force and effect, (ii) neither PBC and the
Broadcasting Subsidiaries nor, to the knowledge of the Company, any other
party thereto is in default under any of such leases, and (iii) no event has
occurred which with the giving of notice or the passage of time or both would
constitute a default under any of such leases.
(d) Schedule 4.08(d)(1) lists (y) each parcel of owned Real Property with a
book value in excess of $1,000,000, as reflected in the audited financial
statements of the Company contained in the Company 10-K, and (z) each lease of
Real Property pursuant to which PBC or a Broadcasting Subsidiary is currently
obligated to make payments of fixed rent in excess of $100,000 per annum. To
the knowledge of the Company, either PBC or the Broadcasting Subsidiaries has
fee title to, or holds by valid and existing lease or license, the Real
Property, free and clear of all Liens except for such Liens: (i) which would
not have a Material Adverse Effect on Broadcasting; (ii) which are set forth
on Schedule 4.08(d)(2); (iii) which arise out of taxes or general or special
assessments not yet due and payable or the validity of which is being
contested in good faith by appropriate proceedings; or (iv) which are
materialmen's, mechanics', carriers', workmen's, repairmen's, warehouseman's
or other like Liens which would not have a Material Adverse Effect on
Broadcasting. The Company has made
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available to Acquiror complete and accurate copies of all deeds, leases and
other material agreements with respect to the Real Property. To the knowledge
of the Company, there does not exist under any leases of Real Property any
default beyond any applicable notice and grace period by PBC or any
Broadcasting Subsidiary which would have a Material Adverse Effect on
Broadcasting.
(e) To the knowledge of the Company, neither PBC nor the Broadcasting
Subsidiaries has received written notice from any governmental or quasi-
governmental authority with respect to any actual or threatened taking of any
material portion of the Real Property for any purpose by the exercise of the
right of condemnation or eminent domain.
(f) To the knowledge of the Company, the Real Property has not suffered any
material damage by fire or other casualty that has not heretofore been
repaired.
4.09. LITIGATION. Except as is set forth in Schedule 4.09 hereto, there is
no suit, action, proceeding or investigation pending against or, to the
knowledge of the Company, threatened against or affecting PBC or any
Broadcasting Subsidiary or any of their respective material properties (except
for proceedings or investigations affecting the television or radio industries
generally) that would reasonably be expected to adversely affect the validity
or enforceability of any of the material Licenses of, or otherwise to have a
Material Adverse Effect on, Broadcasting nor is there any judgment, decree,
inquiry, rule or order outstanding against PBC or any Broadcasting Subsidiary
that would reasonably be expected to have a Material Adverse Effect on
Broadcasting, materially interfere with or delay the Transactions or have an
adverse effect on the validity or enforceability of any of the material
Licenses of Broadcasting or the Station Network Affiliation Agreements.
4.10. EMPLOYEE BENEFIT MATTERS.
(a) Schedule 4.10(a) lists each Employee Plan which is currently sponsored,
maintained or contributed to by the Company, any of its Subsidiaries or any of
their ERISA Affiliates for the benefit of any Broadcasting Employee (a
"Broadcasting Employee Plan"). For the purposes hereof, the term "Employee
Plan" means any plan, program, contract or arrangement, whether oral or
written, which (i) is an "employee benefit plan," as such term is defined in
Section 3(3) of ERISA, whether or not subject to ERISA, or (ii) is an
incentive, bonus, stock option, stock purchase, phantom stock, severance,
fringe benefit or other compensatory plan, contract, or arrangement that is
not an employee benefit plan within the meaning of Section 3(3) of ERISA. No
Broadcasting Employee Plan is a multiemployer plan within the meaning of
Sections 3(37) and 4001(a)(3) of ERISA.
(b) The Company has delivered or made available to Acquiror true and
complete copies of the plan documents, contracts, policy statements and
summary plan descriptions that currently apply to the operation or funding of
each Broadcasting Employee Plan. With respect to each Broadcasting Employee
Plan (including, without limitation, a plan that is a "pension plan" within
the meaning of Section 3(2) of ERISA (a "Broadcasting Pension Plan")), the
Company has delivered or made available to Acquiror, where applicable, true
and complete copies of (i) the most recent annual report (5500 series) filed
with the IRS or Department of Labor, (ii) the most recent audited financial
statement, (iii) the most recent actuarial valuation report, (iv) the last
determination letter issued by the IRS, and (v) the most recent PBGC-1 filed
with PBGC.
(c) Each Broadcasting Employee Plan described in Section 6.11(c), (d) or (f)
has been maintained and administered substantially in accordance with its
terms and with the provisions of applicable law and, with respect to each such
Broadcasting Employee Plan, (i) no application, proceeding or other matter is
pending before the IRS, the Department of Labor, PBGC or any other
governmental agency, (ii) there is no pending action, suit, proceeding or
claim (other than routine claims for benefits) that could reasonably be
expected to give rise to a material liability or expense of the Company or
PBC, and (iii) to the knowledge of the Company, no facts exist that are likely
to result in such an action, suit, proceeding or claim. A favorable IRS
determination letter is currently in effect with respect to each funded
Broadcasting Pension Plan, and no subsequent amendments have been or will be
adopted or other action taken which would adversely affect the qualified
status of any such Broadcasting Pension Plan.
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(d) With respect to each funded employee pension plan (within the meaning of
Section 3(2) of ERISA) maintained by the Company, any of its Subsidiaries or
any of their ERISA Affiliates within six years prior to the date hereof for
the benefit of any of its employees (other than a multiemployer plan within
the meaning of Section 3(37) of ERISA), where applicable, (i) there has been
no termination or partial termination within the meaning of Section 411(d)(3)
of the Code, except to the extent that the Transactions will result in such a
partial termination; (ii) there has been no accumulated funding deficiency,
whether or not waived, within the meaning of Section 302(a)(2) of ERISA or
Section 412 of the Code, and there has been no failure to make a required
installment by its due date under Section 412(m) of the Code; (iii) no non-
exempt prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) has occurred which could result in the imposition of
a material tax or liability against the Company or any of its Subsidiaries;
and (iv) with respect to each such plan which is covered by Title IV of ERISA,
(A) no reportable event within the meaning of Section 4043(c) of ERISA has
occurred, except a reportable event occurring as a result of the consummation
of the transactions contemplated by this Agreement or any prior event which
will not result in a liability to the Company or any of its Subsidiaries or
any of their Affiliates after the consummation of said transactions; (B) no
notice of intent to terminate the plan has been provided to participants or
filed with PBGC under Section 4041 of ERISA, nor has PBGC instituted or
threatened to institute any proceeding under Section 4042 of ERISA to
terminate the plan; and (C) no liability has been incurred under Title IV of
ERISA to PBGC or otherwise (except for the payment of PBGC premiums) which has
not been satisfied. Neither the Company, any of its Subsidiaries nor any of
their ERISA Affiliates has ceased operations at a facility so as to become
subject to the provisions of Section 4068(f) of ERISA, withdrawn as a
substantial employer so as to become subject to the provisions of Section 4063
of ERISA or ceased making contributions on or before the Closing Date to any
such plan which is a pension plan subject to Section 4064(a) of ERISA.
(e) Neither the Company, any of its Subsidiaries nor any of their ERISA
Affiliates has incurred or expects to incur any withdrawal liability under
Title IV of ERISA (either as a contributing employer or as part of a
controlled group which includes a contributing employer) in connection with a
complete or partial withdrawal from a Multiemployer Plan that will be
unsatisfied at the Effective Time; and, with respect to any Multiemployer Plan
to which the Company or any ERISA Affiliate is, or within the preceding six
years, was required to make or accrue a contribution, neither the Company, any
of its Subsidiaries nor any of their ERISA Affiliates has received notice from
such Multiemployer Plan that the plan is in reorganization or insolvency
pursuant to Sections 4241 or 4245 or ERISA or that the plan is intended to
terminate or has terminated under Sections 4041A or 4042 of ERISA.
(f) The Company, its Subsidiaries and each of their ERISA Affiliates has
complied in all material respects with its obligations under the provisions of
Section 4980B of the Code with respect to any group health plan. Except as
identified on Schedule 4.10(a), no Broadcasting Employee Plan provides health
or death benefits (whether or not insured) to Broadcasting Employees beyond
the termination of their employment or other services.
(g) All Broadcasting Employee Plans which provide medical, dental health or
long-term disability benefits are insured and, to the Company's knowledge,
claims with respect to any participant or covered dependent under any such
Broadcasting Employee Plan will not result in any uninsured liability to the
Acquiror, the Company, PBC or any of their Subsidiaries.
4.11. LABOR MATTERS.
(a) Except as set forth on Schedule 4.11(a), neither PBC nor any
Broadcasting Subsidiary is a party to any labor or collective bargaining
agreement and there are no labor or collective bargaining agreements which
pertain to any Broadcasting employees.
(b) Except as set forth on Schedule 4.11(b), as of the date of this
Agreement, (i) no employees of PBC or any of the Broadcasting Subsidiaries are
represented by any labor organization and (ii) no labor organization or group
of employees of PBC or any of the Broadcasting Subsidiaries has made a pending
demand for recognition
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or certification, and there are no representation or certification proceedings
or petitions seeking a representation proceeding presently pending or, to the
knowledge of the Company, threatened to be brought or filed with the NLRB or
any other labor relations tribunal or authority. To the knowledge of the
Company, as of the date of this Agreement, there are no formal organizing
activities involving a material number of Broadcasting employees pending with,
or threatened by, any labor organization.
(c) Except as would not result in a Material Adverse Effect on Broadcasting,
(i) there are no strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances or other material labor disputes pending
or, to the knowledge of the Company, threatened against or involving PBC or
any of the Broadcasting Subsidiaries and (ii) there are no unfair labor
practice charges, grievances or complaints pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of
PBC or any of the Broadcasting Subsidiaries.
4.12. ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 4.12(a), to the knowledge of the Company
there are no Environmental Liabilities of Broadcasting that may reasonably be
expected to have a Material Adverse Effect on Broadcasting or materially
interfere with or delay the Transactions.
(b) Since January 1, 1997 and prior to the date of this Agreement, to the
knowledge of the Company there has been no material environmental assessment
investigation, study, Audit, test, review or other analysis conducted in
relation to the current business of Broadcasting or any property or facility
now owned or leased by Broadcasting which has not been delivered or made
available to Acquiror prior to the date hereof.
4.13. COMPLAINTS. As of the date of this Agreement, there is not, to the
knowledge of the Company, any FCC investigation, notice of apparent liability
or order of forfeiture pending or outstanding against any of the Stations
respecting any violation, or allegation thereof, of any FCC rule, regulation
or policy, or, to the knowledge of the Company, any complaint before the FCC
as a result of which an investigation, notice of apparent liability, or order
of forfeiture may issue from the FCC relating to any of the Stations.
4.14. REPORTS. Excluding reports and statements which do not materially
affect the business and operations of any of the Stations, all reports and
statements currently required to be filed by the Company or any of its
Subsidiaries with the FCC or with any other governmental agency with respect
to the Stations have been filed and substantially complied with and shall
continue to be filed and be in substantial compliance on a current basis until
the Closing Date. All such material reports and statements are substantially
complete and correct as filed, and copies thereof have heretofore been made
available to Acquiror.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company and Newco as follows:
5.01. ORGANIZATION AND AUTHORITY. Acquiror is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation. Acquiror has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to have such power or authority
would not have a Material Adverse Effect on Acquiror and its Subsidiaries
taken as a whole. Acquiror has all requisite corporate power and authority to
execute and deliver this Agreement and, subject to the items referred to in
Sections 5.02 and 5.03, to consummate the Transactions. Subject to the items
referred to in Sections 5.02 and 5.03, all necessary action, corporate or
otherwise, required to have been taken by or on behalf of Acquiror by
applicable law, its charter documents or otherwise to authorize (i) the
approval, execution and delivery on its behalf of this Agreement and (ii) its
performance of its obligations under this Agreement and the consummation of
the Transactions has been taken, except that this Agreement must
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be approved by the stockholders of Acquiror, and the Board of Directors of
Acquiror must increase the size of such Board to comply with the Board
Representation Agreement. Assuming that this Agreement and each Transaction
Agreement constitutes or will constitute, as the case may be, a legal, valid
and binding agreement of the Company or Newco, as the case may be, this
Agreement and each other Transaction Agreement to which Acquiror is or will be
a party constitutes or will constitute, as the case may be, a valid and
binding agreement of Acquiror, enforceable against it in accordance with its
terms, subject to (i) the Enforceability Exceptions and (ii) in the case of
the Board Representation Agreement to the Communications Act of 1934, as
amended (the "Communications Act"), and the rules and regulations thereunder
(the "Rules and Regulations") regarding cross-ownership of radio and
television stations, to the extent that such Rules and Regulations may
prohibit Newco or any of its officers, directors or shareholders from
designating or acting as a director or observer on Acquiror's Board of
Directors. Acquiror has heretofore made available to the Company true and
complete copies of its Certificate of Incorporation and Bylaws as in effect on
the date hereof.
5.02. NO BREACH. The execution and delivery of this Agreement by Acquiror do
not and the consummation of the Transactions by Acquiror will not (i) assuming
that the requisite stockholder approval is obtained, violate or conflict with
its Certificate of Incorporation or Bylaws or (ii) except as set forth on
Schedule 5.02(a) hereto, or subject to obtaining the approvals and making the
filings described in Section 5.03, constitute a breach or default (or an event
which with notice or lapse of time or both would become a breach or default)
of, or give rise to any third-party right of termination, cancellation,
modification or acceleration under, or otherwise require notice or approval
under, any agreement, understanding or undertaking to which Acquiror or any of
its Subsidiaries is a party or by which any of them is bound, or give rise to
any Lien on any of their properties, except where such breach, default, Lien,
third-party right, cancellation, modification or acceleration would not have a
Material Adverse Effect on Acquiror and its Subsidiaries taken as a whole or
materially interfere with or delay the Transactions, or (iii) subject to
obtaining the approvals and making the filings described in Section 5.03
hereof, constitute a violation of any statute, law, ordinance, rule,
regulation, judgment, decree, order or writ of any judicial, arbitral, public,
or governmental authority having jurisdiction over Acquiror or any of its
Subsidiaries or any of their respective properties or assets, except as would
not have a Material Adverse Effect on Acquiror and its Subsidiaries taken as a
whole. Except as set forth on Schedule 5.02(b), neither Acquiror nor any of
its Subsidiaries is a party to or bound by any Contract that restricts or
purports to restrict the ability of any of them or any Affiliate of them to
engage in any location in the business of television broadcasting, except for
such restrictions that would not have a Material Adverse Effect on Acquiror
and its Subsidiaries taken as a whole or materially interfere with or delay
the Transactions.
5.03. CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement by Acquiror nor the consummation of the Transactions by Acquiror
will require any License from, or filing with, or notification to, any
governmental or regulatory authority, except (i) for filings required under
the Securities Act, (ii) for filings required under the Exchange Act, (iii)
for filings required under state securities or "blue sky" laws, (iv) for
filings and approvals required by the rules and regulations of NASDAQ or the
NYSE, as the case may be, (v) for notification pursuant to the HSR Act and
expiration or termination of the waiting period thereunder, (vi) for the
filing of the Certificate of Merger as set forth in Article I hereof, (vii)
for any waiver, consent or declaratory ruling by the FCC with respect to the
Rules and Regulations regarding cross-ownership of radio or television
stations, to the extent that such Rules and Regulations may prohibit (A) Newco
or any of its officers, directors or shareholders from designating or acting
as a director or observer on Acquiror's Board of Directors or (B) a designee
of Newco from serving on the Board of Directors of Acquiror, (viii) for
consents or waivers from the relevant governmental entities necessary to
transfer control of Broadcasting's FCC Licenses to Acquiror, and (ix) where
the failure to obtain such Licenses or to make such filings or notifications,
would not have a Material Adverse Effect on Acquiror and its Subsidiaries
taken as a whole or materially interfere with or delay the Transactions;
PROVIDED, HOWEVER, that no representation or warranty is made with respect to
the foregoing relating to, or arising by reason of, the legal or regulatory
status of the Company or Broadcasting or the respective facts pertaining
specifically to them.
5.04. APPROVAL OF THE BOARD; VOTE REQUIRED. The Board of Directors of
Acquiror has, by resolutions duly adopted at a meeting duly called and held,
unanimously approved and adopted this Agreement,
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the Merger, the Transaction Agreements and the other Transactions on the
material terms and conditions set forth herein. The transactions contemplated
by the Acquiror Voting Agreement have been duly and validly approved by the
Board of Directors of Acquiror prior to the execution and delivery of the
Acquiror Voting Agreement in accordance with Section 203 of the DGCL. The
affirmative vote or action by written consent of a majority of the votes that
holders of the outstanding shares of capital stock of Acquiror are entitled to
cast voting as a single class are the only votes of the holders of any class
or series of the capital stock of Acquiror necessary to approve this
Agreement, the Merger and the Transaction Agreements under applicable law and
Acquiror's Articles of Incorporation and Bylaws.
5.05. CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of
Acquiror consists of: (i) 200,000,000 shares of common stock, par value $.01,
of which 100,000,000 shares are designated as Series A Common Stock and
100,000,000 shares are designated as Series B Common Stock, and (ii) 1,000,000
shares of preferred stock, par value $.01, of which 12,500 shares are
designated as Series A Preferred Stock and 12,500 shares are designated as
Series B Preferred Stock. As of May 13, 1998, there were issued and
outstanding the following shares of such stock: (i) 53,842,377 shares of
common stock outstanding, consisting of 12,543,729 shares of Series A Common
Stock and 41,298,648 shares of Series B Common Stock, and (ii) 21,876 shares
of preferred stock outstanding, consisting of 10,938 shares of Series A
Preferred Stock and 10,938 shares of Series B Preferred Stock. All such
outstanding shares are duly authorized, validly issued and fully paid and
nonassessable. There are no preemptive or other similar rights available to
the existing holders of the capital stock of Acquiror. As of the date of this
Agreement, and other than as set forth on Schedule 5.05(a) or other than as
contemplated by this Agreement, there are no outstanding options, warrants,
rights, puts, calls, commitments, or other Contracts issued by or binding upon
Acquiror or any of its Subsidiaries requiring or providing for, and there are
no outstanding debt or equity securities of Acquiror or its Subsidiaries
which, upon the conversion, exchange or exercise thereof, would require or
provide for the issuance, sale or transfer by Acquiror or any of its
Subsidiaries of any new or additional equity interests in Acquiror or any of
its Subsidiaries (or any other securities of Acquiror which, with notice,
lapse of time or payment of monies, are or would be convertible into or
exercisable or exchangeable for equity interests in Acquiror or any of its
Subsidiaries). Except as described on Schedule 5.05(a), there are no voting
trusts or other agreements or understandings to which Acquiror or any of its
Subsidiaries is a party with respect to the voting of capital stock of
Acquiror.
(b) The shares of Acquiror Common Stock to be issued in the Merger, upon
their issuance in accordance with the terms hereof, will be duly authorized,
validly issued, fully paid and nonassessable and free and clear of all Liens,
other than any Liens created by the stockholders of the Company.
5.06. SEC REPORTS. Acquiror has filed all required forms, reports and
documents required to be filed by it with the SEC since January 1, 1997
(collectively, "Acquiror's SEC Reports") and delivered or made available to
the Company copies thereof. Acquiror's SEC Reports have complied in all
material respects with all applicable requirements of the Securities Act and
the Exchange Act. As of their respective dates, none of the Acquiror's SEC
Reports, including any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
5.07. FINANCIAL STATEMENTS. The (i) audited consolidated financial
statements of Acquiror contained in Acquiror's Annual Report on Form 10-K for
the year ended December 31, 1997 ("Acquiror's 10-K"), and (ii) unaudited
condensed consolidated financial statements of Acquiror contained in
Acquiror's Quarterly Report on Form 10-Q for the three months ended March 31,
1998 ("Acquiror's 10-Q" and together with Acquiror's 10-K, "Acquiror's
Financial Statements"), were prepared in accordance with GAAP and present
fairly, in all material respects, Acquiror's consolidated financial position
and the results of its consolidated operations and its consolidated cash flows
as of the relevant dates thereof and for the periods covered thereby in
accordance with GAAP (subject to normal year-end adjustments in the case of
the unaudited interim financial statements).
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5.08. ABSENCE OF CERTAIN CHANGES. Since the date of the balance sheet of
Acquiror included in Acquiror's 10-Q, except as contemplated or disclosed by
this Agreement, the Acquiror and its Subsidiaries have conducted their
respective businesses in the ordinary course of business consistent with past
practice, and except as contemplated by this Agreement there has not been any
change, event or condition of any character that, individually or in the
aggregate, has or would reasonably be expected to have a Material Adverse
Effect on Acquiror and its Subsidiaries taken as a whole or materially
interfere with or delay the Transactions.
5.09. ABSENCE OF UNDISCLOSED LIABILITIES. To the knowledge of Acquiror,
except as set forth in Schedule 5.09 or otherwise disclosed in this Agreement,
neither Acquiror nor any of its Subsidiaries has any obligation or liability
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, of a type required by GAAP to be disclosed in a
balance sheet of Acquiror or any of its Subsidiaries except (i) such
liabilities and obligations that are reflected in Acquiror's Financial
Statements or disclosed in the notes thereto, (ii) liabilities and obligations
incurred in the ordinary course of business after March 31, 1998, and (iii)
liabilities and obligations that will not, individually or in the aggregate,
have a Material Adverse Effect on Acquiror or its Subsidiaries taken as a
whole or materially interfere with or delay the Transactions.
5.10. COMPLIANCE WITH LAW. Acquiror holds all Licenses from all governmental
authorities necessary for the lawful conduct of its business, except where the
failure to hold any such License would not have a Material Adverse Effect on
Acquiror and its Subsidiaries taken as a whole or materially interfere with or
delay the Transactions. To Acquiror's knowledge, Acquiror has not violated,
and is not in violation of, any such Licenses or any applicable Laws of any
governmental authorities, except where such violations do not and, insofar as
reasonably can be foreseen, will not have a Material Adverse Effect on
Acquiror and its Subsidiaries taken as a whole or materially interfere with or
delay the Transactions.
5.11. TAXES.
(a) All material Tax Returns of Acquiror and its Subsidiaries required to
have been filed on or before the date hereof have been filed with the
appropriate governmental agencies in all jurisdictions in which such Tax
Returns were required to have been filed. All of such Tax Returns were true,
correct and complete in all material respects and all Taxes shown to be due on
such Tax Returns have been paid. All material Taxes payable by or with respect
to Acquiror and its Subsidiaries but not reflected on any Tax Return required
to have been filed prior to the date of Acquiror's Financial Statements have
been fully paid or adequate provision therefor has been made and reflected on
such balance sheet.
(b) Except as set forth on Schedule 5.11(b) hereto, there is no claim or
investigation involving an amount greater than $1,000,000 pending or
threatened against Acquiror or any of its Subsidiaries for past Taxes, and
adequate provision for the claims or investigations set forth on Schedule
5.11(b) has been made as reflected on Acquiror's Financial Statements. Except
as set forth on Schedule 5.11(b), neither Acquiror nor any of its Subsidiaries
has waived or extended any applicable statute of limitations relating to the
assessment of federal, state or local Taxes.
(c) Acquiror is not, and on the Closing Date will not be, an investment
company within the meaning of Section 368(a)(2)(F)(iii) and (iv) of the Code.
5.12. LITIGATION. There is no suit, action, proceeding or investigation
pending against or, to the knowledge of Acquiror, threatened against or
affecting Acquiror or any of its Subsidiaries or any of their respective
properties nor, to the knowledge of Acquiror, is there any judgment, decree,
inquiry, rule or order outstanding against Acquiror or any of its Subsidiaries
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Acquiror and its Subsidiaries taken as a whole, or
materially interfere with or delay the ability of Acquiror to consummate the
Transactions.
5.13. BROKERS AND FINDERS. Neither Acquiror nor any of its officers,
directors, employees or Affiliates has employed any investment banker, broker
or finder or incurred any liability for any brokerage fees, commissions or
finder's fees in connection with the Transactions, except that Acquiror has
employed Credit
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Suisse First Boston Corporation as its financial advisor in connection with
the Transactions and for whose fees and expenses Acquiror is responsible.
5.14. SOLVENCY. After giving effect to the Merger, the New Company Debt and
the other Transactions, Acquiror will not be insolvent and will not have
unreasonably small capital with which to engage in its businesses, and
Acquiror will be able to pay its debts as they come due.
5.15. FCC QUALIFICATION. Except as set forth on Schedule 5.15, Acquiror is,
for purposes of obtaining the approval of the FCC under the Communications
Act, legally, financially and otherwise qualified to acquire control of the
Company and, after due investigation, Acquiror is not aware of any facts or
circumstances relating to Acquiror or any of its Subsidiaries that might
disqualify Acquiror as a transferee of the Licenses, or as owner and operator
of the Broadcasting Assets or otherwise might prevent or delay the prompt
approval of this Agreement, the Transaction Agreements or the Transactions.
ARTICLE VI
OTHER AGREEMENTS
6.01. NO SOLICITATION.
(a) Neither the Company nor any of its Subsidiaries, nor any of its or their
officers, directors, representatives or agents shall, directly or indirectly,
knowingly encourage, solicit, initiate or, except as otherwise provided in
this Section 6.01(a), participate in any way in discussions or negotiations
with or knowingly provide any confidential information to, any Person (other
than Acquiror or any Affiliate or associate of Acquiror and their respective
directors, officers, employees, representatives and agents) concerning any
merger, consolidation, business combination, recapitalization, liquidation or
dissolution of the Company, PBC or any Broadcasting Subsidiary, the sale of
any substantial part of the assets of PBC or any of the Broadcasting
Subsidiaries (other than in the ordinary course of business consistent with
past practice), the sale of any shares of the capital stock of PBC or any of
the Broadcasting Subsidiaries, or the sale of shares representing a
controlling interest of the capital stock of the Company, PBC or the
Broadcasting Subsidiaries or any similar transaction or series of transactions
involving Broadcasting; PROVIDED, HOWEVER, that nothing contained in this
Section 6.01(a) shall prohibit the Board of Directors of the Company from (i)
taking and disclosing to the Company's stockholders a position with respect to
a tender offer for Company Stock by a third party pursuant to Rules 14d-9 and
14e-2 promulgated under the Exchange Act, (ii) making such disclosure to the
Company's stockholders as, in the judgment of the Board of Directors of the
Company, with the advice of outside counsel, may be required under applicable
Law, or (iii) responding to any unsolicited third party proposal or inquiry by
advising the Person making such proposal or inquiry of the terms of this
Section 6.01(a). Notwithstanding anything to the contrary set forth herein,
the Board of Directors of the Company may respond to any Acquisition Proposal
and may provide information and afford access to, and negotiate and hold
discussions with, any Person or group in connection therewith if the Board of
Directors of the Company determines, with the advice of outside counsel, that
it may be required to do so to comply with its fiduciary duties. For purposes
hereof, "Acquisition Proposal" means any proposal, offer or any expression of
interest by any third party relating to a possible transaction described in
this Section 6.01(a) by any Person, other than Acquiror. Subject to the
fiduciary duties of the Company's Board of Directors, in the event that the
Company, Newco or any of their Subsidiaries or any of their respective
officers, directors, employees, representatives or agents receives from any
Person an Acquisition Proposal, the Company shall promptly advise Acquiror of
such Acquisition Proposal and thereafter keep Acquiror reasonably and promptly
informed of all material facts and circumstances relating to the Acquisition
Proposal and the Company's response thereto.
(b) Acquiror will promptly notify the Company and provide it with pertinent
information in the event that Acquiror or any of its Subsidiaries, or any of
its or their officers, directors, representatives or agents (i) solicits,
initiates or participates in any way in discussions or negotiations with, or
provides any confidential information to, any Person or group (other than the
Company or any Affiliate or associate of the Company and their
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respective directors, officers, employees, representatives and agents)
concerning any merger, sale of substantially all of the assets, or the sale of
shares representing a controlling interest of the capital stock of Acquiror,
or any similar transaction or series of transactions involving Acquiror, or
(ii) receives any proposal or inquiry in respect of any such transaction or
any request to provide any such information or hold any such negotiations or
discussions.
6.02. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, the
Company shall not, without the prior written consent of Acquiror:
(a) amend its Certificate of Incorporation or Bylaws;
(b) declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its
capital stock, except for cash dividends declared and paid consistent with
the Company's past practice (except that (i) any Subsidiary of the Company
other than PBC or a Broadcasting Subsidiary may declare and pay dividends
that are payable to the Company or to any other Subsidiary of the Company,
(ii) PBC or any Broadcasting Subsidiary may declare and pay dividends in
cash and cash equivalents that are payable to the Company or to any other
Subsidiary of the Company and (iii) PBC may declare and pay a dividend of
all of the capital stock of Pulitzer Sports Inc. to the Company) or redeem
or acquire any of its securities other than for cash;
(c) except pursuant to the terms of the Company Class B Common Stock, the
Company Option Plans, or the Employee Stock Purchase Plan, split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution of any
shares of its capital stock;
(d) except (x) to the extent that the Company is acting in the ordinary
course of business or is otherwise released therefrom as described in
Section 2.02 or (y) any investment or acquisition relating to the newspaper
business or any activity related thereto, (i) create, incur or assume any
Indebtedness, other than the New Company Debt, not currently outstanding
(including obligations in respect of capital leases), (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
Person or (iii) make any loans, advances or capital contributions to, or
investments in, any Person other than Newco or another Subsidiary;
(e) except pursuant to the terms of the Company Class B Common Stock, the
Company Option Plans, or the Employee Stock Purchase Plan, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other
securities or amend any of the terms of any securities outstanding at the
date hereof;
(f) terminate, amend, modify or waive compliance with any of the terms or
conditions of the Contribution Agreement directly or indirectly respecting
the Retained Assets or the Retained Liabilities or affecting the rights or
obligations of the Company thereunder from and after the Effective Time;
(g) subject to the fiduciary duties of the Board of Directors, terminate,
amend, modify or waive any of the terms or conditions of any
confidentiality agreement in effect as of the date hereof between the
Company and any other prospective acquiror of the Company or Broadcasting,
provided that the Company, PBC or any Broadcasting Subsidiary may waive,
and Acquiror will not enforce after Closing, any restriction on employment
of any employee of the Company, PBC or any Broadcasting Subsidiary who is
not employed by the Acquiror, PBC or any Broadcasting Subsidiary at Closing
or whose employment with any of them is terminated after Closing; or
(h) take, or agree in writing or otherwise to take, any of the foregoing
actions or any other actions that would (i) make any representation or
warranty of the Company or Newco contained in this Agreement untrue or
incorrect, in any material respect, as of the date when made or as of the
Closing Date, (ii) result in any of the conditions to Closing in Article
VII of this Agreement not being satisfied, or (iii) be inconsistent, in any
material respect, with the terms of this Agreement or the Transactions.
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6.03. CONDUCT OF BUSINESS OF BROADCASTING.
(a) Except as contemplated by this Agreement, during the period from the
date hereof to the Closing Date, the Company shall cause PBC and the
Broadcasting Subsidiaries to conduct their operations in the ordinary course
of business consistent with past practices. Without limiting the generality of
the foregoing, except as otherwise contemplated by this Agreement, without the
prior written consent of Acquiror, the Company shall not permit PBC or any of
the Broadcasting Subsidiaries to:
(i) amend its Certificate of Incorporation or Bylaws;
(ii) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other securities or amend any of the terms of any
securities outstanding on the date hereof;
(iii) acquire, lease, sell or dispose of any assets or any FCC Licenses
other than acquisitions, leases, sales or dispositions of inventory and
equipment in the ordinary course of business consistent with past practices
or inventory items expended, depleted or worn out in accordance with
Broadcasting's normal operating procedures;
(iv) except for Permitted Exceptions, subject to any Lien any of its
properties or assets, tangible or intangible;
(v) increase the amount of any cash compensation payable to any employee
if such increase would cause the aggregate cash compensation payable to all
employees on an annualized basis to exceed, by more than 5% percent, the
cash compensation payable by Broadcasting to all employees under its 1998
budget as outlined in Schedule 6.03(a)(v) (PROVIDED that this Section
6.03(a)(v) shall not apply to the employment, bonus and/or severance
agreements made with the corporate executives of PBC and the Station
managers (all of which agreements are listed on Schedule 4.10(a) hereto));
(vi) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, or redeem or otherwise acquire any of its securities,
except as provided in Sections 6.24 and 6.02(b);
(vii) fail to maintain the Broadcasting Assets in the condition specified
in Section 4.08(a) hereof;
(viii) by any act or omission to act within its reasonable knowledge and
power, surrender, modify, adversely affect or forfeit any of the material
Licenses;
(ix) enter into or amend any program license or program contract for any
Station which will be in effect after the Effective Time, or enter into or
amend any other contract or agreement which, in each case, will be in
effect after the Effective Time and requiring payments to or by PBC or any
of the Broadcasting Subsidiaries of more than $250,000;
(x) (i) create, incur or assume any Indebtedness not currently
outstanding (including obligations in respect of capital leases), (ii)
except in the ordinary course of business, assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, or (iii) except in the
ordinary course of business, make any loans, advances or capital
contributions to, or investments in, any Person other than Newco or another
Subsidiary; or
(xi) take, or agree in writing or otherwise to take, any of the foregoing
actions or any other action that would (i) make any representation or
warranty of the Company or Newco contained in this Agreement untrue or
incorrect, in any material respect, as of the date when made or as of the
Closing Date, (ii) result in any of the conditions to Closing in Article
VII of this Agreement not being satisfied or (iii) be inconsistent, in any
material respect, with the terms of this Agreement or the Transactions.
(b) The Company shall use its commercially reasonable efforts to: (i)
maintain the present operations of the Stations; (ii) preserve intact the
business organization of the Stations; and (iii) preserve for the Stations the
existing relationships with employees, suppliers, customers and their agencies
and others having business with the Stations.
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(c) Prior to the Effective Time, control of the television and radio
operations of PBC and the Broadcasting Subsidiaries shall remain with the
Company. The Company and Acquiror acknowledge and agree that neither Acquiror
nor any of its employees, agents or representatives, directly or indirectly,
shall, or have any right to, control, direct or otherwise supervise, or
attempt to control, direct or otherwise supervise, such broadcast operations;
it being understood that at all times prior to the Effective Time, supervision
of all programs, equipment and operations shall remain within the complete
control and discretion of the Company.
(d) The Company shall use its commercially reasonable efforts to cause
Broadcasting to maintain in full force and effect the Station Network
Affiliation Agreements set forth on Schedule 4.07 hereto.
6.04. CONDUCT OF BUSINESS OF ACQUIROR. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date,
Acquiror will not, without the prior written consent of the Company;
(a) amend its certificate of incorporation (other than to provide for the
issuance of preferred stock and to increase its authorized shares of common
stock or any series thereof);
(b) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class;
PROVIDED, HOWEVER, that Acquiror may (i) issue shares of its capital stock
upon the exercise of options outstanding on the date hereof, (ii) grant
options to purchase shares of its capital stock (and issue any shares of
capital stock upon exercise of such options) pursuant to employee compensation
arrangements consistent with past practices, (iii) issue shares of common
stock upon conversion of any shares of capital stock, and (iv) issue shares of
capital stock at or above fair market value;
(c) declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, except for dividends declared and paid consistent with Acquiror's past
practice;
(d) (i) enter into a transaction or (ii) except for Indebtedness incurred in
connection with Section 2.01(b), create, incur or assume any Indebtedness not
currently outstanding (including obligations in respect of capital leases but
excluding indebtedness incurred in refinancing, replacement or substitution of
indebtedness that is currently outstanding) that in the case of clauses (i) or
(ii) would result in a down-grading below investment grade in the rating of
any rated debt securities of the Company by both Standard & Poors Corporation
and Moody's Investors Service;
(e) sell, lease or dispose of any assets material to Acquiror and its
Subsidiaries taken as a whole, other than (i) sales of inventory in the
ordinary course of business consistent with past practices and (ii) in
connection with or in exchange for acquisitions of assets related to the
business of Acquiror;
(f) make any material change in the lines of business in which it
participates or is engaged; or
(g) take, or agree in writing or otherwise to take, any of the foregoing
actions or any other actions that would (i) make any representation or
warranty of Acquiror contained in this Agreement untrue or incorrect, in any
material respect, as of the date when made or as of the Closing Date, (ii)
result in any of the conditions to Closing in Article VII of this Agreement
not being satisfied in any material respect or (iii) be inconsistent, in any
material respect, with the terms of this Agreement or the Transactions.
6.05. ACCESS TO INFORMATION. Between the date of this Agreement and the
Effective Time, (a) the Company and Acquiror will each (i) give the other
party and its authorized representatives reasonable access, during regular
business hours upon reasonable notice, to all offices and other facilities of
such party and its Subsidiaries and to all books and records of such party and
its Subsidiaries, (ii) permit the other party to make such reasonable
inspections of the offices, facilities, books and records described in clause
(i) as it may require, (iii) cause its officers and those of its Subsidiaries
to furnish the other party with such financial and operating data and other
information with respect to the business and properties of the Company and
Broadcasting, or Acquiror and its Subsidiaries, as the case may be, as the
other party may, from time to time, reasonably request,
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and (iv) permit Acquiror to conduct, at its expense, environmental tests and
assessments and (b) Acquiror will keep the Company informed, and the Company
will keep Acquiror informed, in each case as to material developments
affecting the other party and its Subsidiaries. All such access and
information obtained by Acquiror and its authorized representatives shall be
subject to the terms and conditions of the letter agreement between the
Company and Acquiror dated in February 1998 (the "Confidentiality Agreement").
All such information obtained by the Company and its authorized
representatives, and, after the Closing, all other information regarding the
Broadcasting Assets, or its business and operations which Newco or any of its
Subsidiaries possesses or has access to (including pursuant to Section 6.17),
shall be treated in accordance with the terms of the Confidentiality Agreement
as if such agreement obligated such Persons to hold such information
confidential on the same basis as set forth therein MUTATIS MUTANDIS and
Acquiror and its Subsidiaries were beneficiaries of such obligations.
6.06. SEC FILINGS.
(a) The Company, Newco and Acquiror shall prepare jointly and, as soon as
practicable after the date of this Agreement, file with the SEC a joint proxy
statement/registration statement (the "Preliminary Joint Proxy
Statement/Prospectus") comprising preliminary proxy materials of the Company
and Acquiror under the Exchange Act with respect to the Merger and the
Transactions and Registration Statement on Form S-4 containing a preliminary
prospectus of Acquiror under the Securities Act with respect to the Merger
Stock, and will thereafter use their respective reasonable best efforts to
respond to any comments of the SEC with respect thereto and to cause a
definitive joint proxy statement/prospectus (including all supplements and
amendments thereto, the "Joint Proxy Statement/Prospectus") and proxy to be
mailed to the Company's and Acquiror's stockholders as promptly as
practicable.
(b) As soon as practicable after the date hereof, the Company, Newco and
Acquiror shall prepare and file any other filings required to be filed by each
under the Exchange Act, any other federal or state laws, or the rules and
regulations of the NYSE or NASDAQ, relating to the Merger, the Contribution
and the Distribution, and the other Transactions, including in the case of
Newco, an Information Statement on Form 10 under the Exchange Act with respect
to the Newco Common Stock (collectively, the "Other Filings") and will use
their respective reasonable best efforts to respond to any comments, if any,
of the SEC or any other appropriate government official with respect thereto.
(c) The Company, Newco and Acquiror shall cooperate with each other and
provide to each other all information necessary in order to prepare the
Preliminary Joint Proxy Statement/Prospectus, the Joint Proxy
Statement/Prospectus and the Other Filings (collectively, the "SEC Filings")
and shall provide promptly to the other party any information that such party
may obtain that could necessitate amending any such document.
(d) The Company and Acquiror will notify the other party promptly of the
receipt of any comments from the SEC or its staff or any other government
official and of any requests by the SEC or its staff or any other government
official for amendments and/or supplements to any of the SEC Filings or for
additional information and will supply the other party with copies of all
correspondence between the Company or any of its representatives, Newco or any
of its representatives, or Acquiror or any of its representatives, as the case
may be, on the one hand, and the SEC or its staff or any other government
official, on the other hand, with respect thereto. If at any time prior to the
Effective Time, any event shall occur that should be set forth in an amendment
of, or a supplement to, any of the SEC Filings, the Company, Newco and
Acquiror agree promptly to prepare and file such amendment or supplement and
to distribute such amendment or supplement as required by applicable law,
including, in the case of an amendment or supplement to the Joint Proxy
Statement/Prospectus, mailing such supplement or amendment to the Company's
and Acquiror's stockholders.
(e) The information provided and to be provided by the Company, Newco and
Acquiror for use in SEC Filings shall at all times prior to the Effective Time
be true and correct in all material respects and shall not omit to state any
material fact required to be stated therein or necessary in order to make such
information in light of the circumstances under which they were made, not
false or misleading, and the Company, Newco and Acquiror
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each agree to correct any such information provided by it for use in the SEC
Filings that shall have become false or misleading. Each SEC Filing, when
filed with the SEC or any government official, shall comply in all material
respects with all applicable requirements of law.
(f) Acquiror shall indemnify, defend and hold harmless the Company and
Newco, each of their officers and directors and each other Person, if any, who
controls any of the foregoing within the meaning of the Exchange Act, against
any losses, claims, damages or liabilities, joint or several, to which any of
the foregoing may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (i) an untrue statement or
alleged untrue statement of a material fact contained in any SEC Filing or
(ii) the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, PROVIDED that
Acquiror was responsible for such misstatement or omission, and, upon request
from time to time, Acquiror shall reimburse the Company, Newco and each such
officer, director and controlling Person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action or enforcing this
indemnity.
(g) Newco (and, if this Agreement is terminated prior to the consummation of
the Merger, the Company, jointly and severally with Newco) shall indemnify,
defend and hold harmless Acquiror, each of its officers and directors and each
other Person, if any, who controls any of the foregoing within the meaning of
the Exchange Act, against any losses, claims, damages or liabilities, joint or
several, to which any of the foregoing may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
an untrue statement or alleged untrue statement of a material fact contained
in any SEC Filing or (ii) the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, PROVIDED that the Company or Newco was responsible for such
misstatement or omission, and, upon request from time to time, Newco (and, if
this Agreement is terminated prior to the consummation of the Merger, the
Company) shall reimburse Acquiror and each such officer, director and
controlling Person for any legal or any other expenses reasonably incurred by
any of them in connection with investigating or defending any such loss,
claim, damage, liability or action or enforcing this indemnity.
(h) For the purpose of this Section 6.06, the term "Indemnifying Party"
shall mean the party having an obligation hereunder to indemnify the other
party pursuant to this Section 6.06, and the term "Indemnified Party" shall
mean the party having the right to be indemnified pursuant to this Section
6.06. Whenever any claim shall arise for indemnification under this Section
6.06, the Indemnified Party shall promptly notify the Indemnifying Party in
writing of such claim and, when known, the facts constituting the basis for
such claim (in reasonable detail). Failure by the Indemnified Party to so
notify the Indemnifying Party shall not relieve the Indemnifying Party of any
liability hereunder except to the extent that such failure prejudices the
Indemnifying Party.
(i) After such notice, if the Indemnifying Party undertakes to defend any
such claim, then the Indemnifying Party shall be entitled, if it so elects, to
take control of the defense and investigation with respect to such claim and
to employ and engage attorneys of its own choice and reasonably acceptable to
the Indemnified Party to handle and defend the same, at the Indemnifying
Party's cost, risk and expense, upon written notice to the Indemnified Party
of such election, which notice acknowledges the Indemnifying Party's
obligation to provide indemnification hereunder. The Indemnifying Party shall
not settle any third-party claim that is the subject of indemnification
without the prior written consent of the Indemnified Party, which consent
shall not be unreasonably withheld; PROVIDED, HOWEVER, that the Indemnifying
Party may settle a claim without the Indemnified Party's consent if such
settlement (i) makes no admission or acknowledgment of liability or
culpability with respect to the Indemnified Party, (ii) includes a complete
release of the Indemnified Party and (iii) does not require the Indemnified
Party to make any payment or forego or take any action or otherwise materially
adversely affect the Indemnified Party. The Indemnified Party shall cooperate
in all reasonable respects with the Indemnifying Party and its attorneys in
the investigation, trial and defense of any lawsuit or
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action with respect to such claim and any appeal arising therefrom (including
the filing in the Indemnified Party's name of appropriate cross claims and
counterclaims). The Indemnified Party may, at its own cost, participate in any
investigation, trial and defense of such lawsuit or action controlled by the
Indemnifying Party and any appeal arising therefrom. If, after receipt of a
notice of claim pursuant to Section 6.06(h), the Indemnifying Party does not
undertake to defend any such claim, the Indemnified Party may, but shall have
no obligation to, contest any lawsuit or action with respect to such claim and
the Indemnifying Party shall be bound by the result obtained with respect
thereto by the Indemnified Party (including the settlement thereof without the
consent of the Indemnifying Party). If there are one or more legal defenses
available to the Indemnified Party that conflict with those available to the
Indemnifying Party or there is otherwise an actual or potential conflict of
interest, the Indemnified Party shall have the right, at the expense of the
Indemnifying Party, to assume the defense of the lawsuit or action; PROVIDED,
HOWEVER, that the Indemnified Party may not settle such lawsuit or action
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.
(j) If the indemnification provided for in this Section 6.06 shall for any
reason be unavailable to the Indemnified Party in respect of any loss, claim,
damage or liability, or action referred to herein, then the Indemnifying Party
shall, in lieu of indemnifying the Indemnified Party, contribute to the amount
paid or payable by the Indemnified Party as a result of such loss, claim,
damage or liability, or action in respect thereof, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and the Indemnified Party on the other hand with respect to the
statements or omissions that resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to whether the untrue or alleged untrue statement or omission of a material
fact related to information supplied by the Indemnifying Party on the one hand
or the Indemnified Party on the other hand, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by the
Indemnified Party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this paragraph shall be deemed
to include, for purposes of this paragraph, any legal or other expenses
reasonably incurred by the Indemnified Party in connection with investigating
or defending any such action or claim or enforcing this provision. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
6.07. REASONABLE BEST EFFORTS. Subject to the other terms and conditions
hereof, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Transactions contemplated by
this Agreement in the most expeditious manner practicable, including the
satisfaction of all conditions to the Merger and the other Transactions and
seeking to remove promptly any injunction or other legal barrier that may
prevent or delay such consummation. Each of the parties shall promptly notify
the other whenever a material consent is obtained and shall keep the other
informed as to the progress in obtaining such material consents.
6.08. PUBLIC ANNOUNCEMENTS. Except as otherwise may be required by law, no
party hereto shall make any public announcements or otherwise communicate with
any news media with respect to this Agreement or any of the Transactions
without such prior consultation with the other parties as to the timing and
content of any such announcement as may be reasonable under the circumstances;
PROVIDED, HOWEVER, that nothing contained herein shall prevent any party from
promptly making all filings with governmental authorities as may, in its
judgment, be required or advisable in connection with the execution and
delivery of this Agreement, the Transaction Agreements or the consummation of
the Transactions.
6.09. TAX MATTERS.
(a) INDEMNIFICATION OBLIGATIONS.
(i) NEWCO'S INDEMNIFICATION OBLIGATIONS. Newco shall be liable for, shall
pay and shall indemnify and hold the Surviving Corporation and its
Subsidiaries harmless, on an After-Tax Basis, against (A) subject to
Section 6.09(a)(ii)(D), any Tax of the Company or any Subsidiary of the
Company
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attributable to any Pre-Closing Tax Period, including, without limitation,
any Spin-Off Tax, but not including any Tax assessed against the Company as
a result of the Merger not qualifying as a reorganization under Section
368(a)(1)(A) of the Code by reason of any action or inaction on the part of
Acquiror subsequent to the Effective Time, (B) any Tax of Newco or any
Subsidiary of Newco, whether attributable to a Pre-Closing Tax Period or
Post-Closing Tax Period, and (C) any Transfer Taxes which may be imposed or
assessed as a result of the Contribution and the Distribution.
(ii) ACQUIROR'S INDEMNIFICATION OBLIGATIONS. Acquiror and the Surviving
Corporation shall be liable for, shall pay and shall indemnify and hold
Newco and its Subsidiaries harmless, on an After-Tax Basis, against (A) any
Tax of Acquiror or any Subsidiary of Acquiror (other than the Company or
any Subsidiary of the Company) attributable to any Pre-Closing Tax Period,
(B) any Tax of Acquiror, any Subsidiary of Acquiror, the Surviving
Corporation, Broadcasting or any Subsidiary of the Surviving Corporation
attributable to any Post-Closing Tax Period, (C) any Transfer Tax imposed
or assessed as a result of the Merger, and (D) any Taxes (including, for
purposes of this Section 6.09(a)(ii)(D), any income Taxes for which any
stockholders of the Company immediately prior to the Effective Time are
liable as a result of the Transactions) arising primarily as a result of a
breach by Acquiror of any of the covenants set forth in Section 6.09(i)(ii)
hereof (provided that actions or omissions by Newco do not materially
contribute to the incurrence of such Taxes).
(iii) PRORATION OF TAXES. To the extent required or permitted by
applicable Law or administrative practice, the then-current Tax period of
the Company and any of the Broadcasting Subsidiaries shall terminate as of
the close of the Closing Date. Any Taxes imposed with respect to any
Straddle Period shall be allocated between the Pre-Closing Tax Period and
the Post-Closing Tax Period, based on the permanent books and records
maintained by the Company, as follows:
(A) in the case of any Taxes based upon or related to income, as if
the Pre-Closing Tax Period ended on the Closing Date and the Post-
Closing Tax Period began on the date immediately following the Closing
Date; and
(B) in the case of any Taxes other than Taxes based upon or related
to income, the amount of Taxes attributable to the Pre-Closing Tax
Period shall be calculated by reference to the number of days in such
period ending on the Closing Date as compared to the total number of
days in the Straddle Period, and the amount of Taxes attributable to
the Post-Closing Tax Period shall be calculated by reference to the
number of days in such period beginning after the Closing Date as
compared to the total number of days in the Straddle Period.
(iv) REFUNDS AND CREDITS OF TAXES. Each party shall be entitled to all
refunds or credits of any Tax, including, without limitation, in the case
of Newco, any refunds attributable to the Spin-Off Tax, for which such
party is liable hereunder. Any party receiving a refund or credit (and
interest, if any, with respect thereto) that is for the account of another
party hereunder shall promptly and, in any event, no later than five
Business Days following its receipt, pay to the other party such refund or
credit (and any interest with respect thereto).
(v) CONTROL OF TAX PROCEEDINGS.
(A) Newco shall be designated as the agent for the Company Group
pursuant to Section 1.1502-77(d) of the Treasury Regulations, subject
to the approval of the District Director of the IRS, and any similar
provisions of applicable state income or franchise Tax laws for any Tax
period relating to Taxes for which Newco is obligated to indemnify the
Surviving Corporation and its Subsidiaries under Section 6.09(a)(i).
Whenever any Taxing authority asserts a claim, makes an assessment or
otherwise disputes the amount of Taxes for which Newco is obligated to
indemnify the Surviving Corporation and its Subsidiaries under Section
6.09(a)(i), in whole or in part, under this Agreement, including,
without limitation, any Taxes of the Company or any Subsidiary of the
Company attributable to any Pre-Closing Tax Period (except as otherwise
provided in Section 6.09(a)(i)) and any Spin-Off Tax, Acquiror shall
promptly inform Newco, and Newco, at its cost and expense, shall have
the right to control any resulting proceedings and to determine whether
and when to settle any such claim,
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assessment or dispute, PROVIDED, HOWEVER, that Newco shall not, without
Acquiror's consent, which consent shall not be unreasonably withheld,
take any action or omit to take any action relating to a Pre-Closing
Tax Period which would result in an increase of more than $1,000,000 in
the Tax liability of the Surviving Corporation or any Subsidiary of the
Surviving Corporation for all Post-Closing Tax Periods, computed on an
After Tax Basis.
(B) If any Taxing authority notifies Newco of a claim, makes an
assessment or otherwise disputes the amount of Taxes for which Acquiror
is obligated to indemnify Newco and its Subsidiaries under Section
6.09(a)(ii), in whole or in part, under this Agreement, Newco shall
promptly inform Acquiror, and Acquiror, at its cost and expense, shall
have the right to control any resulting proceedings and to determine
whether and when to settle any such claim, assessment or dispute,
provided, however, that Acquiror shall not take any action or omit to
take any action relating to a Post-Closing Tax Period which would
result in an increase of more than $1,000,000 in the Tax liability of
the Company or any Subsidiary of the Company for all Pre-Closing Tax
Periods, computed on an After-Tax Basis.
(C) Notwithstanding the foregoing provisions of this Section
6.09(a)(v), in the event any Taxing authority asserts a claim, makes an
assessment or otherwise disputes the amount of Taxes attributable to
any Straddle Period for which both Newco and Acquiror may be liable
under this Agreement, Newco and Acquiror, at their respective cost and
expense, shall jointly participate in any resulting proceedings and
mutually determine whether and when to settle any such claim,
assessment or dispute, PROVIDED, HOWEVER, that Newco or Acquiror, at
its cost and expense, may, by written notice to the other, elect to
control the defense of such claim, assessment or dispute, including the
decision whether and when to settle such claim, assessment or dispute,
but in the event Newco or Acquiror so elects, the other shall no longer
be obligated to indemnify Acquiror or Newco, as the case may be, and
its Subsidiaries for any portion of the Taxes attributable to such
Straddle Period which are in dispute.
(b) TAX RETURNS.
(i) Newco shall be responsible for the preparation and timely filing of
all Company Consolidated Income Tax Returns for any Pre-Closing Tax Period,
including Company Consolidated Income Tax Returns for such period that are
due after the Closing Date, all Tax Returns for any Tax period relating to
the Newspaper Subsidiaries, and all Broadcasting Tax Returns required to be
filed on or before the Closing Date. Within twenty (20) days following the
filing of Company Consolidated Income Tax Returns for the Tax period ended
on the Closing Date, Newco shall furnish Acquiror with (i) copies of such
Tax Returns, and (ii) information concerning (A) the Tax basis of the
assets of Broadcasting as of the Closing Date; (B) the earnings and profits
of the Company and Broadcasting as of the Closing Date; (C) the Company's
Tax basis in the stock of Broadcasting and PBC's Tax basis in the stock of
each of its Subsidiaries as of the Closing Date; (D) the net operating loss
carryover, investment tax credit carryover, alternative minimum tax
carryover and the capital loss carryover, if any, available to the
Surviving Corporation and its Subsidiaries for a Post-Closing Tax Period;
and (E) all elections with respect to Company Consolidated Income Taxes in
effect for Broadcasting as of the Closing Date. Other than elections in the
ordinary course of business consistent with past practice or elections
which will not have the effect of increasing the Taxes of Acquiror in a
Post-Closing Tax Period, no Tax elections shall be made with respect to any
of the Tax Returns for which Newco is responsible under this Section
6.09(b)(i) on behalf of the Company or any Broadcasting Subsidiary without
the consent of Acquiror.
(ii) Acquiror shall be responsible for the preparation and timely filing
of all Tax Returns relating to the business or assets of the Company or
Broadcasting required to be filed after the Closing Date (other than the
Tax Returns to be prepared and filed by Newco pursuant to Section
6.09(b)(i)), PROVIDED, HOWEVER, that all such Tax Returns relating to any
Pre-Closing Tax Period or Straddle Period shall be prepared in a manner
consistent with the past practice of the Company in preparing such Tax
Returns. Acquiror shall provide Newco with a draft of any such Tax Return
relating to any Pre-Closing Tax Period or Straddle Period at least thirty
(30) days prior to the due date for filing such Tax Return (taking into
account any applicable extensions), and Newco may provide Acquiror with
written comments on such draft Tax Return within ten (10) days after its
receipt of such draft. Subject to Section 6.09(e), Acquiror and
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Newco shall attempt to resolve any disputes regarding such draft Tax Return
in good faith at least ten (10) days prior to the due date for filing such
Tax Return.
(c) COOPERATION. Acquiror and Newco shall cooperate with each other in a
timely manner in the preparation and filing of any Tax Returns described in
Section 6.09(b), payment of any Taxes in accordance with this Agreement, and
the conduct of any audit or other proceeding relating thereto. Each party
shall execute and deliver such powers of attorney and make available such
other documents as are necessary to carry out the intent of this Section 6.09.
Each party agrees to notify the other party of any audit adjustments that do
not result in Tax liability but can reasonably be expected to affect Tax
Returns of the other party.
(d) RETENTION OF RECORDS. Acquiror and Newco shall each, to the extent
potentially relevant to the other party, (1) retain records, documents,
accounting data and other information (including computer data) necessary for
the preparation and filing of all Tax Returns or the audit of such Tax
Returns, and (2) give to the other reasonable access to such records,
documents, accounting data, Tax Returns and related books and records and
other information (including computer data) and to its personnel (insuring
their cooperation) and premises, for purposes of the review or audit of such
Tax Returns to the extent relevant to an obligation or liability of a party
under this Agreement.
(e) PAYMENTS; DISPUTES. Except as otherwise provided in this Section 6.09,
any amounts owed by any party ("Indemnitor") to any other party ("Indemnitee")
under this Section 6.09 shall be paid within ten days of notice from the
Indemnitee, PROVIDED, HOWEVER, that if such amounts are being contested before
a Taxing authority in good faith, the Indemnitor shall not be required to make
payment until it is determined finally by such Taxing authority, unless the
Indemnitor has authorized the Indemnitee to make payment to such Taxing
Authority. Unless otherwise required under applicable Law, the Company, Newco
and Acquiror agree to treat any and all indemnity payments made pursuant to
this Agreement as having been made immediately prior to the Distribution and
as a dividend from or a capital contribution to Newco, as the case may be, for
federal, state and local Tax purposes. If Acquiror and Newco cannot agree on
any calculation or determination of any of their respective liabilities or any
other matter under this Section 6.09, such calculation or determination shall
be made by an independent public accounting firm reasonably acceptable to both
such parties. The decision of such firm shall be final and binding. The fees
and expenses incurred in connection with such calculation or determination
shall be borne equally by the disputing parties.
(f) TERMINATION OF TAX SHARING AGREEMENTS. Except as specifically provided
in this Section 6.09, any Tax Sharing Agreement or policy of the Company Group
shall be terminated at the Effective Time, and the Company and Broadcasting
shall have no obligation under such agreements after the Effective Time.
(g) SURVIVAL. Notwithstanding anything in this Agreement to the contrary,
the provisions of this Section 6.09 shall survive for the full period of all
statutes of limitations (giving effect to any waiver or extension thereof)
applicable to Taxes and Tax Returns subject to this Section 6.09.
(h) DEFINITIONS.
(i) "After-Tax Basis" means, with respect to any payment, an amount
calculated by taking into account the Tax consequences of the receipt of
such payment, as well as any Tax benefit associated with the liability
giving rise to the payment, in each case calculated on a present value
basis using the Agreed Rate.
(ii) "Broadcasting Tax Return" means any Tax Return of PBC or any of its
Subsidiaries.
(iii) "Company Consolidated Income Tax Returns" means any Tax Return of
the Company or any Subsidiary with respect to Company Consolidated Income
Taxes.
(iv) "Company Consolidated Income Taxes" means the federal income Tax and
all applicable state or local income or franchise Taxes of the Company
Group.
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(v) "Company Group" means the affiliated group of corporations, within
the meaning of Section 1504(a) of the Code, of which the Company is the
common parent or any unitary, combined or consolidated group of
corporations for state income Tax purposes in which the Company or any
Broadcasting Subsidiary is included.
(vi) "Pre-Closing Tax Period" means any Tax period, or portion thereof,
ending on or before the close of business on the Closing Date.
(vii) "Post-Closing Tax Period" means any Tax Period or portion thereof,
beginning after the close of business on the Closing Date.
(viii) "Spin-Off Tax" means any Tax to which the Company or any
Subsidiary of the Company is subject as a result of the application of
Section 311(b), Section 355(c)(2), Section 355(e) or Section 361(c)(2) of
the Code (or any corresponding or similar provision of state or local law)
to the Distribution.
(ix) "Straddle Period" means any Tax period which begins before and ends
after the Closing Date.
(x) "Tax" (including with correlative meaning, the terms "Taxes" and
"Taxable") means any income, gross receipts, ad valorem, premium, excise,
value-added, sales, use, transfer, franchise, license, severance, stamp,
occupation, service, lease, withholding, employment, payroll premium,
property or windfall profits tax, alternative or add-on-minimum tax, or
other tax, fee or assessment, and any payment required to be made to any
state abandoned property administrator or other public official pursuant to
an abandoned property, escheat or similar law, together with any interest
and any penalty, addition to tax or additional amount imposed by any Taxing
authority responsible for the imposition of any such Tax or payment.
(xi) "Tax Return" means any return, report, statement, information
statement, refund claim and the like, including any amendment thereto,
required to be filed with any Taxing authority with respect to Taxes.
(xii) "Tax Sharing Agreement" means any Tax sharing agreement or
arrangement (whether or not written) binding on a Person, and any agreement
or arrangement (including any arrangement required or permitted by law)
which (i) requires a Person to make a payment to or for the account of any
other Person, (ii) requires or permits the transfer or assignment of
income, revenues, receipts or gains to a Person from any other Person, or
(iii) otherwise requires a Person to indemnify any other Person in respect
of Taxes.
(xiii) "Transfer Tax" means any excise, sales, use, transfer,
documentary, filing, recordation or other similar tax or fee, together with
any interest, additions or penalties with respect thereto and any interest
in respect of such additions or penalties.
(i) ADDITIONAL COVENANTS.
(i) Each of the Company, Acquiror and their respective Affiliates shall
exercise their best efforts to obtain and assist in obtaining the advance
letter ruling from the IRS contemplated by Section 6.16 hereof. Without in
any way limiting the foregoing, each of the Company and Acquiror agrees
that it (and such of its Affiliates as are reasonably required by the IRS)
shall make such representations as are reasonably required by the IRS
pursuant to Rev. Proc. 96-30, 1996-1 C.B. 696, including, in particular,
Sections 4.04 and 4.05 thereof.
(ii) Acquiror covenants that any representations made by it or any of its
Affiliates to the IRS in connection with the IRS ruling request and any
information supplied by it to the IRS in connection with the ruling request
will be true and accurate. In addition, for a period of two years after the
Closing Date:
(A) except for actions taken in the ordinary course of business or as
otherwise required by applicable Law, Acquiror shall not sell,
transfer, distribute or otherwise dispose of any of the operating
assets of Broadcasting or any shares of capital stock of Broadcasting
or a Broadcasting Subsidiary, whether by merger or otherwise, in a
transaction or series of transactions which would cause the
Transactions to fail to satisfy the continuity of business enterprise
requirements of the Treasury Regulations; and
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(B) Acquiror shall not adopt a plan of liquidation or initiate and
enter into an agreement of merger or other transaction pursuant to
which the corporate legal existence of Acquiror would terminate or the
outstanding stock of Acquiror would, in a taxable transaction, be
converted into cash, other property or the stock or securities of any
other issuer.
Notwithstanding the foregoing, Acquiror may take any actions described in
clauses (A) and (B) above if it first obtains either (i) a ruling from the
IRS; or (ii) an opinion reasonably satisfactory to Newco of nationally
recognized tax counsel that such actions will not result in the
Distribution or the Merger being taxable to the Company's stockholders.
(j) PAYMENT OF SPIN-OFF TAX. The Company shall pay the Spin-Off Tax to the
appropriate governmental authorities as and when such payment is required to
be made, including by making estimated Tax payments which take into account
its liability for the Spin-Off Tax as and when such estimated Tax payments are
required to be made.
6.10. NOTIFICATION. Each party hereto shall, in the event of, or promptly
after obtaining knowledge of the occurrence or threatened occurrence of, any
fact or circumstance that would cause or constitute a breach of any of its
representations and warranties set forth herein, give notice thereof to the
other parties and shall use its reasonable best efforts to prevent or promptly
remedy such breach.
6.11. EMPLOYEE BENEFIT MATTERS.
(a) Except as otherwise provided herein, as of the Effective Time, Newco
will assume sponsorship of and responsibility for the employer obligations
under the Company Employee Plans. From and after the Effective Time, except
with respect to previously accrued and unpaid benefits, all Broadcasting
Employees will cease to be covered by any Company Employee Plan that is
assumed by Newco. Except as otherwise specifically provided herein, neither
Acquiror, the Company, PBC nor any of their respective Affiliates, shall
retain or acquire any liability or obligation under any Company Employee Plan;
and Newco will defend and indemnify Acquiror, the Surviving Corporation, PBC
and their respective Affiliates from and against all Losses arising from or
relating to any such liability or obligation that is not so retained or
acquired. The indemnification arrangements set forth in this Section 6.11(a)
shall be subject to the procedures set forth in Section 2.04 of the
Contribution Agreement. All Broadcasting Employees who become employees of
Acquiror as of the Effective Time will thereupon become fully vested in their
accrued benefits under the Broadcasting Pension Plans.
(b) All Broadcasting Employees who are employed by the Company or PBC or a
subsidiary of PBC immediately prior to the Effective Time will remain or
become employees of PBC (or a Subsidiary of PBC) or Surviving Corporation, as
the case may be, immediately after the Effective Time (the "Transferred
Employees"). At the Effective Time, Acquiror will provide or cause Transferred
Employees (and, where applicable, their eligible dependents) to be provided
with compensation, pension, retirement, welfare (including, without
limitation, group health, life insurance, disability, severance and vacation
benefits) and fringe benefits (exclusive of any benefit or plan which provides
for any opportunity to acquire or invest in employer equity) which, in the
aggregate, are not less favorable than the compensation, pension, welfare and
fringe benefits theretofore provided to such Transferred Employees (and their
dependents) under the Broadcasting Employee Plans, PROVIDED HOWEVER that
Acquiror shall not be required to offer post-retirement benefits except as
provided in Section 6.11(f). Each Transferred Employee's pre-Effective Time
service with the Company or its Affiliates will be treated as service with
Acquiror and its Affiliates for purposes of determining such Transferred
Employee's eligibility, vesting and seniority (but expressly excluding service
for determining benefit accruals) under the Employee Plans of Acquiror and its
Affiliates, if such service is otherwise creditable under such plans, from and
after the Effective Time.
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(c) At or as soon as practicable after the Effective Time, the account
balances held for the Transferred Employees under the Pulitzer Retirement
Savings Plan (the "Pulitzer Savings Plan") will be transferred in cash (or
such other form as may be agreed upon by Newco and Acquiror) by the trustee of
the trust maintained under the Pulitzer Savings Plan to the trustee of the
trust maintained under an existing or newly-established qualified defined
contribution plan sponsored by Acquiror or PBC (the "Transferee DC Plan") in a
plan-to-plan transfer of assets and liabilities that satisfies the
requirements of applicable law, including Sections 411(d) and 414(l) of the
Code. After the Effective Time and until the completion of the aforesaid plan-
to-plan transfer of assets and liabilities, Newco will cause the fiduciaries
of the Pulitzer Savings Plan to process distributions that become payable to
Transferred Employees whose employment with Acquiror, PBC or any of their
Subsidiaries is terminated, and the amount to be transferred in the plan-to-
plan transfer will be reduced accordingly. The Company, Newco and Acquiror
will make or cause to be made any plan amendments and filings as may be
required in connection with said plan-to-plan transfer of assets and
liabilities from the Pulitzer Savings Plan to the Transferee DC Plan, whether
before or after the Effective Time. Newco and Acquiror each may require, as a
condition to the plan-to-plan transfer from the Pulitzer Savings Plan to the
Transferee DC Plan, evidence reasonably satisfactory to it or its counsel of
the qualified status of the Transferee DC Plan or the Pulitzer Savings Plan,
as the case may be, at the time of such transfer under Section 401(a) of the
Code. Each of the parties will pay its own expenses in connection with the
plan to plan transfer of assets and liabilities from the Pulitzer Savings Plan
to the Transferee DC Plan. Newco and Acquiror will take such other and further
actions as may be required or reasonably requested by the other in order to
carry out the transfer of assets and liabilities contemplated by this
subsection without undue delay.
(d) At or as soon as practicable after the Effective Time, Newco shall cause
the trustee of the Pulitzer Publishing Company Pension Plan (the "Pulitzer
Pension Plan") to transfer to the trustee of the trust maintained as part of
an existing or newly-established qualified defined benefit pension plan
maintained or to be maintained by Acquiror or PBC (the "Transferee DB Plan")
cash (or such other assets as may be agreed upon by said trustees) and benefit
liabilities accrued prior to the Effective Time for and on behalf of the
Transferred Employees under the Pulitzer Pension Plan in a plan-to-plan
transfer of assets and liabilities that satisfies the requirements of
applicable law, including the provisions of Sections 414(l) and 411(d) of the
Code. For these purposes, the amount of the plan-to-plan asset transfer will
be equal to the current liability as defined in Section 412(l)(7) of the Code
(calculated as of the Effective Time with appropriate interest adjustment to
the date of transfer at the rate assumed for calculating the benefit
liability) using the 1983 Group Annuity Mortality Table and the PBGC annuity
valuation rate in effect at the Effective Time, provided that the amount
transferred shall in no event be less than the amount required to be
transferred pursuant to Section 414(l) of the Code, and Section 4044 of ERISA
as of the Effective Time. The value of the assets and liabilities to be
transferred from the Pulitzer Pension Plan to the Transferee DB Plan shall
initially be calculated and certified as correct as soon as practicable
following the Effective Time by an actuary selected by Newco ("Newco's
Actuary"). The Acquiror will have the right to appoint is own actuary
("Acquiror's Actuary") for the purpose of verifying whether the calculation
made by Newco's Actuary is correct. Such calculation shall be based upon the
method and assumptions specified for this purpose by Section 414(l) of the
Code and the regulations issued thereunder. The calculations certified by
Newco's Actuary shall be final, conclusive and binding unless, within thirty
(30) days after the delivery of such certification to Acquiror's Actuary,
together with such supporting information as Acquiror's Actuary may reasonably
request, Acquiror's Actuary shall notify Newco's Actuary of its disagreement
with same. If any such disagreement is not resolved to the satisfaction of
Newco and Acquiror within thirty (30) days of Newco's receipt of such
notification, then either Newco or Acquiror may elect to have the calculations
submitted for resolution to a third independent actuary designated for this
purpose by both Newco's Actuary and Acquiror's Actuary, whose determination
shall be made within thirty (30) days and shall be conclusive and binding on
all Persons. After the Effective Time and until the completion of the
aforesaid plan to plan transfer of assets and liabilities, Newco will cause
the fiduciaries of the Pulitzer Pension Plan to process distributions that
become payable to Transferred Employees whose employment with Acquiror, PBC or
any of their Subsidiaries is terminated, and the value of assets and
liabilities to be transferred in the plan to plan transfer will be reduced
accordingly. The Company, Newco and Acquiror will make or cause to be made any
plan amendments and filings (including, without limitation, any filing
required pursuant to Section 4043(c) of ERISA) as may be required or
appropriate in
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connection with said plan-to-plan transfer of assets and liabilities from the
Pulitzer Pension Plan to the Transferee DB Plan, whether before or after the
Effective Time. Newco and Acquiror each may require, as a condition of the
plan-to-plan transfer from the Pulitzer Pension Plan to the Transferee DB
Plan, evidence reasonably satisfactory to it or its counsel of the qualified
status of the Transferee DB Plan or the Pulitzer Pension Plan, as the case may
be, at the time of such transfer under Section 401(a) of the Code. Each of the
parties will pay its own expenses in connection with the plan-to-plan transfer
of assets and liabilities from the Pulitzer Pension Plan to the Transferee DB
Plan. Newco and Acquiror will take such other and further actions as may be
required or reasonably requested by the other in order to carry out the
transfer of assets and liabilities contemplated by this subsection without
undue delay.
(e) No provision of this Section 6.11 or this Agreement shall create any
third party beneficiary or other rights in any employee or former employee
(including any beneficiary or dependent thereof) or any bargaining unit
representing any employee or former employee of the Company, PBC or any of
their Subsidiaries in respect of continued employment (or resumed employment)
with Acquiror or any of its Subsidiaries, and no provision of this Section
6.11 or this Agreement shall create any such rights in any such employee or
former employee in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or any plan or arrangement which may be
established by Acquiror or any of its Subsidiaries.
(f) The following obligations and Broadcasting Employee Plans will not be
assumed by Newco and will continue to be the sole responsibility of the
Company and PBC: (1) the satisfaction and timely payment of any retirement or
other benefits that have been earned as of the Effective Time by Transferring
Employees (other than Ken J. Elkins) under the Pulitzer Publishing Company
Supplemental Executive Retirement Plan (which benefits will become fully
vested as of the Effective Time) (the "SERP Liability"), PROVIDED, HOWEVER,
that Newco will pay to the Surviving Corporation in cash, promptly after the
Effective Time on demand by Acquiror, as an adjustment to the Contribution to
be treated for tax purposes in accordance with the treatment of indemnitee
payments under Section 6.09(e), in an amount equal to the excess of the SERP
Liability over the deferred tax asset attributable to the SERP Liability
calculated in accordance with GAAP, consistently applied, (2) the executive
employment and participation agreements listed on Schedule 6.11(f)(2) annexed
hereto, (3) the group health plan maintained by PBC and any other Broadcasting
Employee Plan listed on Schedule 6.11(f)(3) annexed hereto, which is sponsored
and maintained by PBC or any of its subsidiaries exclusively for the benefit
of any current or former Broadcasting Employees (and their eligible dependents
and beneficiaries) (it being understood that the assets to be contributed to
Newco pursuant to Section 2.02 will not include employee balances, if any,
under such plans), and (4) post-retirement medical or other welfare benefits
which are or may become payable to any Transferring Employee or any dependent
or beneficiary of a Transferring Employee pursuant to the Broadcasting
Employee Plan(s) listed on Schedule 6.11(f)(4) annexed hereto.
(g) At or immediately prior to the Effective Time, the Company will satisfy
its retention and transaction incentive obligations then payable under any
participation and employment agreements described on Schedule 6.11(g).
Notwithstanding anything to the contrary contained herein, any retention or
transaction incentive, stock option cashout (described in Section 6.12 of this
Agreement) or other compensatory amounts payable by the Company to an
individual who, for the taxable year of the Company ending on the date the
Merger is consummated, is a "covered employee" of the Company (within the
meaning of Section 162(m)(3) of the Code), will be paid at the Effective Time
to the trustee of a trust established for their benefit by Newco (the "Newco
Trust") if and to the extent that the payment of those amounts, when added to
all other compensation paid or payable to that individual, would not be
deductible by the Company for such taxable year by reason of the deduction
limitation prescribed by Section 162(m)(1) of the Code. Obligations covered by
amounts transferred to the Newco Trust will be deemed to have been assumed by
Newco for purposes of applying the provisions of Section 6.11(a) of this
Agreement, and neither the Acquiror, the Surviving Corporation, PBC nor any of
their respective Affiliates will have any further liability with respect to
said covered obligations. At the Effective Time, the Company will have made
all contributions theretofore required to be made to any Broadcasting Employee
Plan for the benefit of Transferred Employees.
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6.12. EMPLOYEE STOCK OPTIONS. At or immediately prior to the Effective Time,
the Company will cause all options then outstanding under the Company's 1986
and 1994 stock option plans (the "Company Option Plans"), whether or not
vested, to be cashed out and terminated. The amount payable by the Company in
respect of the termination of an outstanding Company stock option will be
equal to the difference between the exercise price of the option and the
average daily closing price of the Company Common Stock for the ten trading
days immediately prior to the Closing Date. The Company may prohibit the
exercise of vested options after a specified cutoff date prior to the
Effective Time in order to facilitate the orderly liquidation and termination
of the remaining vested and nonvested outstanding options. Unless the Board
determines otherwise, the Company will suspend payroll deductions and Company
stock option grants under the Employee Stock Purchase Plan as of or prior to
October 1, 1998. All such Employee Stock Purchase Plan grants will have been
exercised or terminated before the Effective Time.
6.13. MEETINGS OF STOCKHOLDERS. Subject to the terms and conditions of this
Agreement, each of the Company and Acquiror shall take all action necessary,
in accordance with applicable law and its charter and bylaws, to duly call,
give notice of, convene and hold a meeting of its stockholders to consider and
vote upon the adoption and approval of the Merger, this Agreement and the
Transactions (except the Company Charter Amendment, in the case of Acquiror).
The Company and Acquiror shall coordinate and cooperate with respect to the
timing of their respective stockholder meetings and shall endeavor to hold
such meetings on the same day. The stockholder vote required for the adoption
and approval of the Merger, this Agreement and the Transactions (except the
Company Charter Amendment, in the case of Acquiror) shall be the vote
required: (i) in the case of the Company, by the DGCL and the Company's
Certificate of Incorporation; and (ii) in the case of Acquiror, by the DGCL
and Acquiror's Certificate of Incorporation. The Boards of Directors of the
Company and Acquiror shall recommend that their respective stockholders
approve the Merger, this Agreement and the related Transactions (except the
Company Charter Amendment, in the case of Acquiror) and such recommendation
shall be contained in the Joint Proxy Statement/Prospectus. Nothing contained
in the preceding sentence shall prohibit the Company from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to the
Company or the Company's stockholders if, in the good faith judgment of the
Board of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with its duties to the Company or
the Company's stockholders under applicable law. Notwithstanding the preceding
sentence, neither the Company nor its Board of Directors nor any committee
thereof shall withdraw or modify, or propose publicly to withdraw or modify
its position with respect to, this Agreement or the Merger or, except as
permitted by the preceding sentence, approve or recommend, or propose publicly
to approve or recommend, an Acquisition Proposal.
6.14. REGULATORY AND OTHER AUTHORIZATIONS.
(a) The Company and Acquiror agree to use their respective commercially
reasonable efforts (i) to obtain all Licenses and waivers of federal, state,
local and foreign regulatory bodies and officials (each a "Governmental
Authority") and non-governmental third parties that may be or become necessary
for performance of their respective obligations pursuant to this Agreement,
(ii) to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties hereto to consummate the
Transactions contemplated hereby and (iii) to effect all necessary
registrations and filings including, but not limited to, filings under the HSR
Act and submissions of information requested by any Governmental Authority.
The parties hereto further covenant and agree, with respect to any threatened
or pending preliminary or permanent injunction or other order, decree or
ruling or statute, rule, regulation, executive order or withheld waiver or
approval that would adversely affect the ability of the parties hereto to
consummate the Merger and the other Transactions contemplated hereby, to
respectively use their commercially reasonable efforts (including, if
necessary, the measures described in subsection (b) below) to prevent the
entry, enactment or promulgation thereof or to obtain such waiver or approval,
as the case may be.
(b) Without limiting the obligations of the parties hereto under Section
6.14(a), Acquiror and the Company agree to take or cause to be taken the
following actions: (i) provide promptly to Governmental Authorities with
regulatory jurisdiction over (a) enforcement of any applicable antitrust laws
("Government Antitrust Entity") or
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(b) the laws, rules or regulations of the FCC or otherwise relating to the
broadcast, newspaper, mass media or communications industry ("Government
Communications Entity," and together with Government Antitrust Entity, a
"Government Regulatory Entity") information and documents requested by any
Government Regulatory Entity, or necessary, proper or advisable to permit
consummation of the Transactions contemplated by this Agreement; (ii) without
in any way limiting the provisions of Section 6.14(b)(i) above, (a) file any
Notification and Report Form and related material required under the HSR Act
as soon as practicable and in any event not later than fifteen (15) business
days after the date hereof (which shall request early termination of the
waiting period imposed by the HSR Act), and thereafter use its reasonable
efforts to certify as soon as practicable its substantial compliance with any
requests for additional information or documentary material that may be made
under the HSR Act and (b) file the FCC Application as soon as practicable and
in any event not later than fifteen (15) business days after the date hereof;
(iii) the proffer by Acquiror of its willingness to sell or otherwise dispose
of either WBAL or WGAL or any other broadcast station, if such action is
necessary or reasonably advisable for the purpose of avoiding or preventing
any action by any Government Regulatory Entity which would restrain, enjoin,
withhold approval or otherwise prevent consummation of the Transactions
contemplated by this Agreement; and (iv) Acquiror shall take promptly, in the
event that any permanent or preliminary injunction or other order is entered
or becomes reasonably foreseeable to be entered in any proceeding that would
make consummation of the Transactions contemplated hereby in accordance with
the terms of this Agreement unlawful or that would prevent or delay
consummation of the Transactions contemplated hereby, any and all commercially
reasonable steps including the appeal thereof, the posting of a bond or the
taking of the steps contemplated by clause (iii) of this subsection (b)
necessary to vacate, modify, suspend such injunction or order, or obtain such
approval so as to permit such consummation. Each of the Company and Acquiror
will provide to the other copies of all correspondence between it (or its
advisors) and any Government Regulatory Entity relating to this Agreement or
any of the matters described in this Section 6.14(b) other than statements or
filings under the HSR Act. Acquiror and Company agree that all telephonic
calls, meetings or hearings with a Government Regulatory Entity regarding the
Transactions contemplated hereby or any of the matters described in this
Section 6.14(b) shall include representatives of each of Acquiror and Company.
(c) Each party hereto shall promptly inform the other of any material
communication from any other Government Regulatory Entity regarding any of the
Transactions contemplated hereby. If any party hereto or any Affiliate thereof
receives a request for additional information or documentary material from any
such Government Regulatory Entity with respect to the Transactions
contemplated hereby, then such party shall endeavor in good faith to make, or
cause to be made, as soon as reasonably practicable and after consultation
with the other party, an appropriate response in compliance with such request.
Acquiror shall advise Company promptly in respect of any understandings,
undertakings or agreements (oral or written) that Acquiror proposes to make or
enter into with any other Government Regulatory Entity in connection with the
Transactions contemplated hereby.
(d) Notwithstanding the generality of any other provision of this Section
6.14, each of Acquiror and the Company, to the extent applicable, further
agrees to file contemporaneously with the filing of the FCC Application any
requests for waivers of applicable FCC rules or rules or regulations of other
Governmental Regulatory Entities as may be required, to expeditiously
prosecute such waiver requests and to diligently submit any additional
information or amendments for which the FCC or any other relevant Governmental
Regulatory Entity may ask with respect to such waiver requests. In furtherance
of the foregoing, Acquiror will agree to seek a temporary waiver (not more
than 6 months in duration) of the FCC's mass media ownership rules (the
"Temporary Waiver") to allow for the disposition of the assets comprising
either WBAL or WGAL or any other broadcast station (the "Divestiture Assets")
to the extent that, under the FCC's mass media ownership rules, the
Divestiture Assets could not be held in common control with any of the
Acquiror broadcasting assets following the Effective Time, and (i) conditional
waivers of the FCC's mass media ownership rules (the "Conditional Waivers") to
allow for the common ownership of WESH-TV, Daytona Beach, Florida, and WWWB-
TV, Lakeland, Florida, and WLKY-TV, Louisville, Kentucky, and WLWT-TV,
Cincinnati, Ohio; and (ii) waivers of the FCC's mass media ownership rules to
permit the common ownership of (A) WLKY-TV, Louisville, Kentucky, and WLKY
(AM), Louisville, Kentucky, and (B) WXII (TV), Winston-Salem, North Carolina,
and
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WXII (AM), Eden, North Carolina. Acquiror further covenants that, prior to the
Effective Time, it shall not acquire any new or increased "attributable
interest," as defined in the FCC rules, in any media property ("Further Media
Interest"), which Further Media Interest could not be held in common control
with any Station by Acquiror following the Effective Time (including by virtue
of the FCC's multiple ownership limits), without the prior written consent of
the Company. Notwithstanding anything to the contrary contained in this
Agreement, it shall not be a condition to the Closing that any such waiver
shall have been obtained.
(e) If at Closing one or more applications for renewal of any of the
Company's FCC Licenses is pending or any order of the FCC granting an
application for renewal of any of the Company's FCC Licenses has not become a
Final Order, then each party agrees to abide by the procedures established in
Stockholders of CBS, Inc., FCC 95-469 (rel. Nov. 22, 1995) Paragraphs 31-35, for
processing applications for assignment of licenses during the pendency of an
application for renewal of a station license (or such other procedures as may
be established by the FCC). For purposes of this provision, a "Final Order" is
an order of the FCC granting any such renewal application (i) that has not
been reversed, stayed, enjoined, set aside, annulled or suspended; (ii) as to
which, no timely request for a stay, petition for reconsideration or appeal of
sua sponte action of the FCC with comparable effect is pending; and (iii) the
time for filing any such request, petition or appeal or for the taking of any
such action sua sponte by the FCC has expired. The parties further agree that
the pendency of any such renewal application or applications, or the fact that
the FCC grant of any renewal application shall not have become a Final Order,
shall not be a cause for delaying the Closing. Notwithstanding anything in
this Agreement to the contrary, this Section shall survive the Closing until
any order issued by the FCC with respect to any such renewal application
becomes a Final Order.
6.15. FURTHER ASSURANCES. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall execute such documents and other
instruments and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and consummate the Transactions
or, at and after the Closing Date, to evidence the consummation of the
Transactions by this Agreement.
6.16. IRS RULING. The Company shall, as promptly as practicable after the
date hereof, prepare and submit to the IRS a request for an advance letter
ruling from the IRS that the Contribution and Distribution will qualify as a
reorganization within the meaning of Section 368(a)(1)(D) of the Code and that
the Company's stockholders will recognize no gain or loss (and no amount will
be included in the income of the Company's stockholders) under Section 355(a)
of the Code as a result of the Distribution. Such request shall be true and
correct in all material respects, and all facts material to the ruling shall
be disclosed in such request. The Company shall afford Acquiror with
reasonable opportunity to review and comment on the IRS ruling request prior
to its submission to the IRS. The Company shall advise Acquiror's tax counsel
of the substance of all communications with the IRS relating to the IRS ruling
request, and provide Acquiror and its tax counsel with copies of all written
materials submitted to the IRS and written communications received from the
IRS in connection with such ruling request. If any written communication to
the IRS is to include information relating to Acquiror or any of its
Affiliates (other than public filings made with the SEC) or representations of
Acquiror, any of its Affiliates or any of their respective officers, directors
or shareholders, such information shall be delivered to Acquiror and its tax
counsel for their review and comment prior to submission, and the Company
shall make such reasonable changes and corrections to such information or
representations as are requested by Acquiror.
6.17. RECORDS RETENTION.
(a) For a period of five years after the Closing Date, Acquiror shall retain
all of its books and records relating to Broadcasting for periods prior to the
Closing Date and Newco shall have the right to inspect and copy such books and
records during normal business hours, upon reasonable prior notice, in
connection with the preparation of financial statements, reports and filings
and for any other reasonable purpose including its indemnification obligations
under this Agreement and the Contribution Agreement.
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(b) For a period of five years after the Closing Date, Newco shall retain
all of its books and records relating to Newco and the Newspaper Subsidiaries
for periods prior to the Closing Date and Acquiror shall have the right to
inspect and copy such books and records during normal business hours, upon
reasonable prior notice, in connection with the preparation of financial
statements, reports and filings and for any other reasonable purpose including
its indemnification obligations under this Agreement and the Contribution
Agreement.
6.18. STOCK EXCHANGE LISTING. Newco shall apply to the NYSE for the listing
of the Newco Common Stock and shall use its reasonable best efforts to receive
approval for the listing of such shares and, if such listing is not available,
then the NASDAQ. Acquiror shall submit a supplemental listing application to
NASDAQ or the NYSE, as the case may be, for the listing of the Merger Stock
and shall use its reasonable best efforts to receive approval for the listing
of such stock.
6.19. COMPANY NAMES.
(a) Acquiror acknowledges that the name "Pulitzer," or any part thereof,
whether alone or in combination with one or more other words, are to the
extent owned by the Company or any of its Subsidiaries an asset of the Company
being transferred to Newco in the Contribution. On the Closing Date, Acquiror
shall (i) cause PBC and the Broadcasting Subsidiaries to change their names to
delete any reference therein to the aforesaid name, (ii) reasonably cooperate
in assisting Newco to change its name to Pulitzer Inc., and (iii) cease using
the aforesaid name in connection with the business operations of Broadcasting.
(b) Between the consummation of the Contribution and the Closing, the
Company, PBC and the Broadcasting Subsidiaries shall have a non-exclusive
license to use the name "Pulitzer. "
6.20. OTHER AGREEMENTS. Contemporaneously with the execution and delivery of
this Agreement, the parties thereto have executed and delivered the following
agreements: (i) a Registration Rights Agreement in substantially the form set
forth in Exhibit D, (ii) the FCC Agreement in substantially the form set forth
in Exhibit E, (iii) a Board Representation Agreement in substantially the form
set forth in Exhibit F, (iv) the Arizona Diamondbacks agreement in
substantially the form set forth in Exhibit G, (v) the Acquiror Voting
Agreement in substantially the form of Exhibit H, and (vi) the Pulitzer Voting
Agreement in substantially the form of Exhibit I. The Company, Newco and
Acquiror shall fully and timely perform all their respective obligations
under, and take all actions necessary to effectuate the intent and purposes
of, the foregoing agreements.
6.21. FORM 8-K; PROVISION OF FINANCIAL STATEMENTS.
(a) As soon as practicable after the date hereof, the Company will prepare
and file a Current Report on Form 8-K (the "Form 8-K") which will include a
description of the business of Broadcasting and certain financial and other
information with respect to Broadcasting. The Company covenants that the Form
8-K will not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) At the request of Acquiror, the Company agrees to provide (or, if
requested by Acquiror, cooperate with Acquiror in the preparation of) as
promptly as practicable (but in any event within 45 days of the request) such
financial statements (audited or unaudited, as requested by Acquiror) relating
to Broadcasting as the Acquiror may reasonably request in order to comply with
the requirements of the Securities Act or the Exchange Act or in order to
secure financing (including pursuant to a public offering registered under the
Securities Act).
6.22. WORKING CAPITAL ADJUSTMENT.
(a) Two days prior to the Effective Time, the Company shall inform Acquiror
of (i) the Company's estimate of the Working Capital Amount as of the end of
the most recently available month end period immediately preceding the
Effective Time (the "Estimated Working Capital Amount") and (ii) the Company's
basis for such estimates. The calculation of the Estimated Working Capital
Amount shall be reasonably satisfactory to Acquiror.
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(b) At the Effective Time, Acquiror shall pay to Newco in immediately
available funds the amount, if any, by which the Estimated Working Capital
Amount exceeds $41,000,000 or Newco shall pay to Acquiror in immediately
available funds the amount, if any, by which $41,000,000 exceeds the Estimated
Working Capital Amount.
(c) As promptly as practicable after the Effective Time, but in any event
within ninety (90) days thereafter, Acquiror shall prepare and deliver to
Newco a schedule (the "Acquiror Schedule") showing Acquiror's determination of
the Working Capital Amount at the Closing Date. If Newco disagrees with the
determination set forth in the Acquiror Schedule, Newco shall give notice
thereof to Acquiror within sixty (60) days after delivery of the Acquiror
Schedule to Newco, such notice to include reasonable detail regarding the
basis for the disagreement.
(d) Acquiror and Newco shall attempt to settle any such disagreement; any
such settlement shall be final and binding upon Acquiror and Newco. If,
however, Acquiror and Newco are unable to settle such dispute within sixty
(60) days after receipt by Acquiror of such notice of dispute, the dispute
shall be submitted to an independent certified public accounting firm mutually
acceptable to Acquiror and Newco for resolution, and the decision of such firm
shall be final and binding upon Acquiror and Newco. All costs incurred in
connection with the resolution of said dispute by such independent public
accountants, including expenses and fees for services rendered, shall be paid
one-half by Acquiror and one-half by Newco. Acquiror and Newco shall use
reasonable efforts to have the dispute resolved within ninety (90) days after
such dispute is submitted to said independent public accountants. The final
determination of the Working Capital Amount (whether as a result of Newco's
failing to give notice of Newco's disagreement with Acquiror's determination
within the time period prescribed above, a resolution by Acquiror and Newco of
any such disagreement, or a determination by an accounting firm selected
pursuant to this paragraph to resolve any disagreement among the parties) may
occur on different dates.
(e) Within ten (10) Business Days following a final determination of the
Final Working Capital Amount ("Final Working Capital Amount"), (i) if the
Final Working Capital Amount exceeds the Estimated Working Capital Amount,
then Acquiror will pay to Newco in immediately available funds an amount equal
to such excess plus interest at the Agreed Rate from the Closing Date to the
date of payment and (ii) if the Estimated Working Capital Amount exceeds the
Final Working Capital Amount, Newco will pay to Acquiror in immediately
available funds an amount equal to such excess plus interest at the Agreed
Rate from the Closing Date to the date of payment. Any such payments shall be
made on an After-Tax Basis.
(f) In the event that after the Effective Time it is determined that the
Company shall have failed to pay or provide for the Existing Company Debt and
the Deal Expenses as provided in Section 2.01(b) and the Surviving Corporation
makes such payment, Newco shall promptly pay such amount to the Surviving
Corporation in immediately available funds promptly upon demand therefor.
6.23. CAPITAL EXPENDITURES. Prior to the Effective Time, PBC and the
Broadcasting Subsidiaries shall be responsible for and pay all capital
expenditures incurred in the ordinary and usual course of their respective
businesses based upon the Company's plans concerning the timing of such
capital expenditures during 1998.
6.24. EXCESS CASH. From time to time, after the date of execution of this
Agreement and until the Effective Time, and subject to applicable law, (i) PBC
and the Broadcasting Subsidiaries may pay cash dividends, or otherwise make
cash distributions, to the Company or any of its Subsidiaries and (ii) the
Company shall contribute to Newco cash held by the Company, including the
proceeds of the New Company Debt after payment or provision for the Existing
Company Debt and the Deal Expenses as provided in Section 2.01(b). Immediately
prior to the Contribution, PBC and the Broadcasting Subsidiaries shall, to the
extent permitted by law, pay dividends in cash or cash equivalents, or
otherwise make contributions in cash or cash equivalents, to the Company and
its Subsidiaries so that neither PBC nor the Broadcasting Subsidiaries owns
any cash or cash equivalents at the Effective Time, except that each of the
Stations may retain cash in those operating and payroll checking accounts in
existence as of the date hereof, in amounts necessary, as determined by the
Company, for general operating purposes of each of the Stations or group of
Stations, as the case may be.
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6.25. INDEMNITY RELATING TO CERTAIN LITIGATION.
(a) Newco shall indemnify from and after the Closing Date (i) the Surviving
Corporation, its Subsidiaries, including Broadcasting, and their Affiliates
against all Losses in connection with any suit, action, proceeding or
investigation pending at or arising after the Closing Date that relates to the
Newspaper Subsidiaries or their respective operations prior to the Effective
Time and (ii) any person who was an officer, director, partner or employee of
the Company, PBC or any Broadcasting Subsidiary against all Losses in
connection with any such suit, action, proceeding or investigation. The
Company and Newco, jointly and severally, shall indemnify Acquiror and its
Subsidiaries against all Losses arising prior to the Closing, and Newco shall
indemnify the Surviving Corporation and its Subsidiaries against all Losses
arising after the Closing, from or relating to any claim, action or proceeding
brought by or on behalf of the holders of Company Stock in connection with the
Transactions except by reason of actions taken or omitted to be taken by
Acquiror or except as provided in Section 6.06 hereof. The obligations of the
Company pursuant to this Section 6.25(a) shall terminate at the Effective
Time.
(b) Acquiror shall indemnify from and after the Closing Date (i) Newco, its
Subsidiaries and their Affiliates against all Losses in connection with any
suit, action, proceeding or investigation pending at or arising after the
Closing Date that relates to the business and operations of Broadcasting and
(ii) any person who was an officer, director, partner or employee of PBC or
any Broadcasting Subsidiary prior to, whether or not any person continues in
such capacity after, the Closing against all Losses in connection with any
such suit, action, proceeding or investigation. Acquiror shall indemnify the
Company and Newco against all Losses arising from or relating to any claim,
action or proceeding brought by or on behalf of the holders of Acquiror Common
Stock in connection with the Transactions except by reason of actions taken or
omitted to be taken by the Company or except as provided in Section 6.06
hereof.
(c) The indemnification arrangements set forth in this Section 6.25 shall be
subject to the procedures set forth in Section 2.04 of the Contribution
Agreement.
6.26. CANCELLATION OF INTERCOMPANY ARRANGEMENTS. Prior to the Effective
Time, and except as otherwise provided herein or as otherwise agreed by the
parties hereto, all accounts, payables, receivables, contracts, commitments
and agreements between the Company and its Newspaper Subsidiaries, on the one
hand, and PBC and the Broadcasting Subsidiaries, on the other hand, will be
settled, cancelled or otherwise terminated.
6.27. NETWORK AFFILIATION AGREEMENTS. Upon the terms and subject to the
conditions hereof, each of the parties shall use its respective reasonable
best efforts to take or cause to be taken all actions and to do or cause to be
done all other things necessary to assign the Station Network Affiliation
Agreements to Acquiror.
6.28. GROSS-UP MATTERS.
(a) Newco shall be liable for, shall pay and shall indemnify and hold the
Surviving Corporation, its Subsidiaries, their Affiliates and their respective
directors, officers and employees harmless against all Losses arising from or
relating to any claim or dispute relating to the Gross-Up Agreements and/or
the Gross-Up Amount.
(b) Newco shall have the sole authority to deal with and control any
matters, disputes, claims, proceedings or litigations relating to the Gross-Up
Agreements and/or the Gross-Up Amount. If Acquiror receives written notice
that any Person is asserting a claim or is otherwise disputing the amount of
the Gross-Up Amount for which Newco is or may be liable, in whole or in part,
under this Agreement, Acquiror shall promptly inform Newco, and Newco, at its
sole cost and expense, shall have the sole right to control any resulting
actions, proceedings or negotiations, including the sole right to determine
whether and when to settle any such claim or dispute, PROVIDED HOWEVER, that
the failure by an indemnified party hereunder to so notify Newco shall not
affect Newco's obligations except to the extent that Newco is actually
prejudiced by such failure and Newco
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may not settle a claim without the Surviving Corporation's consent if such
settlement (i) makes an admission or acknowledgement of liability or
culpability with respect to any indemnified party hereunder, (ii) does not
include a complete release of such indemnified parties, or (iii) requires any
indemnified party hereunder to make any payment or forego or take any action
or otherwise materially adversely affect such indemnified party.
(c) Acquiror shall use commercially reasonable efforts to cooperate with
Newco at Newco's expense, in a timely manner in the resolution of any claim or
dispute by any Person relating to the Gross-Up Agreements and/or the Gross-Up
Amount, including the performance of all rights and non-monetary obligations
of the Surviving Corporation under the Gross-Up Agreements and the conduct of
any actions or proceedings relating thereto.
(d) Any amounts owed by Newco to any indemnified party under this Section
6.28 shall be paid within ten days of notice from such indemnified party,
PROVIDED, HOWEVER, that if Newco has not paid such amounts and is contesting
such amounts in good faith, Newco shall not be required to make payment until
it is determined finally, by settlement, by agreement or determination in
accordance with the Gross-Up Agreements or by a court, that payment is due.
6.29. AFFILIATE LETTERS; FCC LETTERS.
(a) At least thirty (30) days prior to the Closing Date, the Company shall
deliver to Acquiror a list of names and addresses of those persons who were,
in the Company's reasonable judgment, at the record date for the meeting of
the Company's stockholders to be held for the purposes of voting on the
Transactions, "affiliates" (each such person, an "Affiliate") of the Company
within the meaning of Rule 145 of the rules and regulations promulgated under
the Securities Act. The Company shall use all reasonable efforts to deliver or
cause to be delivered to Acquiror prior to the Closing Date, from each of the
Affiliates of the Company identified in the foregoing list, an Affiliate
Letter in the form attached hereto as Exhibit J. The Surviving Corporation
shall be entitled to place legends as specified in such Affiliate Letters on
the certificates evidencing any Acquiror Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the Acquiror Common
Stock, consistent with the terms of such Affiliate Letters.
(b) At least five (5) days prior to the Closing, the Company shall deliver
to Acquiror a list names and addresses of those Persons who, in the Company's
reasonable judgment will own immediately after the Effective Time 5% or more
of outstanding Acquiror Common Stock. The Company shall use all reasonable
efforts to deliver or cause to be delivered to Acquiror at the Closing, from
each of the stockholders identified on the foregoing list (other than
institutional holders of such Stock), an FCC Agreement in the form attached
hereto as Exhibit E other than those Persons who have executed such FCC
Agreement on the date hereof.
ARTICLE VII
CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
7.01. CLOSING AND CLOSING DATE. As soon as practicable after the
satisfaction or waiver of the conditions set forth herein (but no later than
five (5) business days thereafter) and immediately prior to the filing of the
Certificate of Merger, a closing of the Transactions (the "Closing") shall
take place at the offices of Fulbright & Jaworski L.L.P., 666 Fifth Avenue,
New York, New York, or on such other date and at such other location as the
parties may agree in writing. The date on which the Closing occurs is referred
to as the "Closing Date."
7.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY, NEWCO AND ACQUIROR. The
respective obligations of the Company and Newco, on the one hand, to
consummate the Transactions and the obligations of the Acquiror, on the other
hand, to consummate the Merger are subject to the requirements that:
(a) The Transactions shall have been approved and adopted by the
stockholders of the Company and of Acquiror, as applicable and as
contemplated hereby;
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(b) The Transactions contemplated by Article II hereof shall have been
consummated in accordance with the terms hereof and in accordance with
applicable Law and the Company shall have drawn down in its entirety the
New Company Debt;
(c) Any waiting period applicable to the consummation of the Transactions
under the HSR Act shall have expired or been terminated;
(d) Any governmental or regulatory Licenses, notices or temporary or
permanent waivers, including FCC Approval, necessary for the performance of
the parties' respective obligations pursuant to this Agreement shall have
been either filed (in the case of notices) or received and be in effect,
PROVIDED that in no event shall the foregoing require the satisfaction of
any condition or the taking of any action that could under the terms of the
FCC Approval be so satisfied or taken subsequent to the consummation of the
Merger. "FCC Approval" means action by the FCC or its staff granting
consent to the transfer of control of the material Licenses held by
Broadcasting to Acquiror which: (i) has not been reversed, stayed,
enjoined, set aside, annulled or suspended; (ii) with respect to which no
timely request for a stay, petition for reconsideration or appeal of sua
sponte action of the FCC with comparable effect is pending; and (iii) as to
which the time for filing any such request, petition or appeal or for the
taking of any such sua sponte action by the FCC has expired;
(e) No federal, state or foreign governmental authority or other agency
or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, or regulation,
or any permanent injunction or other order (whether temporary, preliminary
or permanent), which remains in effect and which has the effect of making
any of the Transactions illegal or otherwise prohibiting any of the
Transactions, or which questions the validity or the legality of any of the
Transactions and which could reasonably be expected to have a Material
Adverse Effect on Broadcasting or on Acquiror and its Subsidiaries taken as
a whole; and
(f) The Registration Statement on Form S-4 shall have been declared
effective under the Securities Act and no stop orders with respect thereto
shall have been issued.
7.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND NEWCO. The
obligations of the Company and Newco to effect the Transactions are subject to
the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) The representations and warranties of Acquiror contained in this
Agreement, the Transaction Agreements to which it is a party or in any
other document delivered pursuant hereto shall be true and correct in all
material respects on and as of the Closing Date with the same effect as if
made on and as of the Closing Date, and at the Closing Acquiror shall have
delivered to the Company and Newco a certificate to that effect;
(b) Each of the obligations of Acquiror to be performed on or before the
Closing Date pursuant to the terms of this Agreement or the Transaction
Agreements shall have been duly performed in all material respects on or
before the Closing Date, and at the Closing Acquiror shall have delivered
to the Company and Newco a certificate to that effect;
(c) The Acquiror Common Stock shall have been approved for listing on the
NYSE or the NASDAQ, as the case may be, subject to official notice of
issuance;
(d) The Newco Common Stock shall have been approved for listing on the
NYSE or the NASDAQ, as the case may be, subject to official notice of
issuance;
(e) [INTENTIONALLY OMITTED]
(f) The Company shall have received from the IRS an advance letter ruling
as contemplated by Section 6.16 hereof;
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(g) The Company shall have received from its counsel, Fulbright &
Jaworski L.L.P. (or another nationally recognized law firm acceptable to
the Company), an opinion that, based upon appropriate representations,
certificates and letters acceptable to Fulbright & Jaworski L.L.P. (or
another nationally recognized law firm acceptable to the Company) dated as
of the Closing Date, the Merger constitutes a tax-free reorganization under
Section 368(a)(1)(A) of the Code (with appropriate exceptions, assumptions
and qualifications); and
(h) The Company and Newco shall have received all customary closing
documents they may reasonably request relating to the existence of Acquiror
and the authority of Acquiror to enter into this Agreement, the Transaction
Agreements and the Transactions, all in form and substance reasonably
satisfactory to the Company and Newco.
7.04. CONDITIONS TO OBLIGATIONS OF ACQUIROR. The obligations of Acquiror to
effect the Merger are subject to the satisfaction, on or prior to the Closing
Date, of the following conditions:
(a) The representations and warranties of the Company and Newco contained
in this Agreement, the Transaction Agreements to which they are a party or
in any other document delivered pursuant hereto shall be true and correct
in all material respects on and as of the Closing Date with the same effect
as if made on and as of the Closing Date, and at the Closing the Company
and Newco shall have delivered to Acquiror their respective certificates to
that effect;
(b) Each of the obligations of the Company and Newco to be performed on
or before the Closing Date pursuant to the terms of this Agreement shall
have been duly performed in all material respects on or before the Closing
Date, and at the Closing the Company and Newco shall have delivered to
Acquiror their respective certificates to that effect;
(c) The Company shall have delivered to Acquiror a certificate signed by
the Chief Financial Officer of the Company certifying, as of the Closing,
as to the number of shares of capital stock of the Company outstanding,
indicating the class and series of such shares;
(d) Acquiror shall have received all customary closing documents it may
reasonably request relating to the existence of the Company, Newco, PBC and
the Broadcasting Subsidiaries and the authority of the Company and Newco to
enter into this Agreement and the Transactions, all in form and substance
reasonably satisfactory to Acquiror;
(e) Acquiror shall have received from its counsel, Rogers & Wells LLP (or
another nationally recognized law firm acceptable to Acquiror), an opinion
that, based upon appropriate representations, certificates and letters
acceptable to Rogers & Wells LLP (or another nationally recognized law firm
acceptable to Acquiror) dated as of the Closing Date, the Merger
constitutes a tax-free reorganization under Section 368(a)(1)(A) of the
Code (with appropriate exceptions, assumptions and qualifications);
(f) The Company shall have paid in full the Existing Company Debt as of
the Closing;
(g) There shall have been obtained and delivered to Acquiror all
necessary approvals and consents to the assignment to Acquiror of the
Station Network Affiliation Agreements; and
(h) Each of the Affiliates referred to in Section 6.29(a) shall have
executed and delivered to Acquiror the Affiliate Letter referred to
therein.
ARTICLE VIII
TERMINATION
8.01. TERMINATION. This Agreement may be terminated and the Transactions may
be abandoned at any time prior to the Closing:
(a) by mutual written consent duly authorized by the Boards of Directors
of the Company, Newco and Acquiror;
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(b) by either the Company or Acquiror (i) if, at the stockholders'
meetings referred to in Section 6.13 (including any postponement or
adjournment thereof), the Merger and the other Transactions that require
stockholder approval shall fail to be approved and adopted by the
affirmative vote specified herein, or (ii) so long as the terminating party
is not then in breach of any of its obligations hereunder, after May 1,
1999 or such other date as the parties shall have mutually agreed (the
"Termination Date") if the Merger shall not have been consummated on or
before such date;
(c) by the Company, provided neither it nor Newco is then in breach of
any of its material obligations hereunder, if either (i) Acquiror fails to
perform, in any material respect, any covenant in this Agreement when
performance thereof is due and does not cure the failure within twenty (20)
Business Days after written notice by the Company thereof, or (ii) any
other condition in Sections 7.02 or 7.03 has not been satisfied and is not
capable of being satisfied prior to the Termination Date;
(d) by the Company, whether or not the conditions set forth in Section
7.02 have been satisfied, if the Board of Directors of the Company
determines, with the advice of outside counsel, in the exercise of its
fiduciary duties to approve or recommend a Superior Proposal or to
authorize the Company to enter into an agreement with respect to a Superior
Proposal;
(e) by Acquiror, provided it is not then in breach of any of its material
obligations hereunder, if either (i) the Company or Newco fails to perform,
in any material respect, any covenant in this Agreement when performance
thereof is due and does not cure the failure within twenty (20) Business
Days after written notice by Acquiror thereof or (ii) any other condition
in Section 7.02 or Section 7.04 has not been satisfied and is not capable
of being satisfied prior to the Termination Date;
(f) [INTENTIONALLY OMITTED];
(g) by either the Company or Acquiror if either has received any
communication from an HSR Authority (such communication to be confirmed in
writing by such HSR Authority to the other party) indicating that an HSR
Authority has authorized the institution of litigation challenging any of
the Transactions under the U.S. antitrust laws, which litigation will
include a motion seeking an order or injunction prohibiting the
consummation of any of the Transactions; or
(h) by Acquiror if the Board of Directors of the Company shall have
withdrawn or modified in any manner materially adverse to Acquiror its
approval or recommendation of this Agreement or the Transactions or shall
have approved or recommended a Superior Proposal.
8.02. EFFECT OF TERMINATION. Except as set forth in the following sentence,
in the event of the termination of this Agreement and abandonment of the
Transactions by any of the parties pursuant to Section 8.01 hereof, prompt
written notice thereof shall be given to the other party and this Agreement,
except for the provisions of Section 6.06(f)-(j), Section 8.03, Section 9.08
and Section 9.12 and the provisions of the Confidentiality Agreement, shall
forthwith become null and void and have no effect, without any liability or
further obligation on the part of any party or its directors, officers or
stockholders. Nothing in this Section 8.02 shall relieve any party to this
Agreement of liability for breach of this Agreement. If this Agreement is
terminated as provided herein, all filings, applications and other submissions
relating to the Merger shall, to the extent practicable, be withdrawn from the
agency or Person to which made.
8.03. FEES AND EXPENSES.
(a) In order to induce Acquiror to, among other things, enter into this
Agreement, the Company agrees as follows: If (1) subsection (c) below does
not apply and (2) this Agreement is terminated (A) by the Company pursuant
to Sections 8.01(d), (B) by either the Company or Acquiror pursuant to
Section 8.01(b)(i) hereof in the event that the Merger, this Agreement and
the other Transactions are not approved at the stockholders' meeting of the
Company referred to in Section 6.13, or (C) by Acquiror pursuant to Section
8.01(h), then the Company shall pay to Acquiror a fee equal to $50,000,000.
(b) In order to induce the Company and Newco to, among other things,
enter into this Agreement, Acquiror agrees as follows: If this Agreement is
terminated by the Company or Acquiror pursuant to
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Section 8.01(b)(i) hereof, in the event that the Merger, this Agreement and
the other Transactions, if any, that require stockholder approval are not
approved at the stockholders' meeting of Acquiror referred to in Section
6.13, then Acquiror shall promptly pay to the Company a fee equal to
$50,000,000.
(c) In order to induce the Company and Newco to, among other things,
enter into this Agreement, Acquiror agrees promptly to pay to the Company a
fee equal to $50,000,000 in the event that the Company is unable to obtain
the New Company Debt at the time of any of the following: (i) this
Agreement is terminated pursuant to Section 8.01(a); (ii) this Agreement is
terminated pursuant to Section 8.01(b)(ii); or (iii) this Agreement is
terminated pursuant to Section 8.01(c)(i), in each case for any reason
other than (x) the Company's failure to use commercially reasonable efforts
to obtain the New Company Debt or (y) a breach of this Agreement by the
Company.
(d) Except in circumstances where the second sentence of Section 8.02 is
applicable or as otherwise expressly provided herein each of the parties
shall pay all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in carrying out and closing
the Transactions (including any title insurance policies, surveys and
environmental reports on the Real Property).
(e) Any amounts payable pursuant to Section 8.03 shall be made in
immediately available funds no later than two (2) Business Days after
termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein shall not survive beyond the Closing Date. This
Section 9.01 shall not limit any covenant or agreement of the parties hereto
which by its terms requires performance after the Closing Date.
9.02. ENTIRE AGREEMENT. This Agreement, including the Exhibits and Schedules
hereto and the documents delivered pursuant to this Agreement, together with
the Confidentiality Agreement, constitute the entire agreement among the
parties with respect to the subject matter hereof and supersedes all prior
written and oral and all contemporaneous oral agreements and understandings
with respect to the subject matter hereof. The Exhibits and Schedules hereto
are an integral part of this Agreement and are incorporated by reference
herein.
9.03. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person,
by telecopy (with confirmation of transmission), by express or overnight mail
delivered by a nationally recognized air courier (delivery charges prepaid),
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties as follows:
If to Acquiror or to the Company (after the Merger):
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10019
Attention: Dean H. Blythe
Telecopy: (212) 887-6855
with a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attention: Steven A. Hobbs, Esq.
Telecopy: (212) 878-8375
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If to the Company (before the Merger) or Newco:
Pulitzer Publishing Company
900 North Tucker Boulevard
St. Louis, Missouri 63101
Attention: Michael E. Pulitzer
Telecopy: (314) 340-3125
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Richard A. Palmer, Esq.
Telecopy: (212) 752-5958
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Any notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy or by air courier shall
be deemed effective on the first business day at the place at which such
notice or communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the fifth business day at the
place from which such notice or communication was mailed following the day on
which such notice or communication was mailed.
9.04. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under principles of conflicts of laws applicable
thereto.
9.05. KNOWLEDGE OF THE COMPANY. The phrase "to the knowledge of the Company"
and phrases of similar import shall mean the actual knowledge of Michael E.
Pulitzer, Ken J. Elkins, Ronald H. Ridgway, Nicholas G. Penniman IV, C. Wayne
Godsey and John Kueneke.
9.06. PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
for Sections 6.06(f)-(j), 6.25, 6.28 and 9.08 (which are intended to be for
the benefit of the Persons provided for therein and may be enforced by such
Persons).
9.07. COUNTERPARTS. This Agreement (and any amendment hereof) may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of
which shall together constitute one and the same instrument. This Agreement
(and any amendment hereof) shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures of all of
the parties reflected hereon as the signatories.
9.08. PERSONAL LIABILITY. This Agreement shall not create or be deemed to
create or permit any personal liability or obligation on the part of any
direct or indirect stockholder of any party hereto or any officer, director,
employee, agent, representative or investor of any party hereto.
9.09. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and successors. This Agreement may not be assigned by any
party hereto and any purported assignment in violation hereof shall be null
and void.
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9.10. AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of all the parties. Any amendment to this
Agreement after the meetings of the stockholders of the Company and the
Acquiror referred to in Section 6.13 may, subject to applicable law, be made
without seeking the approval of such stockholders.
9.11. EXTENSION; WAIVER. All parties hereto affected thereby may (i) extend
the time for the performance of any of the obligations or other acts of any
other party hereto, (ii) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any document, certificate
or writing delivered pursuant hereto by any other party, or (iii) waive
compliance with any of the covenants, agreements or conditions contained
herein or any breach thereof. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
9.12. LEGAL FEES; COSTS. If any party hereto institutes any action or
proceeding to enforce any provision of this Agreement, the prevailing party
therein shall be entitled to receive from the losing party reasonable
attorneys' fees and costs incurred in such action or proceeding, whether or
not such action or proceeding is prosecuted to final judgment.
9.13. DRAFTING. Each party acknowledges that its legal counsel participated
in the preparation of this Agreement and, therefore, stipulates that the rule
of construction that ambiguities are to be resolved against the drafting party
shall not be applied in the interpretation of this Agreement to favor any
party against the other.
9.14. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The parties hereto
irrevocably: (a) agree that any suit, action or other legal proceeding arising
out of this Agreement may be brought in the courts of the State of New York or
the courts of the United States located in New York County, New York, (b)
consent to the jurisdiction of each court in any such suit, action or
proceeding, (c) waive any objection which they, or any of them, may have to
the laying of venue of any such suit, action or proceeding in any of such
courts, and (d) waives the right to a trial by jury in any such suit, action
or other legal proceeding. Each of the Company and Newco hereby designates and
appoints Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York
10103 (the "Authorized Agent"), as its agent to accept and acknowledge on its
behalf, service of any and all process which may be served in any such suit,
action or other proceeding, and agrees that service upon such Authorized Agent
shall be deemed in every respect service of process on the Company or Newco
(as the case may be) or with respect to Newco its successors or assigns and,
to the extent permitted by applicable law, shall be taken and held to be valid
personal service, except that such appointment shall end at the Effective Time
in the case of the Company. Each of the Company and Newco represent and
warrant that the Authorized Agent has agreed to act as such agent for service
of process.
ARTICLE X
DEFINITIONS
10.01. DEFINITIONS. When used in this Agreement, the following terms shall
have the meanings indicated.
"Acquiror" has the meaning set forth in the first paragraph of this
Agreement.
"Acquiror's Actuary" has the meaning set forth in Section 6.11(d).
"Acquiror Common Stock" means the Series A Common Stock, par value $.01 per
share, of Acquiror.
"Acquiror's Financial Statements" has the meaning set forth in Section 5.07.
"Acquiror's 10-K" has the meaning set forth in Section 5.07.
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"Acquiror's 10-Q" has the meaning set forth in Section 5.07.
"Acquiror's SEC Reports" has the meaning set forth in Section 5.06.
"Acquiror Schedule" has the meaning set forth in Section 6.22(b).
"Acquiror Voting Agreement" means the voting agreement, dated the date
hereof, between Acquiror, the Company and Hearst Corporation.
"Acquisition Proposal" has the meaning set forth in Section 6.01(a).
"Affiliate" of any Person means any other Person, directly or indirectly,
through one or more intermediary Persons, controlling, controlled by or under
common control with such Person.
"After Tax Basis" has the meaning set forth in Section 6.09(h)(i).
"Aggregate Consideration" has the meaning set forth in Section 1.02(d).
"Aggregate Shares Delivered" has the meaning set forth in Section 1.02(d).
"Agreed Rate" means the annual rate of interest quoted, from time to time,
by Citibank, N.A. in New York City as its prime rate of interest for the
purpose of determining the interest rates charged by it for United States
dollar commercial loans made in the United States.
"Agreement" or "this Agreement" shall mean, and the words "herein", "hereof"
and "hereunder" and words of similar import shall refer to, this instrument as
it from time to time may be amended, including the exhibits and schedules
hereto.
"Audit or "audited" when used in regard to financial statements shall mean
an examination of the financial statements by a firm of independent public
accountants in accordance with generally accepted auditing standards for the
purpose of expressing an opinion thereon.
"Authorized Agent" has the meaning set forth in Section 9.14.
"Broadcasting" means, collectively, PBC and the Broadcasting Subsidiaries.
"Broadcasting Assets" has the meaning set forth in Section 2.02(a).
"Broadcasting Employee" means any employee or former employee of
Broadcasting.
"Broadcasting Employee Plan" has the meaning set forth in Section 4.10(a).
"Broadcasting Pension Plan" has the meaning set forth in Section 4.10(b).
"Broadcasting Subsidiaries" has the meaning set forth in Section 2.02(a).
"Broadcasting Tax Returns" has the meaning set forth in Section 6.09(h)(ii).
"Broadcasting Unaudited Financial Statements" has the meaning set forth in
Section 4.03.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banking institutions in New York City are authorized or
required by law, regulation or executive order to be closed.
"Certificate of Merger" has the meaning set forth in Section 1.03.
"Certificates" has the meaning set forth in Section 1.04(b).
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"Closing" and "Closing Date" have the meanings set forth in Section 7.01.
"Closing Agreement" has the meaning set forth in Section 3.11(d).
"Code" means Internal Revenue Code of 1986, as amended.
"Common Stock Conversion Number" has the meaning set forth in Section
1.02(d).
"Communications Act" has the meaning set forth in Section 5.01.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Charter Amendment" has the meaning set forth in Section 2.01(a).
"Company Class B Common Stock" means the Company's Class B Common Stock, par
value $.01 per share.
"Company Common Stock" means the Company's Common Stock, par value $.01 per
share.
"Company Consolidated Income Taxes" has the meaning set forth in Section
6.09(h)(iv).
"Company Consolidated Income Tax Returns" has the meaning set forth in
Section 6.09(h)(iii).
"Company Employee Plan" means any Employee Plan that is or was sponsored or
contributed to by the Company, Newco or any of their ERISA Affiliates covering
the employees or former employees (or their beneficiaries or dependents) of
the Company, Newco or any of their ERISA Affiliates.
"Company Financial Statements" has the meaning set forth in Section 3.07.
"Company Group" has the meaning set forth in Section 6.09(h)(v).
"Company Option Plans" has the meaning set forth in Section 6.12.
"Company Preferred Stock" has the meaning set forth in Section 3.05(a).
"Company's SEC Reports" has the meaning set forth in Section 3.06.
"Company Stock" means, collectively, the Company Common Stock and the
Company Class B Common Stock.
"Company 10-K" has the meaning set forth in Section 3.07.
"Company 10-Q" has the meaning set forth in Section 3.07.
"Confidentiality Agreement" has the meaning set forth in Section 6.05.
"Contract" means any contract, agreement or understanding.
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"Contribution" has the meaning set forth in Section 2.02(a).
"Contribution Agreement" has the meaning set forth in Section 2.01(b).
The term "control", with respect to any Person, shall mean the power to
direct the management and policies of such Person, directly or indirectly, by
or through stock ownership, agency or otherwise, or pursuant to or in
connection with an agreement, arrangement or understanding (written or oral)
with one or more other Persons by or through stock ownership, agency or
otherwise; and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.
"Deal Expenses" means the sum of (i) all fees and expenses due Goldman Sachs
and Huntleigh relating to the Merger and the Transactions; (ii) all out-of-
pocket costs and expenses incurred by the Company or any of its Subsidiaries
with respect to this Agreement, the Merger and the Transactions, including
commitment fees payable to the providers of New Company Debt and all fees and
expenses due legal counsel, accountants, compensation advisors and other
advisors for the Company or any of its Subsidiaries relating to this
Agreement, the Merger and the Transactions to the extent not paid or provided
for on the Closing Date; (iii) all payments due at Closing (x) in connection
with the Transactions or (y) for the benefit of employees of the Company, PBC
or the Broadcasting Subsidiaries pursuant to the agreements listed on Schedule
6.11(f)(2) or 6.11(g); and (iv) all amounts payable to cancel all outstanding
options under the Company Option Plans immediately before the Closing.
"DGCL" has the meaning set forth in Section 1.02(e).
"Dissenting Shares" has the meaning set forth in Section 1.02(e).
"Dissenting Stockholder" has the meaning set forth in Section 1.02(e).
"Distribution" has the meaning set forth in Section 2.02(c).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means a Person and/or such Person's Subsidiary or any
trade or business (whether or not incorporated) which is under common control
with such entity or such entity's Subsidiaries or which is treated as a single
employer with such Person or any Subsidiary of such Person under Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA.
"Effective Time" has the meaning set forth in Section 1.03.
"Employee Plan" has the meaning set forth in Section 4.10(a).
"Employee Stock Purchase Plan" means the Pulitzer Publishing Company 1997
Employee Stock Purchase Plan.
"Enforceability Exceptions" has the meaning set forth in Section 3.01.
"Environmental Law" or "Environmental Laws" means all laws, rules,
regulations, statutes, ordinances, decrees or orders of any governmental
entity relating to (i) the control of any potential pollutant or protection of
the air, water or land, (ii) solid, gaseous or liquid waste generation,
handling, treatment, storage, disposal or transportation, and (iii) exposure
to hazardous, toxic or other substances alleged to be harmful, and includes,
(A) the terms and conditions of any License from any governmental entity, and
(B) judicial, administrative, or other regulatory decrees, judgments, and
orders of any governmental entity. The term "Environmental Laws" shall
include, but not be limited to, the following statutes and the regulations
promulgated thereunder: the Clean Air
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Act, 42 U.S.C. (S) 7401 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.,
the Superfund Amendments and Reauthorization Act, 42 U.S.C. (S) 11011 et seq.,
the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., the Water
Pollution Control Act, 33 U.S.C. (S) 1251 et seq., the Safe Drinking Water
Act, 42 U.S.C.(S) 300f et seq., the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., and any state,
county, or local regulations similar thereto.
"Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation,
removal, response, abatement, clean-up, investigative, and/or monitoring costs
and any other related costs and expenses), other causes of action recognized
now or at any later time, damages, settlements, expenses, charges,
assessments, Liens, penalties, fines, pre-judgment and post-judgment interest,
attorney fees and other legal fees (i) pursuant to any agreement, order,
notice, requirement, responsibility, or directive (including directives
embodied in Environmental Laws), injunction, judgment or similar documents
(including settlements) arising out of or in connection with any Environmental
Laws, or (ii) pursuant to any claim by a governmental entity or other Person
for personal injury, property damage, damage to natural resources,
remediation, or similar costs or expenses incurred or asserted by such
governmental entity or Person pursuant to common law or statute.
"Estimated Working Capital Amount" has the meaning set forth in Section
6.22(a).
"Exchange Act" has the meaning set forth in Section 3.03.
"Exchange Agent" has the meaning set forth in Section 1.04(a).
"Existing Company Debt" means the sum as of the Closing Date of (i)
aggregate principal amount of debt under the Company's agreements with
Prudential referred to in Schedule 3.02, together with all accrued and unpaid
interest thereon, outstanding as of Closing Date, (ii) the principal amount of
debt under the Company's agreements with the First National Bank of Chicago
referred to in Schedule 3.02, together with all accrued and unpaid interest
thereon, outstanding as of the Closing Date, and (iii) any other Indebtedness
(other than the New Company Debt) of the Company and its Subsidiaries,
together with all accrued and unpaid interest thereon outstanding. Existing
Company Debt shall include any prepayment penalty or premium required to
prepay the Existing Company Debt at Closing.
"FCC" has the meaning set forth in Section 3.03.
"FCC Application" means any application filed with the FCC necessary to
transfer ownership of Broadcasting's FCC Licenses to Acquiror.
"Final Order" has the meaning set forth in Section 6.14(e).
"Final Working Capital Amount" has the meaning set forth in Section 6.22(e).
"FCC" has the meaning set forth in Section 3.03.
"FCC Approval" has the meaning set forth in Section 7.02(d).
"Form 8-K" has the meaning set forth in Section 6.21(a).
"Further Media Interest" has the meaning set forth in Section 6.14(d).
"GAAP" shall mean generally accepted accounting principles in effect on the
date hereof as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or
as may be generally accepted by the accounting profession of the United
States.
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"Goldman Sachs" means Goldman, Sachs & Co.
"Government Antitrust Entity" has the meaning set forth in Section 6.14(b).
"Government Communications Entity" has the meaning set forth in Section
6.14(b).
"Government Regulatory Entity" has the meaning set forth in Section 6.14(b).
"Governmental Authority" has the meaning set forth in Section 6.14(a).
"Gross-Up Agreements" means (i) the Agreement, dated as of May 12, 1986, by
and among The Pulitzer Publishing Company, a Missouri corporation, and each of
the owners of shares of capital stock of The Pulitzer Publishing Company who
was a signatory to such Agreement, (ii) the Agreement, dated as of May 12,
1986, by and among The Pulitzer Publishing Company and each of the owners of
shares of capital stock of The Pulitzer Publishing Company who was a signatory
to such Agreement, (iii) the Agreement, dated as of September 29, 1986, by and
among The Pulitzer Publishing Company and each of the parties thereto; and
(iv) the Agreement, dated as of September 29, 1986, by and among The Pulitzer
Publishing Company and each of the owners of shares of capital stock of The
Pulitzer Publishing Company who was a signatory to such Agreement.
"Gross-Up Amount" means the amount, if any, due by the Company to any Person
with respect to the consummation of the Transactions pursuant to the Gross-Up
Agreements.
"HSR Act" has the meaning set forth in Section 3.03.
"HSR Authority" means either the Department of Justice or the Federal Trade
Commission.
"Huntleigh" means Huntleigh Securities Corporation.
"IRS" means the Internal Revenue Service.
"Indebtedness" of any Person means all obligations of such Person (i) for
borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" has the meaning set forth in Section 6.06(h).
"Indemnifying Party" has the meaning set forth in Section 6.06(h).
"Indemnitee" has the meaning set forth in Section 6.09(e).
"Indemnitor" has the meaning set forth in Section 6.09(e).
"Joint Proxy Statement/Prospectus" has the meaning set forth in Section
6.06(a).
"Laws" means all applicable statutes, laws, ordinances, rules and
regulations (including any of the foregoing related to occupational safety,
storage, disposal, discharge into the environment of hazardous wastes,
environmental protection, conservation, unfair competition, labor practices or
corrupt practices).
"Licenses" means approvals, authorizations, consents, rights, certificates,
orders, franchises, determinations, permissions, permits, qualifications,
registrations, licenses, authorities or grants issued, declared, designated or
adopted by any nation or government, any federal, state, municipal or other
political subdivision thereof or any department, commission, board, bureau,
agency or instrumentality exercising executive, legislative, judicial,
regulatory or administrative functions pertaining to government.
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<PAGE>
"Liens" means any lien, claim, charge, restriction, pledge, mortgage,
security interest or other encumbrance of any nature whatsoever.
"Losses" means all losses, claims, damages, liabilities or actions,
including any legal or other expenses reasonably incurred in connection with
investigating or defending any such loss, claim, damage or liability or action
or enforcing any indemnity with respect thereto.
"Material Adverse Effect" means a material adverse effect on the business,
condition (financial or otherwise) or assets of the named entity or the named
entities taken as a whole, other than changes or effects resulting from (i)
changes attributable to conditions affecting the newspaper, radio and/or
television businesses generally, (ii) changes in general economic conditions,
(iii) cyclical changes that are consistent with the past operating history of
the named entity or entities, or (iv) changes attributable to the announcement
or pendency of the Merger and the other Transactions. When the term "Material
Adverse Effect" or material is used with respect to more than one act,
occurrence, item or circumstance, all such acts, occurrences, items and
circumstances shall be considered individually and in the aggregate.
"Merger" has the meaning set forth in Section 1.01.
"Merger Stock" has the meaning set forth in Section 1.04(a).
"Multiemployer Plan" means a multiemployer plan, as defined in Sections
3(37) and 4001(a)(3) of ERISA.
"NASDAQ" means the Nasdaq National Market.
"NLRB" means the National Labor Relations Board.
"NYSE" means the New York Stock Exchange, Inc.
"New Company Debt" has the meaning set forth in Section 2.01(b).
"Newco" has the meaning set forth in the first paragraph of this Agreement.
"Newco's Actuary" has the meaning set forth in Section 6.11(d).
"Newco Charter Amendment" has the meaning set forth in Section 2.01(a).
"Newco Class B Common Stock" means the Class B Common Stock, $0.01 par value
per share, of Newco.
"Newco Common Shares" has the meaning set forth in Section 3.05(b).
"Newco Common Stock" means the Common Stock, $0.01 par value per share, of
Newco.
"Newco Preferred Stock" has the meaning set forth in Section 3.05(b).
"Newspaper Subsidiaries" means the Post-Dispatch division of the Company and
all direct and indirect Subsidiaries of the Company, other than Broadcasting,
prior to the Contribution.
"Other Filings" has the meaning set forth in Section 6.06(b).
"Outstanding Company Stock" has the meaning set forth in Section 1.02(d).
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"PBC" has the meaning set forth in Section 2.02(a).
"Permitted Exceptions" has the meaning set forth in Section 4.08(b).
"Person" means any individual, general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
cooperative or association, and the heirs, executors, administrators, legal
representatives, successors, and assigns of such Person where the context so
requires.
"Post-Closing Tax Period" has the meaning set forth in Section 6.09(h)(vii).
"Pre-Closing Tax Period" has the meaning set forth in Section 6.09(h)(vi).
"Preliminary Joint Proxy Statement/Prospectus" has the meaning set forth in
Section 6.06(a).
"Prudential" means The Prudential Insurance Company of America.
"Pulitzer Pension Plan" has the meaning set forth in Section 6.11(d).
"Pulitzer Savings Plan" has the meaning set forth in Section 6.11(c).
"Pulitzer Voting Agreement" means the amended and restated voting agreement,
dated as of the date hereof, between the Company and certain holders of
Company Stock.
"Real Property" means all realty owned or leased and used primarily in the
business and operations of PBC and the Broadcasting Subsidiaries, including
all appurtenances, improvements and fixtures located on such realty, but
excluding personal property.
"Record Date" has the meaning set forth in Section 2.02(c).
"Retained Assets" has the meaning set forth in the Contribution Agreement.
"Retained Business" means the assets and liabilities of the Company and its
Subsidiaries after giving effect to the Contribution and the Distribution.
"Retained Liabilities" has the meaning set forth in the Contribution
Agreement.
"Rules and Regulations" has the meaning set forth in Section 5.01.
"SEC" has the meaning set forth in Section 3.06.
"SEC Filings" has the meaning set forth in Section 6.06(c).
"Securities Act" has the meaning set forth in Section 3.03.
"Spin-Off Tax" has the meaning set forth in Section 6.09(h)(viii).
"Station Network Affiliation Agreements" has the meaning set forth in
Section 4.07.
"Stations" means, collectively, KETV-TV, KOAT-TV, KOCT-TV, KOVT-TV, KCCI-TV,
WLKY-TV, WGAL-TV, WDSU-TV, WYFF-TV, WXII-TV, WESH-TV, KTAR(AM), KMVP(AM),
KKLT(FM), WLKY(AM), and WXII(AM).
"Subsidiary" as to any Person means (i) any corporation of which such Person
owns, either directly or through its Subsidiaries, more than 50% of the total
combined voting power of all classes of voting securities of
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such corporation or (ii) any partnership, association, joint venture or other
form of business organization, whether or not it constitutes a legal entity,
in which such Person directly or indirectly through its Subsidiaries owns more
than 50% of the total equity interests.
"Superior Proposal" means an Acquisition Proposal that the Board of
Directors of the Company determines in the good faith exercise of its business
judgment (after consultation with the Company's independent financial
advisors) to be more favorable to the Company's stockholders than the Merger.
"Surviving Corporation" has the meaning set forth in Section 1.01.
"Tax" has the meaning set forth in Section 6.09(h)(x).
"Tax Return" has the meaning set forth in Section 6.09(h)(xi).
"Tax Ruling Request" has the meaning set forth in Section 3.11(d).
"Temporary Waiver" has the meaning set forth in Section 6.14(d).
"Termination Date" has the meaning set forth in Section 8.01(b).
"Transaction Agreement" has the meaning set forth in Section 3.01.
"Transactions" means (i) the Contribution, (ii) the Distribution, (iii) the
Company Charter Amendment, (iv) the Newco Charter Amendment, (v) the borrowing
by the Company of the New Company Debt, (vi) and any other transactions
contemplated by this Agreement (including the Merger) and the Transaction
Agreements.
"Transfer Agent" means First Chicago Trust Company of New York.
"Transferee DB Plan" has the meaning set forth in Section 6.11(d).
"Transferee DC Plan" has the meaning set forth in Section 6.11(c).
"Transferred Employees" has the meaning set forth in Section 6.11(b).
"Working Capital Amount" means the difference between (x) the total current
assets of the Company and its Subsidiaries and (y) the total current
liabilities (other than the New Company Debt, the Existing Company Debt and
Deal Expenses) of the Company and its Subsidiaries (in each case calculated in
accordance with GAAP immediately prior to the Effective Time and after giving
effect to the Contribution, the Distribution and the disposition of cash and
cash equivalents contemplated by Section 6.24).
10.02. INTERPRETATION. Unless the context otherwise requires, the terms
defined in Section 10.01 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms
of any of the terms defined herein. All accounting terms defined in this
Section 10.01, and those accounting terms used in this Agreement not defined
in Section 10.01, except as otherwise expressly provided herein, shall have
the meanings customarily given thereto in accordance with GAAP. Except as
otherwise expressly provided herein, all terms used in conjunction with
description of securities have the meanings given to those terms under the
Exchange Act. When a reference is made in this Agreement to Sections, such
reference
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shall be to a Section of this Agreement unless otherwise indicated. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The use of the neuter gender herein shall be deemed to include
the masculine and feminine genders wherever necessary or appropriate, the use
of the masculine gender shall be deemed to include the neuter and feminine
genders and the use of the feminine gender shall be deemed to include the
neuter and masculine genders wherever necessary or appropriate.
[The remainder of this page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized as of the day
and year first above written.
Pulitzer Publishing Company
/s/ Michael E. Pulitzer
By:__________________________________
Name: Michael E. Pulitzer
Title:Chairman of the Board,
President and Chief
Executive Officer
Pulitzer Inc.
/s/ Michael E. Pulitzer
By:__________________________________
Name: Michael E. Pulitzer
Title:Chairman of the Board
Hearst-Argyle Television, Inc.
/s/ Dean H. Blythe
By:__________________________________
Name: Dean H. Blythe
Title:Senior Vice-President,
Secretary and General
Counsel
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EXHIBIT A
CHARTER AMENDMENT
Section (2)B of Article III of the Restated Certificate of Incorporation of
Pulitzer Publishing Company shall be deleted in its entirety and substituting
in lieu thereof the following new Section (2)B:
B. Dividends and Distributions. Except as otherwise expressly provided in
the last sentence of this Section (2)B, at any time shares of Class B
Common Stock are outstanding, as and when dividends or other distributions
payable in either cash, capital stock of the Corporation (other than Common
Stock or Class B Common Stock) or other property of the Corporation may be
declared by the Board of Directors, the amount of any such dividend or
other distribution payable on each share of Common Stock shall in all cases
be equal to the amount of such dividend or other distribution payable on
each share of Class B Common Stock, and the amount of any such dividend or
other distribution payable on each share of Class B Common Stock shall in
all cases be equal to the amount of the dividend or other distribution
payable on each share of Common Stock. Dividends or other distributions
payable in shares of Class B Common Stock may not be made on or to shares
of any class of the Corporation's capital stock other than the Class B
Common Stock and dividends payable in shares of Common Stock may not be
made on or to shares of any class of the Corporation's capital stock other
than the Common Stock. If a dividend or other distribution payable in
shares of Common Stock shall be made on the shares of Common Stock, a
dividend or other distribution payable in shares of Class B Common Stock
shall be made simultaneously on the shares of Class B Common Stock, and the
number of shares of Class B Common Stock payable on each share of Class B
Common Stock pursuant to such dividend or other distribution shall be equal
to the number of shares of Common Stock payable on each share of Common
Stock pursuant to such dividend or distribution. Notwithstanding the
foregoing provisions of this Section (2)B, in the case of any dividend or
other distribution payable in stock of Pulitzer Inc., a Delaware
corporation and wholly-owned subsidiary of the Corporation, (i) only shares
of Class B Common Stock of Pulitzer Inc. shall be distributed with respect
to shares of Class B Common Stock and only shares of Common Stock of
Pulitzer Inc. shall be distributed with respect to shares of Common Stock;
(ii) the number of shares of Class B Common Stock of Pulitzer Inc. payable
on each share of Class B Common Stock pursuant to such dividend or other
distribution shall be equal to the number of shares of Common Stock of
Pulitzer Inc. payable on each share of Common Stock pursuant to such
dividend or other distribution; and (iii) such dividends or other
distributions of shares of Common Stock of Pulitzer Inc. and Class B Common
Stock of Pulitzer Inc. shall be made simultaneously.
<PAGE>
EXHIBIT B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF PULITZER INC.
PULITZER INC., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
FIRST: That the name of the Corporation is Pulitzer, and the name under
which the Corporation was originally incorporated was Pulitzer Inc. The date
of filing its original Certificate of Incorporation with the Secretary of
State was May 22, 1998.
SECOND: That this Amended and Restated Certificate of Incorporation amends
and restates the Certificate of Incorporation of this Corporation.
THIRD: That the text of the Certificate of Incorporation is amended hereby
to read as herein set forth in full:
ARTICLE I
NAME
The name of this Corporation is Pulitzer Inc.
ARTICLE II
AGENT FOR SERVICE
The name and address of the Corporation's agent for service of process in
Delaware is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware
County of New Castle
<PAGE>
ARTICLE III
CAPITAL
(1) Classes and Number of Shares.
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 175,000,000 shares. The classes and the
aggregate number of shares of stock of each class which the Corporation shall
have authority to issue are as follows:
A. 100,000,000 shares of Common Stock, $0.01 par value ("Common Stock").
B. 50,000,000 shares of Class B Common Stock, $0.01 par value ("Class B
Common Stock").
C. 25,000,000 shares of Preferred Stock, $0.01 par value ("Preferred
Stock").
(2) Powers and Rights of the Common Stock and the Class B Common Stock.
A. Voting Rights and Powers. Except as otherwise provided in this
Certificate of Incorporation or required by law, with respect to all matters
upon which stockholders are entitled to vote, the holders of the outstanding
shares of Common Stock and the holders of any outstanding shares of Class B
Common Stock shall vote together with the holders of any other outstanding
shares of voting capital stock of the Corporation, without regard to class,
and every holder of outstanding shares of Common Stock shall be entitled to
cast thereon one vote in person or by proxy for each share of Common Stock
standing in his name, and every holder of the outstanding shares of Class B
Common Stock shall be entitled to cast thereon ten votes in person or by proxy
for each share of Class B Common Stock standing in his name. The holders of
shares of Common Stock and Class B Common Stock shall have the relevant class
voting rights set forth in Article XIV.
B. Dividends and Distributions.
(i) At any time shares of Class B Common Stock are outstanding, as and when
dividends or other distributions payable in either cash, capital stock of the
Corporation (other than Common Stock or Class B Common Stock) or other
property of the Corporation may be declared by the Board of Directors, the
amount of any such dividend payable on each share of Common Stock shall in all
cases be equal to the amount of such dividend payable on each share of Class B
Common Stock, and the amount of any such dividend payable on each share of
Class B Common Stock shall in all cases be equal to the amount of the dividend
payable on each share of Common Stock. Dividends and distributions payable in
shares of Class B Common Stock may not be made on or to shares of any class of
the Corporation's capital stock other than the Class B Common Stock and
dividends payable in shares of Common Stock may not be made on or to shares of
any class of the Corporation's capital stock other than the Common Stock. If a
dividend or distribution payable in shares of Common Stock shall be made on
the shares of Common Stock, a dividend or distribution payable in shares of
Class B Common Stock shall be made simultaneously on the shares of Class B
Common Stock, and the number of shares of Class B Common Stock payable on each
share of Class B Common Stock pursuant to such dividend or distribution shall
be equal to the number of shares of Common Stock payable on each share of
Common Stock pursuant to such dividend or distribution.
(ii) In the case of any dividend or other distribution payable in stock of
any corporation which immediately prior to the time of such dividend or other
distribution is a wholly-owned subsidiary of the Corporation and which
possesses authority to issue shares of capital stock with voting
characteristics identical to those of the shares of Common Stock and Class B
Common Stock, respectively, provided in this Amended and Restated Certificate
of Incorporation, including a distribution pursuant to a stock dividend or
division or split-up of the shares of the Corporation, (i) only shares of
Class B Common Stock shall be distributed with respect to shares of Class B
Common Stock and only shares of Common Stock shall be distributed with respect
to Common Stock; (ii) the number of shares of Class B Common Stock payable on
each share of Class B Common Stock pursuant to such dividend or other
distribution shall be equal to the number of shares of Common Stock payable on
each share of Common Stock pursuant to such dividend or other distribution;
and (iii) such dividends or other distributions of shares of Common Stock and
Class B Common Stock shall be made simultaneously.
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<PAGE>
C. Distribution of Assets Upon Liquidation. In the event the Corporation
shall be liquidated, dissolved or wound up, whether voluntarily or
involuntarily, after there shall have been paid or set aside for the holders
of all shares of the Preferred Stock then outstanding the full preferential
amounts to which they are entitled under the resolutions authorizing the
issuance of such Preferred Stock, the net assets of the Corporation remaining
thereafter shall be divided among the holders of the Common Stock and Class B
Common Stock in such a manner that the amount of such net assets distributed
to each share of Common Stock shall be equal to the amount of such assets
distributed to each share of Class B Common Stock.
D. Issuance of the Class B Common Stock. Class B Common Stock may only be
issued (i) in accordance with and pursuant to the terms of that certain
Contribution and Assumption Agreement (the "Contribution and Assumption
Agreement") to be entered into by and between the Corporation and Pulitzer
Publishing Company, a Delaware corporation which immediately prior to the
filing of this Amended and Restated Certificate of Incorporation owned all of
the issued and outstanding shares of capital stock of the Corporation
("Pulitzer Publishing"), or (ii) in the form of a distribution or
distributions pursuant to a stock dividend or division or split-up of the
shares of Class B Common Stock and only then in respect of the issued shares
of Class B Common Stock.
E. Restrictions on Transfer of Class B Common Stock.
(i) No person holding shares of Class B Common Stock of record (a "Class B
Holder") may transfer, and the Corporation shall not register the transfer of,
any shares of Class B Common Stock, whether by sale, assignment, gift,
bequest, appointment or otherwise, except to a Permitted Transferee (a
"Permitted Transfer"). The term Permitted Transferee has the following
meanings with respect to each Class B Holder:
(a) The following persons shall be "Permitted Transferees" of each Class
B Holder who is a natural person:
1. The spouse or former spouse of such Class B Holder; any Original
Holder (as defined in clause (iii) of this Section E) or the spouse or
former spouse of any Original Holder; any lineal descendant of any
Original Holder or of the spouse or former spouse of any Original
Holder; and any spouse or former spouse of such lineal descendant
(hereinafter such Class B Holder's "Family Members");
2. The trustee or trustees of a voting trust of which a Controlling
Number (as defined in clause (iii) of this Section E) of such trustees
are any of the following (each a "Qualified Person"): (i) such Class B
Holder, (ii) one of such Class B Holder's Family Members, (iii) an
executive officer (as defined in Rule 3b-7 of the General Rules and
Regulations under the Exchange Act, as in effect on March 1, 1986) of
the Corporation or any wholly owned subsidiary of the Corporation, or
(iv) any person who is the duly designated initial or subsequent
successor of an Original Holder in accordance with the terms of such
voting trust;
3. The trustee or trustees of a trust (other than a voting trust)
solely for the benefit of such Class B Holder or one or more of such
Class B Holder's Permitted Transferees described in each subclause of
this clause (a) other than subclause (2) or this subclause (3);
4. Any organization contributions to which are deductible for federal
income, estate or gift tax purposes or any split interest trust
described in Section 4947 of the Internal Revenue Code as it may from
time to time be amended, and of which a Controlling Number of the
members of the Board of Directors or other governing body or group
having the ultimate authority, inter alia, to vote, dispose or direct
the voting or disposition of the shares of Class B Common Stock held by
such organization ("Governing Body") are Qualified Persons (a
"Charitable Organization");
5. A corporation of which a majority of the outstanding shares of
capital stock entitled to vote generally for the election of directors
is beneficially owned by, or a partnership of which a majority of the
partnership interests entitled to participate in the management of the
partnership are beneficially owned by, such Class B Holder or his or
her Permitted Transferees described in each subclause of this clause
(a) other than this subclause (5); and
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<PAGE>
6. If the Class B Holder is deceased, bankrupt or insolvent, the
estate of such Class B Holder.
(b) In the case of one or more Class B Holders holding shares of Class B
Common Stock as trustees pursuant to a voting trust or any other trust
(other than a Charitable Organization or a trust described in clause (d)
below) as a result of a Permitted Transfer, "Permitted Transferee" means,
with respect to each share of Class B Common Stock so transferred to such
trustees, (X) any person who transferred such share of Class B Common Stock
to such trustees and (Y) any Permitted Transferee of any such transferor,
and, with respect to each Subsequent Class B Share (as defined in clause
(iii) of this Section E) held by such trustees, any person who is a
Permitted Transferee with respect to the share of Class B Common Stock in
respect of which such Subsequent Class B Share was issued.
(c) In the case of one or more Class B Holders holding shares of Class B
Common Stock as trustees pursuant to a trust (other than a voting trust or
a Charitable Organization) which was irrevocable on the effective date of
this Certificate of Incorporation, "Permitted Transferee" means any person
to whom or for whose benefit principal may be distributed either during or
at the end of the term of such trust whether by power of appointment or
otherwise.
(d) In the case of any Charitable Organization that is a Class B Holder,
"Permitted Transferee" means, (X) with respect to any share of Class B
Common Stock transferred to such Charitable Organization in a Permitted
Transfer, the transferor in such Permitted Transfer and any Permitted
Transferee of such transferor and (Y) with respect to each Subsequent Class
B Share held by such Charitable Organization, any person who is a Permitted
Transferee with respect to the share of Class B Common Stock in respect of
which such Subsequent Class B Share was issued.
(e) In the case of a Class B Holder that is a corporation or partnership
(other than a Charitable Organization) holding shares of Class B Common
Stock as a result of a Permitted Transfer, "Permitted Transferee" means
with respect to each share of Class B Common Stock so transferred to such
corporation or partnership (X) any person who transferred such share of
Class B Common Stock to such corporation or partnership and (Y) any
Permitted Transferee of any such transferor, and, with respect to each
Subsequent Class B Share held by such corporation or partnership, any
person who is a Permitted Transferee with respect to the share of Class B
Common Stock in respect of which such Subsequent Class B Share was issued.
(f) In the case of a Class B Holder that is the estate of a deceased,
bankrupt or insolvent Class B Holder, "Permitted Transferee" means a
Permitted Transferee of such deceased, bankrupt or insolvent Class B
Holder.
(ii) Notwithstanding anything to the contrary set forth herein, any Class B
Holder may pledge his shares of Class B Common Stock to a pledgee pursuant to
a bona fide pledge of such shares as collateral security for indebtedness due
to the pledgee, provided that such shares shall not be transferred to or
registered in the name of the pledgee and shall remain subject to the
provisions of this Section E. In the event of foreclosure or other similar
action with respect to such shares by the pledgee, such pledged shares of
Class B Common Stock may only be transferred to a Permitted Transferee of the
pledgor or converted into shares of Common Stock, as the pledgee may elect.
(iii) For purposes of this Section E:
(a) The term "Controlling Number" means the minimum number of trustees,
in the case of a trust, or members of a Governing Body, in the case of any
other form of entity, whose affirmative vote is necessary to take any
action on, or whose negative vote, abstention or failure to attend is
sufficient to prevent any action with respect to the voting or disposition
of shares of capital stock held by such entity;
(b) The term "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(c) The term "Original Holder" means any person to whom or trust to which
shares of Class B Common Stock of Pulitzer Publishing were issued in
connection with the merger of The Pulitzer Publishing Company, a Missouri
corporation, into Pulitzer Publishing in 1986.
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(d) The term "Subsequent Class B Share" means any share of Class B Common
Stock issued by the Corporation to a Class B Holder in respect of an
existing share of Class B Common Stock held by such Class B Holder.
(e) The relationship of any person that is derived by or through legal
adoption shall be considered a natural one.
(f) A minor for whom shares of Class B Common Stock are held pursuant to
the Uniform Gifts to Minors Act, as in effect in any state, or any similar
law, shall be considered a Class B Holder.
(g) Unless otherwise specified, the term "person" means both natural
persons and legal entities.
(h) Without derogating from the election conferred upon the Corporation
pursuant to paragraph (iv) below, each reference to a corporation shall
include any successor corporation resulting from merger or consolidation;
and each reference to a partnership shall include any successor partnership
resulting from the death or withdrawal of a partner.
(i) The term "beneficial owner" has the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as
in effect on October 1, 1986.
(iv) If at any time after the effective date of this Certificate of
Incorporation, any of the following events shall occur:
(a) A Controlling Number of the trustees of any voting trust that is a
Class B Holder shall cease to be Qualified Persons;
(b) A Controlling Number of the Governing Body of any Charitable
Organization that is a Class B Holder shall cease to be Qualified Persons;
or
(c) A corporation or partnership that first became a Class B Holder as a
result of a Permitted Transfer shall thereafter by reason of any transfer
of the beneficial ownership of the capital stock or partnership interests
thereof cease to be a Permitted Transferee of the transferor in such
Permitted Transfer;
then, at any time after the occurrence of any such event, upon the election
of the Corporation given by written notice to the trustees of such voting
trust, Charitable Organization, corporation or partnership, as the case may
be, without further act on anyone's part, each share of Class B Common
Stock held by such entity shall be converted into one share of Common
Stock, effective upon the giving of such notice, and the stock certificates
formerly representing the shares of Class B Common Stock held by such
entity shall thereupon and thereafter be deemed to represent such shares of
Common Stock.
(v) Anything contained in this Section E to the contrary notwithstanding:
(a) Shares of Class B Common Stock may be registered in the names of more
than one person only if each person in whose name the shares of Class B
Common Stock are to be registered is a Permitted Transferee of each such
other person. If shares of Class B Common Stock are registered in the names
of more than one person in accordance with this subclause (a), then any
transfer of such shares of Class B Common Stock to any Permitted Transferee
of any person in whose name such shares are registered shall be a Permitted
Transfer.
(b) Any transfer of shares of Class B Common Stock to an employee benefit
plan established and maintained by the Corporation or any wholly owned
subsidiary of the Corporation or any trustee or fiduciary with respect to
any such plan in such capacity shall be a Permitted Transfer, and any such
plan, trustee or fiduciary shall be a Permitted Transferee of any Class B
Holder.
(vi) Any purported transfer of record or beneficial ownership of shares of
Class B Common Stock other than in accordance with the terms of this Section E
shall, without any act on anyone's part, result in the conversion of each
share of the purportedly transferred share of Class B Common Stock into one
share of Common Stock effective on the date of such purported transfer, and
the stock certificates formerly representing such shares of Class B Common
Stock shall thereupon and thereafter be deemed to represent such number of
shares of Common Stock.
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(vii) Shares of Class B Common Stock shall be issued to or registered in the
names of the beneficial owners thereof and not in "street" or "nominee" name.
The Corporation may, in connection with preparing a list of stockholders
entitled to vote at any meeting of stockholders, or as a condition to the
transfer or the registration of shares of Class B Common Stock on the
Corporation's books, require the furnishing of such affidavits or other proof
as it deems necessary to establish that the registered owner of such shares is
in fact the beneficial owner of such shares.
(viii) The Corporation shall note on the certificates for shares of Class B
Common Stock that the shares represented by such certificates are subject to
the restrictions on transfer and registration of transfer imposed by this
Section E.
F. Conversion of the Class B Common Stock. Each share of the Class B Common
Stock may at any time be converted at the election of the holder thereof into
one share of the Common Stock. Any holder of shares of Class B Common Stock
may elect to convert any or all of such shares at one time or at various times
in such holder's discretion. Such right shall be exercised by the surrender of
the certificate representing each share of Class B Common Stock to be
converted to the Corporation at its principal executive offices, accompanied
by a written notice of the election by the holder thereof to convert and (if
so required by the Corporation) by instruments of transfer, in form
satisfactory to the Corporation, duly executed by such holder or his duly
authorized attorney. The issuance of a certificate or certificates for shares
of the Common Stock upon conversion of shares of Class B Common Stock shall be
made without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate or certificates is or are to be
issued in a name other than that of the holder of the shares of Class B Common
Stock to be converted, the person or persons requesting the issuance thereof
shall pay to the Corporation the amount of any tax which may be payable in
respect of any such transfer, or shall establish to the satisfaction of the
Corporation that such tax has been paid. As promptly as practicable after the
surrender for conversion of a certificate or certificates representing shares
of Class B Common Stock and the payment of any tax as hereinabove provided,
the Corporation will deliver to, or upon the written order of, the holder of
such certificate or certificates, a certificate or certificates representing
the number of shares of Common Stock issuable upon such conversion, issued in
such name or names as such holder may direct. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date of
the surrender of the certificate or certificates representing shares of Class
B Common Stock (or, if on such date the transfer books of the Corporation
shall be closed, then immediately prior to the close of business on the first
date thereafter that said books shall be open), and all rights of such holder
arising from ownership of shares of Class B Common Stock shall cease at such
time, and the person or persons in whose name or names the certificate or
certificates representing shares of Common Stock are to be issued shall be
treated for all purposes as having become the record holder or holders of such
shares of Common Stock at such time and shall have and may exercise all the
rights and powers appertaining thereto. No adjustments in respect of past cash
dividends shall be made upon the conversion of any share of Class B Common
Stock; provided, that, if any shares of Class B Common Stock shall be
converted into shares of Common Stock subsequent to the record date for the
payment of a dividend or other distribution on shares of Class B Common Stock
but prior to such payment, the registered holder of such shares of Class B
Common Stock at the close of business on such record date shall be entitled to
receive on the payment date, with respect to the shares of Common Stock
received upon such conversion, the dividend or other distribution which would
have been payable had such shares of Common Stock been outstanding and held of
record on such dividend record date by the registered holder on such dividend
record date of the shares of Class B Common Stock so converted in lieu of the
dividend otherwise payable on the shares of Class B Common Stock so converted.
The Corporation shall at all times reserve and keep available, solely for the
purpose of issuance upon conversion of outstanding shares of Class B Common
Stock, such number of shares of Common Stock as may be issuable upon the
conversion of all such outstanding shares of Class B Common Stock; provided,
that, the Corporation may deliver shares of Common Stock which are held in the
treasury of the Corporation for shares of Class B Common Stock to be
converted. If any share of Common Stock requires registration with or approval
of any governmental authority under any federal or state law before such share
of Common Stock may be issued upon conversion, the Corporation will endeavor
to cause such share to be duly registered or approved, as the case may be. The
Corporation will endeavor to list shares of Common
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Stock required to be delivered upon conversion prior to such delivery upon any
national securities exchange or national market system on which the
outstanding shares of Common Stock may be listed at the time of such delivery.
All shares of Common Stock which may be issued upon conversion of shares of
Class B Common Stock will, upon issuance, be fully paid and nonassessable. The
aggregate amount of stated capital represented by shares of Common Stock
issued upon conversion of shares of Class B Common Stock shall be the same as
the aggregate amount of stated capital represented by the shares of Class B
Common Stock so converted.
G. Mandatory Conversion of Class B Common Stock. At any time when the
aggregate voting power of all outstanding shares of Class B Common Stock as
reflected on the stock transfer books of the Corporation falls below 20% of
the aggregate voting power of all outstanding shares of Common Stock and Class
B Common Stock of the Corporation, or when the Board of Directors and the
holders of a majority of the outstanding shares of Class B Common Stock
approve the conversion of all of the shares of Class B Common Stock into
Common Stock, then, immediately upon the occurrence of either such event,
without any act on anyone's part, the outstanding shares of Class B Common
Stock shall be converted into shares of Common Stock in accordance with
Section F above. In the event of such a conversion, certificates formerly
representing outstanding shares of Class B Common Stock shall thereupon and
thereafter be deemed to represent the number of shares of Common Stock into
which such shares of Class B Common Stock are convertible.
H. Other Rights. Except as otherwise required by the General Corporation Law
of the State of Delaware or as otherwise provided in this Certificate of
Incorporation, each share of Common Stock and each share of Class B Common
Stock shall have identical powers, preferences and rights.
(3) Powers and Rights of the Preferred Stock.
A. Preferred Stock. The Preferred Stock may be issued from time to time in
one or more series, with such distinctive serial designations as may be stated
or expressed in the resolution or resolutions providing for the issue of such
stock adopted from time to time by the Board of Directors; and in such
resolution or resolutions providing for the issuance of shares of each
particular series, the Board of Directors is also expressly authorized to fix:
the right to vote, if any; the consideration for which the shares of such
series are to be issued; the number of shares constituting such series, which
number may be increased (except as otherwise fixed by the Board of Directors)
or decreased (but not below the number of shares thereof then outstanding)
from time to time by action of the Board of Directors; the rate of dividends
upon which and the times at which dividends on shares of such series shall be
payable and the preference, if any, which such dividends shall have relative
to dividends on shares of any other class or classes or any other series of
stock of the Corporation; whether such dividends shall be cumulative or
noncumulative, and if cumulative, the date or dates from which dividends on
shares of such series shall be cumulative; the rights, if any, which the
holders of shares of such series shall have in the event of any voluntary or
involuntary liquidation, merger, consolidation, distribution or sale of
assets, dissolution or winding up of the affairs of the Corporation; the
rights, if any, which the holders of shares of such series shall have to
convert such shares into or exchange such shares for shares of any other class
or classes or any other series of stock of the Corporation (other than shares
of Class B Common Stock) and the terms and conditions, including price and
rate of exchange, of such conversion or exchange; whether shares of such
series shall be subject to redemption, and the redemption price or prices and
other terms of redemption, if any, for shares of such series including,
without limitation, a redemption price or prices payable in shares of Common
Stock; the terms and amounts of any sinking fund for the purchase or
redemption of shares of such series; and any and all other powers, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof pertaining to shares of
such series permitted by law.
(4) Issuance of the Common Stock and the Preferred Stock.
The Board of Directors of the Corporation may from time to time authorize by
resolution the issuance of any or all shares of the Common Stock and the
Preferred Stock herein authorized in accordance with the terms and conditions
set forth in this Certificate of Incorporation for such purposes, in such
amounts, to such persons, corporations, or entities, for such consideration,
and in the case of the Preferred Stock, in one or more series, all as the
Board of Directors in its discretion may determine and without any vote or
other action by the Stockholders, except as otherwise required by law.
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ARTICLE IV
NAME AND ADDRESS OF INCORPORATOR
The name and mailing address of the sole incorporator is as follows:
Richard A. Palmer
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
ARTICLE V
DIRECTORS
(l) Power of the Board of Directors. The property and business of the
Corporation shall be controlled and managed by or under the direction of its
Board of Directors. In furtherance, and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized:
(a) To make, alter, amend or repeal the By-Laws of the Corporation, but
only in accordance with the provisions of Article XIII; provided, that no
By-Laws hereafter adopted shall invalidate any prior act of the Directors
that would have been valid if such By-Laws had not been adopted;
(b) To determine the rights, powers, duties, rules and procedures that
affect the power of the Board of Directors to manage and direct the
property, business and affairs of the Corporation, including the power to
designate and empower committees of the Board of Directors, to elect,
appoint and empower the officers and other agents of the Corporation, and
to determine the time and place of, and the notice requirements for Board
meetings, as well as the manner of taking Board action; and
(c) To exercise all such powers and do all such acts as may be exercised
by the Corporation, subject to the provisions of the laws of the State of
Delaware, this Certificate of Incorporation, and the By-Laws of the
Corporation.
(2) Number and Qualifications of Directors; Classified Board of
Directors. The number of Directors constituting the entire Board of Directors
shall be fixed at a number not less than six by, or in the manner provided in,
the By-Laws. The Board of Directors shall be divided into three classes, as
nearly equal in number as possible, with the mode of such classification to be
set forth in the By-Laws. Except as otherwise provided in the By-Laws with
respect to the implementation of this Article V, Directors shall be elected to
hold office for a term of three years, with the term of office of one class of
Directors expiring each year. As used in this Certificate of Incorporation,
the term "entire Board of Directors" means the total number of Directors fixed
by, or in the manner provided in, the By-Laws.
(3) Nominations. Subject to the rights of holders of any series of Preferred
Stock or any other class of capital stock of the Corporation (other than the
Common Stock and the Class B Common Stock) then outstanding, nominations for
the election of Directors may be made by the affirmative vote of a majority of
the entire Board of Directors or by any stockholder of record entitled to vote
generally in the election of Directors. However, any stockholder of record
entitled to vote generally in the election of Directors desiring to nominate
one or more persons for election as Directors at any meeting of stockholders
may do so only if written notice of such stockholder's intent to make such
nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Corporation not
less than 50 days nor more than 75 days prior to the meeting; provided,
however, that in the event that less than 60 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close
of business on the tenth day following the day on which such notice of the
date of meeting was mailed or such public disclosure was made, whichever first
occurs. Each such notice to the Secretary shall set forth: (i) the name and
address of record of the stockholder who intends to make the
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nomination; (ii) a representation that the stockholder is a holder of record
of shares of capital stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (iii) the name, age, business and
residence addresses, and principal occupation or employment of each nominee;
(iv) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (v) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission; and (vi) the consent of each nominee to serve as a Director of the
Corporation if so elected. The Corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as
a Director of the Corporation. The presiding officer of the meeting may, if
the facts warrant, determine that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded.
(4) Vacancies. Subject to the rights of the holders of any series of
Preferred Stock or any other class of capital stock of the Corporation (other
than the Common Stock and the Class B Common Stock) then outstanding, any
vacancies in the Board of Directors for any reason, including by reason of any
increase in the number of Directors, shall, if occurring prior to the
expiration of the term of office of the class in which such vacancy occurs, be
filled only by the Board of Directors, acting by the affirmative vote of a
majority of the remaining Directors then in office, although less than a
quorum, and any Directors so elected shall hold office until the next election
of Directors.
(5) Removal of Directors. Subject to the rights of the holders of any series
of Preferred Stock or any other class of capital stock of the Corporation
(other than the Common Stock and the Class B Common Stock) then outstanding,
(i) any Director, or the entire Board of Directors, may be removed from office
at any time prior to the expiration of his term of office, with or without
cause, only by the affirmative vote of the holders of record of at least 66
2/3% of the aggregate voting power of all outstanding shares of capital stock
of the Corporation then entitled to vote generally in the election of
Directors, voting together as a single class, at a special meeting of
stockholders called expressly for that purpose; and (ii) any Director may be
removed from office by the affirmative vote of a majority of the entire Board
of Directors, at any time prior to the expiration of his term of office, as
provided by law, in the event a Director fails to meet the qualifications
stated in the By-Laws for election as a Director or in the event such Director
is in breach of any agreement between such Director and the Corporation
relating to such Director's service as a Director or employee of the
Corporation.
ARTICLE VI
DURATION
The Corporation shall have perpetual existence.
ARTICLE VII
PURPOSES
The nature of the business or purposes to be conducted or promoted by the
Corporation shall be to engage in any lawful act or activity for which a
corporation may be organized under the General Corporation Law of Delaware.
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ARTICLE VIII
STOCKHOLDERS' MEETINGS
Special meetings of stockholders of the Corporation may be called only by
(i) the Board of Directors pursuant to a resolution adopted by the affirmative
vote of a majority of the entire Board of Directors, (ii) the Chairman of the
Board, (iii) the Vice Chairman of the Board, (iv) the President, or (v) by the
holders of record of at least 50.1% of the aggregate voting power of all
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of Directors, acting together as a single class.
ARTICLE IX
BUSINESS COMBINATIONS
(1) Certain Definitions. For the purposes of this Article:
A. "Affiliate" or "Associate" have the meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as
in effect on October 1, 1986.
B. "Beneficial Owner" has the meaning ascribed to such term in Rule 13d-3
of the General Rules and Regulations under the Exchange Act, as in effect
on October 1, 1986.
C. "Business Combination" means:
(i) any merger or consolidation of the Corporation or any Subsidiary
with (a) an Interested Stockholder or (b) any other person (whether or
not itself an interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an Interested
Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or
with, or proposed by or on behalf of, an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder of any assets of
the Corporation or any Subsidiary including, without limitation, any
voting securities of a Subsidiary having an aggregate Fair Market Value
of not less than 1% of the total assets of the Corporation as reported
in the consolidated balance sheet of the Corporation as of the end of
the most recent quarter with respect to which such balance sheet has
been prepared; or
(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to or with, or proposed by or on
behalf of, an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair Market
Value of not less than 1% of the total assets of the Corporation as
reported in the consolidated balance sheet of the Corporation as of the
end of the most recent quarter with respect to which such balance sheet
has been prepared; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or any spin-off or split-up of any kind
of the Corporation or any Subsidiary, proposed by or on behalf of an
Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder; or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any Subsidiary or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly,
of increasing the percentage of the outstanding shares of (a) any class
of equity securities of the Corporation or any Subsidiary or (b) any
class of securities of the Corporation or any Subsidiary convertible
into equity securities of the Corporation or any Subsidiary,
represented by securities of such class which are directly or
indirectly owned by an Interested Stockholder and all of its Affiliates
and Associates; or
(vi) any other transaction with an Interested Stockholder or its
Affiliates or Associates which requires the approval of the
stockholders under the General Corporation Law of Delaware; or
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(vii) any agreement, contract or other arrangement providing for any
one or more of the actions specified in clauses (i) through (vi) of
this Section (1)C.
D. "Fair Market Value" means: (i) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not reported on the
Composite Tape, on the New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United States securities exchange
registered under the Exchange Act on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest closing sale
price, or if closing sale prices are not reported, the closing bid
quotation with respect to a snare of such stock during the 30-day period
preceding the date in question on the NASD Automated Quotations System or
any similar interdealer quotation system then in use, or, if no such
quotation is available, the fair market value on the date in question of a
share of such stock as determined by a majority of the Board of Directors
in good faith; and (ii) in the case of property other than cash or stock,
the fair market value of such property on the date in question as is
determined by a majority of the Board of Directors in good faith.
E. "Interested Stockholder" means any person (other than the Corporation
or any Subsidiary, any employee benefit plan maintained by the Corporation
or any Subsidiary or any trustee or fiduciary with respect to any such plan
when acting in such capacity) who or which:
(i) is, or was at any time within the two-year period immediately
prior to the date in question, the Beneficial Owner of 10% or more of
the then outstanding Voting Stock of the Corporation, provided,
however, that any person who, immediately prior to the effective time
of the impending merger between Pulitzer Publishing and Hearst-Argyle
Television, Inc., a Delaware corporation, will become the Beneficial
Owner of 10% or more of the outstanding Voting Stock of the
Corporation, or the Permitted Transferee of any such person, shall not
be an Interested Stockholder; or
(ii) is an assignee of, or has otherwise succeeded to, any shares of
Voting Stock of the Corporation of which an Interested Stockholder was
the Beneficial Owner at any time within the two-year period immediately
prior to the date in question, if such assignment or succession shall
have occurred in the course of a transaction, or series of
transactions, not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
For the purpose of determining whether a Person is an Interested
Stockholder, the outstanding Voting Stock of the Corporation shall
include unissued shares of Voting Stock of the Corporation of which the
Interested Stockholder is the Beneficial Owner but shall not include
any other shares of Voting Stock of the Corporation which may be
issuable pursuant to any agreement, arrangement or understanding, or
upon the exercise of conversion rights, warrants or options, or
otherwise, to any Person who is not the Interested Stockholder.
F. A "Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as
any syndicate or group deemed to be a person under Section 14(d)(2) of the
Exchange Act.
G. "Subsidiary" means any corporation of which the Corporation owns,
directly or indirectly, (i) a majority of the outstanding shares of equity
securities of such corporation, or (ii) shares having a majority of the
aggregate voting power of all outstanding shares of Voting Stock of such
corporation. For the purpose of determining whether a corporation is a
Subsidiary, the outstanding Voting Stock and shares of equity securities
thereof shall include unissued shares of which the Corporation is the
Beneficial Owner but shall not include any other shares of Voting Stock of
such corporation which may be issuable pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
warrants, or options, or otherwise, to any Person other than the
Corporation.
H. "Voting Stock" means outstanding shares of capital stock of the
relevant corporation entitled to vote generally in the election of
directors.
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(2) Vote for Business Combinations. In addition to any affirmative vote
required by law or by this Certificate of Incorporation, unless a Business
Combination shall have been approved by the affirmative vote of not less than
a majority of the entire Board of Directors, any Business Combination shall
require the affirmative vote of the holders of record of at least 66 2/3% of
the aggregate voting power of all outstanding shares of the Voting Stock of
the Corporation, voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(3) Powers of Board of Directors. A majority of the Board of Directors shall
have the power and duty to determine, on the basis of information known to
them after reasonable inquiry, all facts necessary to determine compliance
with this Article, including, without limitation, (A) whether a Person is an
Interested Stockholder, (B) the number of shares of Voting Stock of the
Corporation beneficially owned by any Person, (C) whether a Person is an
Affiliate or Associate of another, and (D) whether the assets which are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregate Fair Market Value of
not less than 1% of the total assets of the Corporation as reported in the
consolidated balance sheet of the Corporation as of the end of the most recent
quarter with respect to which such balance sheet has been prepared; and the
good faith determination of a majority of the Board of Directors on such
matters shall be conclusive and binding for all the purposes of this Article.
(4) Amendment, Repeal. Notwithstanding any other provisions of the
Certificate of Incorporation or By-Laws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, the
other provisions of this Certificate of Incorporation or the By-Laws of the
Corporation), and in addition to any requirement of the General Corporation
Law of Delaware, the affirmative vote of the holders of record of at least 66
2/3% of the aggregate voting power of all outstanding shares of Voting Stock
of the Corporation held by stockholders other than an Interested Stockholder
or its Affiliates or Associates, voting together as a single class, shall be
required to amend or repeal, or to adopt any provisions inconsistent with this
Article IX; provided, however, that the preceding provision shall not be
applicable to any amendment or repeal or adoption of any provision
inconsistent with this Article IX, and such amendment or repeal or adoption of
any provision inconsistent with this Article IX shall require only such
affirmative vote as required by law and any other provisions of this
Certificate of Incorporation, if such amendment or repeal or adoption shall
have been approved by a majority vote of the members of the Board of Directors
who are not Interested Stockholders or Affiliates or Associates of Interested
Stockholders.
(5) No Effect on Fiduciary Obligations. Nothing contained in this Article
shall be construed to relieve the members of the Board of Directors or an
Interested Stockholder from any fiduciary obligation imposed by law.
ARTICLE X
DELIBERATIONS OF DIRECTORS
The Board of Directors of the Corporation, when evaluating any offer of
another party to make a tender or exchange offer for any equity security of
the Corporation, to merge or consolidate the Corporation with another
corporation or to purchase or otherwise acquire all or substantially all of
the properties and assets of the Corporation, shall, in connection with the
exercise of its judgment in determining what is in the best interests of the
Corporation and its stockholders, give due consideration to the effect of such
a transaction on the editorial and publishing integrity and the character and
quality of the Corporation's newspaper and broadcasting operations, all other
relevant factors, including, without limitation, the social, legal and
economic effects on the employees, customers, suppliers and other affected
persons, firms and corporations and on the communities and geographical areas
in which the Corporation and its subsidiaries operate or are located and on
any of the businesses and properties of the Corporation or any of its
subsidiaries, as well as such other factors as the Directors deem relevant.
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ARTICLE XI
INDEMNIFICATION
(1) Action Not By or on Behalf of Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that he is or was a
Director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against judgments and amounts paid in settlement and expenses (including
attorneys' fees), actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contender or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(2) Action By or on Behalf of Corporation. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he
is or was a Director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability and in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
(3) Successful Defense. To the extent that a Director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 1 or 2 of
this Article XI, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(4) Determination of Right to Indemnification in Certain Circumstances. Any
indemnification under Section 1 or 2 of this Article XI (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the Director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in this Article. Such determination
shall be made by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or
proceeding, or if such a quorum of disinterested Directors so directs, by
independent legal counsel in a written opinion, or by the stockholders.
(5) Advance Payment of Expenses. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of a Director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
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(6) Not Exclusive. The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article XI shall not be
deemed exclusive of any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any statute, By-Law,
agreement, vote of stockholders or disinterested Directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office. Without limiting the foregoing, the Corporation is
authorized to enter into an agreement with any Director, officer, employee or
agent of the Corporation providing indemnification for such person against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement that result from any threatened, pending or completed action, suit,
or proceeding, whether civil, criminal, administrative or investigative,
including any action by or in the right of the Corporation, that arises by
reason of the fact that such person is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the full extent
allowed by law, except that no such agreement shall provide for
indemnification for any actions that constitute fraud, actual dishonesty or
willful misconduct.
(7) Insurance. The Corporation may purchase and maintain insurance on behalf
of any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent or another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article XI.
(8) Certain Definitions. For the purposes of this Article XI, (A) any
Director, officer, employee or agent of the Corporation who shall serve as a
director, officer, employee or agent of any other corporation, joint venture,
trust or other enterprise of which the Corporation, directly or indirectly, is
or was a stockholder or creditor, or in which the Corporation is or was in any
way interested, or (B) any director, officer, employee or agent of any
subsidiary corporation, joint venture, trust or other enterprise wholly owned
by the Corporation, shall be deemed to be serving as such director, officer,
employee or agent at the request of the Corporation, unless the Board of
Directors of the Corporation shall determine otherwise. In all other instances
where any person shall serve as a director, officer, employee or agent of
another corporation, joint venture, trust or other enterprise of which the
Corporation is or was a stockholder or creditor, or in which it is or was
otherwise interested, if it is not otherwise established that such person is
or was serving as such director, officer, employee or agent at the request of
the Corporation, the Board of Directors of the Corporation may determine
whether such service is or was at the request of the Corporation, and it shall
not be necessary to show any actual or prior request for such service. For
purposes of this Article XI, references to a corporation include all
constituent corporations absorbed in a consolidation or merger as well as the
resulting or surviving corporation so that any person who is or was a
director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, joint venture, trust or
other enterprise shall stand in the same position under the provisions of this
Article XI with respect to the resulting or surviving corporation as he would
if he had served the resulting or surviving corporation in the same capacity.
For purposes of this Article XI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to
in this Article XI.
(9) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article XI shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
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(10) A Director's liability to the Corporation for breach of duty to the
Corporation or its stockholders shall be limited to the fullest extent
permitted by Delaware law as now in effect or hereafter amended. In
particular, no Director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended, or (iv) for
any transaction from which the Director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a Director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Delaware General Corporation Law. Any repeal or
modification of this Article by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the
personal liability of a Director of the Corporation existing at the time of
such repeal or modification.
ARTICLE XII
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power;
provided, that, notwithstanding the fact that a lesser percentage may be
specified by the General Corporation Law of Delaware, the affirmative vote of
the holders of record of at least 66 2/3% of the aggregate voting power of all
outstanding shares of capital stock of the Corporation then entitled to vote
generally in the election of Directors, voting together as a single class,
shall be required to amend, alter, change, repeal, or adopt any provision or
provisions inconsistent with, Section (2), (3) or (4) of Article III, Articles
V, VIII, IX, XI, XIII, XIV or this Article XII of this Certificate of
Incorporation unless such amendment, alteration, repeal or adoption of any
inconsistent provision or provisions is declared advisable by the Board of
Directors by the affirmative vote of a majority of the entire Board of
Directors, in which case the percentage required shall be as specified by the
General Corporation Law of Delaware.
ARTICLE XIII
AMENDMENT OF BY-LAWS
The By-Laws of the Corporation may be amended, altered, changed or repealed,
and a provision or provisions inconsistent with the provisions of the By-Laws
as they exist from time to time may be adopted, only by the majority of the
entire Board of Directors or by the affirmative vote of the holders of record
of at least 66 2/3% of the aggregate voting power of all outstanding shares of
capital stock of the Corporation then entitled to vote generally in the
election of Directors, voting together as a single class, notwithstanding the
fact that a lesser percentage may be specified by the General Corporation Law
of Delaware.
ARTICLE XIV
VOTING RIGHTS
(1) Common Stock. In addition to any other approval required by law or by
this Certificate of Incorporation, the affirmative vote of a majority of the
then outstanding shares of Common Stock, voted separately as a class, shall be
necessary to approve any consolidation of the Corporation with another
corporation, any merger of the Corporation into another corporation or any
merger of any other corporation into the Corporation pursuant to which shares
of Common Stock or Class B Common Stock are converted into or
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exchanged for any securities or any other consideration, unless, pursuant to
such consolidation or merger, each share of Common Stock will receive
consideration of a type identical to the type to be received by each share of
Class B Common Stock and each share of Common Stock will receive consideration
in an amount equal to the amount to be received by each share of Class B
Common Stock.
(2) Preferred Stock. In addition to any other approval required by law or by
this Certificate of Incorporation, each particular series of any class of
Preferred Stock shall have such right to vote, if any, as shall be fixed in
the resolution or resolutions, adopted by the Board of Directors, providing
for the issuance of shares of such particular series.
(3) Agreement of Merger or Consolidation. In addition to any other approval
required by law or by this Certificate of Incorporation, the affirmative vote
of the holders of record of at least 66 2/3% of the aggregate voting power of
all outstanding shares of capital stock of the Corporation then entitled to
vote generally in the election of Directors, voting together as a single
class, shall be required to approve any consolidation of the Corporation with
another corporation, any merger of the Corporation into another corporation or
any merger of any other corporation into the Corporation other than any merger
between the Corporation and any corporation in which at least 90 percent of
the outstanding shares of each class of stock is owned by the Corporation,
unless any such transaction is approved by the Board of Directors by the
affirmative vote of a majority of the entire Board of Directors, in which case
the percentage required shall be as specified by the General Corporation Law
of Delaware.
(4) Sale of Assets. In addition to any other approval required by law or by
this Certificate of Incorporation, the affirmative vote of the holders of
record of at least 66 2/3% of the aggregate voting power of all outstanding
shares of capital stock of the Corporation then entitled to vote generally in
the election of Directors, voting together as a single class, shall be
required to authorize any sale, lease, or exchange of all or substantially all
of the Corporation's property and assets, including its goodwill and its
corporate franchises, unless any such transaction is deemed expedient and for
the best interests of the Corporation by the Board of Directors by the
affirmative vote of a majority of the entire Board of Directors, in which case
the percentage required shall be as specified by the General Corporation Law
of Delaware.
ARTICLE XV
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stock holders, of this Corporation, as the case may
be, and also on this Corporation."
FOURTH: That in lieu of a meeting and vote of stockholders, the stockholders
have given written unanimous consent to said restatement and amendment in
accordance with the provisions of Section 228 of the General Corporation Law
of the State of Delaware, and said written consent was filed with the
Corporation.
FIFTH: That this Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the applicable provisions of Sections 228, 242 and
245 of Title 8 of the Delaware Code of 1953.
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SIXTH: That the capital of the Corporation will not be reduced under or by
reason of any amendment in this Amended and Restated Certificate of
Incorporation.
IN WITNESS WHEREOF, Pulitzer Inc. has caused its corporate seal to be
hereunto affixed and this certificate to be signed by Ronald H. Ridgway,
Senior Vice President--Finance, and James V. Maloney, Secretary, this th day
of , 1998.
PULITZER INC.
/s/ Ronald H. Ridgway
By: _________________________________
Ronald H. Ridgway
Senior Vice President--Finance
ATTEST:
/s/ James V. Maloney
By: _________________________________
James V. Maloney
Secretary
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EXHIBIT C
FORM OF CONTRIBUTION AND ASSUMPTION AGREEMENT
This Contribution and Assumption Agreement (this "Agreement"), dated as of
, 1998, is made by and between Pulitzer Publishing Company, a Delaware
corporation (the "Company"), and Pulitzer Inc., a Delaware corporation and
wholly owned subsidiary of the Company ("Newco"). Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
ascribed thereto in the Agreement and Plan of Merger, dated as of May 25,
1998, among the Company, Newco and Hearst-Argyle Television, Inc., a Delaware
corporation ("Acquiror") to which a form of this Agreement is annexed as
Exhibit C (the "Merger Agreement").
RECITALS
WHEREAS, pursuant to the Merger Agreement, the Company has agreed to
contribute to Newco and/or its wholly-owned Subsidiaries (collectively, the
"Newco Group") all of the assets of the Company, except those specifically
identified in Section 2.02(a) of the Merger Agreement, pursuant to the terms
of this Agreement, as a step in a series of transactions as a result of which
(i) Acquiror will acquire Broadcasting and the Broadcasting Assets by means of
a merger of the Company with and into Acquiror, and (ii) the Newco Group will
conduct the businesses previously conducted by the Company and its
Subsidiaries (other than the operations of Broadcasting).
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
ARTICLE I
CONTRIBUTION AND ASSUMPTION
1.01 CONTRIBUTION OF ASSETS.
(a) Subject to Section 1.01(b), effective immediately prior to the
Distribution (the "Time of Contribution") the Company hereby contributes,
grants, conveys, assigns, transfers and delivers to the Newco Group, without
recourse (the "Contribution"), all of the Company's right, title and interest
in and to the following (collectively, the "Contributed Assets"): (i) any and
all assets of the Company, whether tangible or intangible and whether fixed,
contingent or otherwise, including, without limitation, the capital stock or
other equity interests of all its Subsidiaries, (ii) the name "Pulitzer" or
any part thereof whether alone or in combination with one or more other words
(iii) all real property, furniture, fixtures, equipment, tools, vehicles,
supplies, buildings, improvements, accounts receivable, notes, prepaid
expenses, securities, patents, trademarks, trade names, copyrights, Licenses,
leases and contract rights, and (iv) all other tangible or intangible assets
of the Company wherever located.
(b) Notwithstanding Section 1.01(a), the Company hereby retains and does not
contribute, grant, convey, assign, transfer or deliver to the Newco Group (i)
the issued and outstanding capital stock of PBC or the Broadcasting
Subsidiaries; (ii) the Broadcasting Assets; and (iii) the Company's rights
created pursuant to the Merger Agreement, this Agreement and the Transaction
Agreements.
(c) Notwithstanding anything contained in this Agreement or in the Merger
Agreement to the contrary, the Newco Group acknowledges and agrees that the
Company makes and has made no warranty, either express or implied, including
without limitation warranties of merchantability or fitness for a particular
purpose, with respect to any Contributed Assets.
<PAGE>
1.02 ASSUMPTION OF LIABILITIES.
(a) Subject to Sections 1.02(b) and 1.07 hereof, effective as of the Time of
Contribution, the Newco Group, in partial consideration for the Contribution,
hereby unconditionally assumes and agrees to pay, satisfy and discharge any
and all liabilities of the Company of every kind whatsoever, whether absolute,
known, unknown, fixed, contingent or otherwise, that exist as of the date
hereof or exist as of, or otherwise relate to any period ending on or prior to
the Effective Time (the "Assumed Liabilities").
(b) Notwithstanding Section 1.02(a), the Company hereby retains, and the
Newco Group does not assume and will have no liability with respect to the
following (collectively, the "Retained Liabilities"): (i) the New Company
Debt; (ii) any liabilities associated with the radio and/or television
business operations of Broadcasting or the Broadcasting Assets except as
otherwise specifically provided in the Merger Agreement, including Sections
6.06(g), 6.09, 6.11, 6.25 and 6.28 thereof; and (iii) the Company's
obligations created pursuant to the Merger Agreement, this Agreement and the
Transaction Agreements.
(c) It is expressly agreed by the parties hereto that all of the obligations
of Newco under the Merger Agreement this Agreement and the Transaction
Agreements shall be treated as Assumed Liabilities and not as Retained
Liabilities under this Agreement.
1.03 ISSUANCE OF NEWCO STOCK. In partial consideration for the Contribution,
at the Time of Contribution Newco shall issue and deliver to the Company at
the Company's request prior to the Distribution the following:
(i) such number of newly issued shares of Newco Common Stock as will be
required for the Distribution; and
(ii) such number of newly issued shares of Newco Class B Common Stock as
will be required for the Distribution.
1.04 TRANSFER AND ASSUMPTION DOCUMENTATION. In furtherance of the
contribution, grant, conveyance, assignment, transfer and delivery of the
Contributed Assets and the assumption of the Assumed Liabilities set forth in
this Article I, at the Time of Contribution or as promptly as practicable
thereafter, (i) the Company shall execute and deliver, and cause its
Subsidiaries to execute and deliver, such deeds, bills of sale, stock powers,
certificates of title, assignments of leases and contracts and other
instruments of contribution, grant, conveyance, assignment, transfer and
delivery necessary to evidence such contribution, grant, conveyance,
assignment, transfer and delivery and (ii) the Newco Group shall execute and
deliver such instruments of assumption as and to the extent necessary to
evidence such assumption.
1.05 NONASSIGNABLE CONTRACTS. Anything contained herein to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign
any lease, license agreement, contract, agreement, sales order, purchase
order, open bid or other commitment or asset (each an "Applicable Asset") if
an assignment or attempted assignment of the same, without the consent of the
other party or parties thereto, would constitute a breach thereof or in any
way impair the rights of the Company or the Newco Group thereunder. The
Company shall, prior to the Time of Contribution, use reasonable best efforts
(it being understood that such efforts shall not include any requirement of
the Company to expend money or offer or grant any financial accommodation) as
requested by the Newco Group, and the Newco Group shall cooperate in all
reasonable respects with the Company, to obtain all consents and waivers and
to resolve all impracticalities of assignments or transfers necessary to
convey the Contributed Assets to the Newco Group. If any such consent is not
obtained or if any attempted assignment would be ineffective or would impair
the Newco Group's rights with respect to any Applicable Asset so that the
Newco Group would not receive all such rights, then (x) the Company shall use
reasonable best efforts (it being understood that such efforts shall not
include any requirement of the Company to expend money or offer or grant any
financial accommodation) to provide or cause to be provided to the Newco
Group, to the extent permitted by law, the benefits of any such Applicable
Asset and the Company shall promptly pay or cause to be paid to the Newco
Group when received all moneys received by the Company with respect to
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any such Applicable Asset and (y) in consideration thereof the Newco Group
shall pay, perform and discharge on behalf of the Company all of the Company's
debts, liabilities, obligations and commitments thereunder in a timely manner
and in accordance with the terms thereof. In addition, the Company shall take
such other actions (at Newco's expense) as may reasonably be requested by
Newco in order to place Newco, insofar as reasonably possible, in the same
position as if such Applicable Asset had been transferred as contemplated
hereby and so all the benefits and burdens related thereto, including
possession, use, risk of loss, potential for gain and dominion, control and
command, shall inure to Newco. If and when such consents and proposals are
obtained, the transfer of the Applicable Asset shall be effected in accordance
with the terms of this Agreement.
1.06 EMPLOYEE BENEFITS. All Company Employee Plans are subject to the terms
of Section 6.11 of the Merger Agreement, and all obligations of Newco under
such Section shall be treated as Assumed Liabilities and not as Retained
Liabilities under this Agreement.
1.07 EMPLOYEE STOCK OPTIONS. All plans and arrangements with respect to the
Company's employee stock options and restricted stock awards in place as of
the date hereof and all options and awards outstanding thereunder as of the
date hereof are subject to the terms of Section 6.12 of the Merger Agreement.
1.08 FURTHER ASSURANCES. Each of the parties hereto promptly shall execute
such documents and other instruments and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and to
consummate the transactions contemplated hereby.
1.09 TAX MATTERS. Notwithstanding anything to the contrary in this
Agreement, liabilities of the parties for Taxes are subject to the terms of
Section 6.09 of the Merger Agreement, and all obligations of Newco under
Section 6.09 of the Merger Agreement shall be treated as Assumed Liabilities
and not as Retained Liabilities under this Agreement. The Contribution and the
Merger are intended to qualify as tax-free reorganizations within the meaning
of Sections 368(a)(1)(D) and 368(a)(1)(A) of the Code, respectively, and the
Distribution is intended to be subject to Section 355(a) of the Code.
1.10 COOPERATION. The parties shall cooperate with each other in all
reasonable respects in order to ensure the smooth transfer of the Contributed
Assets, the Assumed Liabilities and the businesses related thereto, including,
without limitation, entering into any service or other sharing agreements that
may be reasonably necessary.
1.11 OTHER MATTERS. After the Effective Time and except as otherwise
provided herein or in the Merger Agreement, neither the Surviving Corporation
nor any of its Subsidiaries shall have any liability to the Newco Group in
respect of any intra-company contract, commitment or account in existence
immediately prior to the Effective Time among the Company, Newco and/or any of
their respective Subsidiaries.
ARTICLE II
INDEMNIFICATION
2.01 INDEMNIFICATION BY THE COMPANY. The Company shall indemnify, defend and
hold harmless the Newco Group and their respective successors-in-interest and
each of their respective past and present officers and directors against any
losses, claims, damages or liabilities, joint or several, arising out of or in
connection with the Retained Liabilities, the Retained Assets or the
operations of Broadcasting, except as otherwise provided in the Merger
Agreement, including Sections 6.06(g), 6.09, 6.11, 6.25 and 6.28. The Company
shall reimburse the Newco group, each of its Subsidiaries, each of their
respective successors-in-interest, and each of their respective past and
present officers and directors for any legal or any other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage or liability referred to in the preceding sentence.
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2.02 INDEMNIFICATION BY NEWCO. Newco shall indemnify, defend and hold
harmless the Company, PBC and each of the Broadcasting Subsidiaries and their
respective successors-in-interest, and each of their respective past and
present officers and directors against any losses, claims, damages or
liabilities, joint or several, arising out of or in connection with the
Assumed Liabilities, the Contributed Assets or the operations of any of the
businesses contributed to the Newco Group, except as otherwise provided in the
Merger Agreement, including Sections 6.06(f), 6.09, and 6.25 thereof. Newco
shall reimburse the Company, PBC and each of the Broadcasting Subsidiaries,
each of their respective successors-in-interest and each of their past and
present respective officers and directors for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage or liability referred to in the
preceding sentence.
2.03 NOTIFICATION OF CLAIMS. For the purpose of this Article II, the term
"Indemnifying Party" shall mean the party having an obligation hereunder to
indemnify the other party pursuant to this Article II, and the term
"Indemnified Party" shall mean the party having the right to be indemnified
pursuant to this Article II. Whenever any claim shall arise for
indemnification under this Article II, the Indemnified Party shall promptly
notify the Indemnifying Party in writing of such claim and, when known, the
facts constituting the basis for such claim (in reasonable detail). Failure by
the Indemnified Party to so notify the Indemnifying Party shall not relieve
the Indemnifying Party of any liability hereunder except to the extent that
such failure materially prejudices the Indemnifying Party.
2.04 INDEMNIFICATION PROCEDURES.
(a) After receipt of the notice of claim required by Section 2.03, if the
Indemnifying Party undertakes to defend any such claim, then the Indemnifying
Party shall be entitled, if it so elects, to take control of the defense and
investigation with respect to such claim and to employ and engage attorneys of
its own choice, reasonably acceptable to the Indemnified Party, to handle and
defend the same, at the Indemnifying Party's cost, risk and expense, upon
written notice to the Indemnified Party of such election, which notice
acknowledges the Indemnifying Party's obligation to provide indemnification
hereunder. The Indemnifying Party shall not settle any third-party claim that
is the subject of indemnification without the written consent of the
Indemnified Party, which consent shall not be unreasonably withheld; provided,
however, that the Indemnifying Party may settle a claim without the
Indemnified Party's consent if such settlement (i) makes no admission or
acknowledgement of liability or culpability with respect to the Indemnified
Party, (ii) includes a complete release of the Indemnified Party, and (iii)
does not require the Indemnified Party to make any payment or forego or take
any action or otherwise materially adversely affect the Indemnified Party. The
Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and its attorneys in the investigation, trial and defense
of any lawsuit or action with respect to such claim and any appeal arising
therefrom (including the filing in the Indemnified Party's name of appropriate
cross-claims and counterclaims). The Indemnified Party may, at its own cost
and expense, participate in any investigation, trial and defense of such
lawsuit or action controlled by the Indemnifying Party and any appeal arising
therefrom.
(b) If, after receipt of a notice of claim pursuant to Section 2.03, the
Indemnifying Party does not undertake to defend any such claim, the
Indemnified Party may, but shall have no obligation to, contest any lawsuit or
action with respect to such claim and the Indemnifying Party shall be bound by
the result obtained with respect thereto by the Indemnified Party (including,
without limitation, the settlement thereof without the consent of the
Indemnifying Party). If there are one or more legal defenses available to the
Indemnified Party that conflict with those available to the Indemnifying Party
or there is otherwise an actual or potential conflict of interest, the
Indemnified Party shall have the right, at the expense of the Indemnifying
Party, to assume the defense of the lawsuit or action; provided, however, that
the Indemnified Party may not settle such lawsuit or action without the
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed.
2.05 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The parties hereto
irrevocably: (a) agree that any suit, action or other legal proceeding arising
out of this Agreement may be brought in the courts of the State of New York or
the courts of the United States located in New York County, New York,
(b) consent to the jurisdiction of each court in any such suit, action or
proceeding, (c) waive any objection which
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they, or any of them, may have to the laying of venue of any such suit, action
or proceeding in any of such courts, and (d) waives the right to a trial by
jury in any suit, action or other legal proceeding. Each of the Company and
Newco agrees that service of any and all process which may be served in any
such suit, action or other proceeding may be made by written notice in
accordance with the provisions of this Agreement, and that such service of
process on the Company or Newco (as the case may be) or with respect to Newco,
its successors or assigns and, to the extent permitted by applicable law,
shall be taken and held to be valid personal service.
2.06 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
2.07 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any right preclude other or further exercises
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
ARTICLE III
MISCELLANEOUS
3.01 ENTIRE AGREEMENT. This Agreement, together with the Merger Agreement,
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof.
3.02 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under principles of conflicts of laws applicable
thereto.
3.03 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
3.04 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person,
by telecopy with confirmation of transmission, by express or overnight mail
delivered by a nationally recognized air courier (delivery charges prepaid),
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties as follows:
If to the Company (prior to the Merger) or Newco:
Pulitzer Publishing Company
Pulitzer Inc.
900 North Tucker Boulevard
St. Louis, Missouri 63101
Attention: Michael E. Pulitzer
Telecopy: (314) 340-3125
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with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attention: Richard A. Palmer, Esq.
Telecopy: (212) 752-5958
If to the Company (after the Merger):
Hearst-Argyle Television, Inc.
959 Eighth Avenue
New York, New York 10106
Attention: Dean M. Blythe
Telecopy: (212) 489-2314
with a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Attention: Steven A. Hobbs
Telecopy: (212) 878-8375
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Any notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy or by air courier shall
be deemed effective on the first business day at the place at which such
notice or communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the fifth business day at the
place from which such notice or communication was mailed following the day on
which such notice or communication was mailed.
3.05 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
as provided in Sections 3.07 and 3.08 and except for Article II (which are
intended to be for the benefit of the Persons provided for therein and may be
enforced by such Persons).
3.06 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding
when one or more counterparts hereof, individually or taken together, shall
bear the signatures of all of the parties reflected hereon as the signatories.
3.07 PERSONAL LIABILITY. This Agreement shall not create or be deemed to
create or permit any personal liability or obligation on the part of any
direct or indirect stockholder of any party hereto or any officer, director,
employee, agent, representative or investor of any party hereto.
3.08 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and successors, including the Surviving Corporation in the
Merger. This Agreement may not be assigned by any party hereto and any
purported assignment in violation hereof shall be null and void.
3.09 AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties.
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3.10 LEGAL FEES, COSTS. If any party hereto institutes any action or
proceeding, whether before a court or arbitrator, to enforce any provision of
this Agreement, the prevailing party therein shall be entitled to receive from
the losing party reasonable attorneys' fees and costs incurred in such action
or proceeding, whether or not such action or proceeding is prosecuted to
judgment.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day
and year first above written.
PULITZER PUBLISHING COMPANY
By: _________________________________
Name: Michael E. Pulitzer
Title: Chairman and Chief
Executive Officer
PULITZER INC.
By: _________________________________
Name: Michael E. Pulitzer
Title: Chairman and Chief
Executive Officer
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EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated May 25, 1998, among
Hearst-Argyle Television, Inc., a Delaware corporation ("Acquiror"), and each
of Emily Rauh Pulitzer, David E. Moore and Michael E. Pulitzer (each, a
"Stockholder" and, collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, Acquiror and Pulitzer Publishing Company, a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger, dated May
25, 1998 (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which the Company will be merged with and
into Acquiror (the "Merger");
WHEREAS, as a condition to the consummation of the Merger, the Stockholders
have required that Acquiror, and Acquiror has agreed to, enter into this
Agreement; and
WHEREAS, it is intended by Acquiror and the Stockholders that this Agreement
shall become effective immediately upon the issuance of Acquiror Common Stock
pursuant to Article I of the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement. For purposes of
this Agreement:
(a) "Stockholder Affiliates" means, with respect to each Stockholder, any
parent, sibling, spouse, child, grandchild or other relative of the
Stockholder, or any custodian or trustee for the benefit of any of the
foregoing, or any partnership, corporation of other entity for which he or she
acts as a trustee or which is owned by the Stockholder or any of the
foregoing.
(b) "Demand Registrations" has the meaning ascribed to it in Section 2(a) of
this Agreement.
(c) "Piggyback Registration" has the meaning ascribed to it in Section 3(a)
of this Agreement.
(d) "Registrable Shares" means, at any particular time at which notice has
been given pursuant to Section 2 or 3 hereunder, any of the following which
are held by the Stockholders or Stockholder Affiliates: (i) shares of Acquiror
Common Stock issued pursuant to the Merger; (ii) shares of Acquiror Common
Stock issued in lieu of cash dividends on other Registrable Shares pursuant to
a dividend reinvestment plan adopted by Acquiror; (iii) shares of Acquiror
Common Stock then outstanding which were issued as, or upon the conversion or
exercise of other securities issued as, a dividend or other distribution with
respect to or in replacement of other Registrable Shares; (iv) shares of
Common Stock then issuable upon conversion or exercise of other securities
which were issued as a dividend or other distribution with respect to or in
replacement of other Registrable Shares; and (v) any equity securities of
Acquiror issued or issuable with respect to the securities referred to in
clauses (i) through (iv) by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. For purposes of this Agreement, the
Stockholders and Stockholder Affiliates will be deemed to be holders of
Registrable Shares whenever they have unqualified right to acquire such
Registrable Shares (by conversion or otherwise, but disregarding any legal
restrictions upon the exercise of such right), whether or not such acquisition
has actually been effected.
(e) "Registration Expenses" has the meaning ascribed to it in Section 5 of
this Agreement.
<PAGE>
2. Demand Registrations.
(a) Requests for Registration. From and after the first anniversary of the
date hereof, each Stockholder may make a written request, from time to time,
on his or her own behalf or on behalf of any Stockholder Affiliates, for
registration under the Securities Act of all or part of the Registrable Shares
held by the Stockholder or any Stockholder Affiliates. Each such request will
specify the number of Registrable Shares to be registered and the intended
method of distribution thereof. All registrations requested pursuant to this
Section 2(a) are referred to herein as "Demand Registrations." Demand
Registrations shall be on any form for which Acquiror then qualifies and which
counsel for Acquiror shall deem appropriate and available for the sale of the
Registrable Shares to be registered thereunder in accordance with the intended
method of distribution thereof; provided that Acquiror will include in any
short-form registration such additional customary information as the
Stockholders may reasonably request after consultation with the managing
underwriter, in the case of any underwritten public offering, or with the
investment banker, in the case of any non-underwritten offering, in order to
facilitate the sale of such securities; and provided further, that Acquiror
shall not be required to file any such registration as a shelf registration
under Rule 415 of the Securities Act. Subject to the terms and conditions of
this Agreement, Acquiror may include the sale of its securities in any Demand
Registration.
(b) Registrations.
(i) Prior to the seventh anniversary of the date hereof, a maximum of two
Demand Registrations may be requested by each Stockholder. On or after the
seventh anniversary of the date hereof, only one Demand Registration may be
requested by each Stockholder; provided that such Stockholder shall not
have previously requested two Demand Registrations which were effected, or
deemed to have been effected, pursuant to this Agreement, in which event
such Stockholder may not request any further Demand Registrations. A
registration will not count as one of the Demand Registrations requested by
the Stockholder until it has become effective and unless either (i) the
requesting Stockholder and Stockholder Affiliates have registered and sold
at least 90% of the Registrable Shares they requested be included in such
registration or (ii) the registration has remained effective and current
for at least 90 days. Acquiror will pay all Registration Expenses in
connection with any registration initiated as a Demand Registration
requested hereunder. Should a Demand Registration not become effective due
to the failure of the Stockholders to perform their obligations under this
Agreement or the inability of the Stockholders to reach agreement with the
underwriters on price or other customary terms for such transaction
(provided that if the registration does not become effective because of
such inability then, on one occasion, at the election of the requesting
Stockholder, it shall not count as a Demand Registration if the requesting
Stockholder pays Acquiror for all of the Registration Expenses in respect
thereof), or in the event the requesting Stockholder withdraws or does not
pursue the request for the Demand Registration (in each of the foregoing
cases, provided that at such time Acquiror is in compliance in all material
respects with its obligations under this Agreement), then such Demand
Registration shall be deemed to have been effected.
(ii) Each Demand Registration effected prior to the third anniversary of
the date hereof must be in respect of Registrable Shares with a fair market
value in excess of $50,000,000; each Demand Registration effected on or
after the third anniversary of the date hereof and prior to the fifth
anniversary of the date hereof must be in respect of Registrable Shares
with a fair market value in excess of $75,000,000; each Demand Registration
effected on or after the fifth anniversary of the date hereof must be in
respect of Registrable Shares with a fair market value in excess of
$100,000,000; in each case, such value shall include Registrable Shares
included pursuant to Section 3 hereof.
(c) Priority on Demand Registrations. If a Demand Registration is an
underwritten public offering and the managing underwriters advise Acquiror in
writing that in their opinion the number of Registrable Shares and other
securities requested to be included in such offering would materially and
adversely affect the success of the offering, Acquiror will include in such
registration, prior to the inclusion of any securities which are not owned by
the Stockholders or Stockholder Affiliates, the number of Registrable Shares
requested to be included which in the opinion of such underwriters can be sold
without materially and adversely affecting the success of the offering.
Whenever a registration requested pursuant to this Section is for an
underwritten offering, only securities which are to be distributed by the
underwriters may be included in the registration.
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(d) Restrictions on Registrations. Acquiror will not be obligated to effect
any Demand Registration within twelve months after the effective date of a
previous Demand Registration. Acquiror may postpone for up to 120 days the
filing or effectiveness of a registration statement for a Demand Registration
if Acquiror reasonably believes that it would be detrimental or otherwise
disadvantageous to Acquiror or its shareholders for such a registration
statement to be filed as expeditiously as possible; provided, however,
Acquiror cannot exercise its right to postpone the filing or effectiveness of
a registration statement for a Demand Registration more than once during any
twelve-month period.
(e) Selection of Underwriters. The requesting Stockholder shall have the
right to select the investment banker(s) and manager(s) to administer any
public offering of equity securities of Acquiror pursuant to a Demand
Registration, subject to Acquiror's approval, which approval shall not be
unreasonably withheld.
3. Piggyback Registrations.
(a) Right to Piggyback. Subject to the provisions of this Section 3,
whenever Acquiror proposes to register any Acquiror Common Stock under the
Securities Act for its own account (other than a registration on Form S-4 or
S-8 or any substitute or successor form that may be adopted by the SEC) or for
the account of any of the holders of Acquiror Common Stock, Acquiror will give
written notice to the Stockholders of its intention to effect such a
registration and will include in such registration, on the same terms and
conditions as apply to Acquiror's or such holder's Acquiror Common Stock, all
Registrable Shares that the Stockholders request be included within 15 days
after the receipt of Acquiror's notice (a "Piggyback Registration"). Prior to
the seventh anniversary of the date hereof, Acquiror is required to include
Registrable Shares requested by the Stockholders in an unlimited number of
Piggyback Registrations. On or after the seventh anniversary of the date
hereof, Acquiror is only required to include Registrable Shares pursuant to
this Section 3 in any Demand Registration requested by any other Stockholder.
If Acquiror shall determine in its sole discretion not to register or to delay
the registration of such Common Stock, Acquiror may, at its election, provide
written notice of such determination to the Stockholders and (i) in the case
of a determination not to effect a registration, shall thereupon be relieved
of the obligation to register such Registrable Shares, and (ii) in the case of
a determination to delay a registration, shall thereupon be permitted to delay
registering any Registrable Shares for the same period as the delay in respect
of the securities of Acquiror being registered for Acquiror's own account.
(b) Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary offering on behalf of Acquiror, and the managing
underwriters for the offering advise Acquiror in writing that in their opinion
the number of securities requested to be included in such registration would
materially and adversely affect the success of the offering, Acquiror will
include in such registration (i) first, the securities Acquiror proposes to
sell and (ii) second, on a pro rata basis, Registrable Shares and all other
securities.
(c) Priority on Secondary Registrations.
(i) If a Piggyback Registration is an underwritten secondary offering on
behalf of holders of Acquiror's securities other than holders of
Registrable Shares, and the managing underwriters advise Acquiror in
writing that in their opinion the number of securities requested to be
included in such registration would materially and adversely affect the
success of the offering, Acquiror will include in such registration (1)
first, the securities included therein held by the holders other than the
Stockholders and (2) second, on a pro rata basis, Registrable Shares and
all other securities.
(ii) If a Piggyback Registration is an underwritten secondary offering on
behalf of a requesting Stockholder pursuant to such Stockholder's Demand
Registration, and the managing underwriters advise Acquiror in writing that
in their opinion the number of securities requested to be included in such
registration would materially and adversely affect the success of the
offering, Acquiror will include in such registration (1) first, Registrable
Shares held by the requesting Stockholder, (2) second, other Registrable
Shares and (3) third, other securities.
(d) Selection of Underwriters. If a Piggyback Registration is an
underwritten primary registration on behalf of Acquiror, and the Stockholders
elect to register and sell Registrable Shares in such registration, Acquiror
will have the right to select the investment banker(s) and manager(s) to
administer the offering.
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4. Holdback Agreements.
(a) Each Stockholder agrees that, at the request of the underwriters
managing a registered public offering, such Stockholder shall not and such
Stockholder shall use best efforts to cause the Stockholder Affiliates to
agree to not offer, sell, contract to sell or otherwise dispose of any
Acquiror Common Stock, or any securities convertible into or exchangeable or
exercisable for Acquiror Common Stock, during the 15-day period prior to, and
the 90-day period beginning on, the effective date of the underwritten
registration (except as part of such underwritten registration). In order to
ensure compliance with the provisions of this Section 4(a), Acquiror hereby
agrees to notify each Stockholder as to the status and proposed effective date
of any registration statement of Acquiror which is filed with the SEC.
(b) Acquiror hereby agrees not to effect, except pursuant to employee
benefit plans and registrations on Form S-4, any public sale or distribution
of any securities of the same class as (or otherwise similar to) the
Registrable Shares, or any securities which, with notice, lapse of time and/or
payment of monies, are exchangeable or exercisable for or convertible into any
such securities, during the 15-day period prior to, and during the 90-day
period commencing on, the effective date of a registration statement filed
with the SEC in connection with an underwritten offering effected pursuant to
Section 2 of this Agreement (except as part of such underwritten offering).
Acquiror agrees to use its reasonable efforts to cause each holder of five
percent or more of the outstanding shares of any equity security (or any
security convertible into or exchangeable or exercisable for any equity
security) of Acquiror purchased from Acquiror at any time other than in a
public offering to enter into a similar agreement with the Company.
5. Registration Procedures. Whenever any Stockholders have requested that
any Registrable Shares be registered pursuant to this Agreement, Acquiror will
use its reasonable best efforts to effect the registration of such Registrable
Shares in accordance with the intended method of disposition thereof, and
pursuant thereto Acquiror will as expeditiously as possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Shares and cause such registration statement to become
and remain effective for such period, not to exceed 90 days, as may be
reasonably necessary to effect the sale of such Registrable Shares and to
include in any such registration statement all information which, in the
opinion of counsel to the Stockholders and counsel to Acquiror, is
reasonably required to be included therein under the Securities Act or
which the managing underwriter, in the case of an underwritten public
offering, or the investment banker, in the case of a non-underwritten
offering, reasonably requests be included therein to facilitate the sale of
such securities and which, in the opinion of counsel to Acquiror and
counsel to the Stockholders, is customary and may appropriately be included
therein under the Securities Act; provided, however, if (i) the effective
date of any registration statement filed pursuant to a Demand Registration
would otherwise be at least 45 calendar days, but fewer than 90 calendar
days, after the end of Acquiror's fiscal year, and (ii) the Securities Act
requires Acquiror to include audited financials as of the end of such
fiscal year or the Securities Act permits the use of, and the Stockholders
have requested that such registration statement include, audited financials
as of the end of such fiscal year, Acquiror may delay the filing of such
registration statement for such period as is reasonably necessary to
include therein its audited financial statements for such fiscal year;
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period
of not less than 90 days and comply with the provisions of the Securities
Act applicable to Acquiror with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition set forth in such
registration statement;
(c) Furnish to the Stockholders and the underwriters such number of
copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including
each preliminary prospectus) as they may reasonably request in order to
facilitate the disposition of the Registrable Shares;
D-4
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(d) Use reasonable best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions
as the Stockholders reasonably request and do any and all other acts and
things which may be reasonably necessary or advisable to enable the
Stockholders and Stockholder Affiliates to consummate the disposition in
such jurisdictions of the Registrable Shares (provided, however, that
Acquiror will not be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this Section 4(d), (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process in any such
jurisdiction);
(e) Otherwise use its best efforts in connection with each registered
offering of Registrable Shares hereunder to comply with all applicable
rules and regulations of the SEC, as the same may hereafter be amended,
including Section 11(a) of the Securities Act and Rule 158 thereunder.
(f) Use its best efforts to cause all such Registrable Shares to be
listed on each securities exchange or market trading system on which
similar securities issued by Acquiror are then listed;
(g) Enter into such customary agreements (including underwriting
agreements that contain such representations and warranties by Acquiror and
such other terms and provisions as are customarily contained in agreements
of this type, including, but not limited to, indemnities to the effect and
to the extent provided in Section 7, provisions for the delivery of
officers' certificates, opinions of counsel and accountants' "comfort"
letters and holdback arrangements) and take all such other actions as are
reasonably required in order to expedite or facilitate the disposition of
such Registrable Shares;
(h) Subject to confidentiality restrictions reasonably required by
Acquiror, and subject to the reasonableness of the request therefor, make
available at reasonable times for inspection by the Stockholders, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by the
Stockholders or any such underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of Acquiror, and
cause Acquiror's officers, directors, employees and independent accountants
to supply all information reasonably requested by the Stockholders or any
such underwriter, attorney accountant or agent in connection with such
registration statement; and to the extent reasonably required, cause
Acquiror's officers, directors and employees to discuss pertinent aspects
of Acquiror's business with the Stockholders and any such underwriter,
accountant, agent, representative or advisor in connection with such
registration statement;
(i) Notify the Stockholders promptly after it shall receive notice of the
time when such registration statement or amendment thereto has become
effective or a prospectus or supplement to any prospectus forming a part of
such registration statement has been filed;
(j) Notify the Stockholders of any request by the SEC for the amending or
supplementing of such registration statement or prospectus or for
supplemental information;
(k) Prepare and file with the SEC, promptly upon the request of the
Stockholders, any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel selected by the Stockholders
and counsel to Acquiror, is reasonably required under the Securities Act or
the rules and regulations thereunder in connection with the distribution of
Registrable Shares by the Stockholders;
(l) Notify the Stockholders of the occurrence of any event during any
time when a prospectus relating to such securities is required to be
delivered under the Securities Act, as the result of which any such
prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading, and in such event, prepare and
promptly file with the SEC and promptly notify the Stockholders of the
filing of such amendment or supplement to such registration statement or
prospectus as may be necessary to correct any such statements or omissions.
The Stockholders agree that, upon receipt of any notice from Acquiror of
the occurrence of any event of the kind described in the preceding
sentence, the Stockholders will and will cause the Stockholder Affiliates
to forthwith discontinue the offer and sale of Registrable Shares pursuant
to the registration statement covering such Registrable Shares until
receipt by the Stockholders and the Stockholder Affiliates and the
Underwriters of the copies of such supplemented or amended prospectus and,
if so directed by Acquiror, the Stockholders
D-5
<PAGE>
and the Stockholder Affiliates will deliver to Acquiror all copies, other
than permanent file copies then in the Stockholders' and the Stockholder
Affiliates' possession, of the most recent prospectus covering such
Registrable Shares at the time of receipt of such notice. In the event
Acquiror shall give such notice, Acquiror shall extend the 90-day period
during which such registration statement shall be maintained effective as
provided in Section 5(a) hereof by the number of days during the period
from and including the date of the giving of such notice to the date when
Acquiror shall make available to the Stockholders such supplemented or
amended prospectus;
(m) Advise the Stockholders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC or
any state authority or agency suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding
for such purpose and promptly use all reasonable efforts to prevent the
issuance of any stop order or to obtain their withdrawal if such stop order
should be issued;
(n) At the request of any underwriter in connection with an underwritten
offering, furnish on the date or dates provided for in the underwriting
agreement: (i) an opinion of counsel, addressed to the underwriters,
covering such customary matters as such underwriters may reasonably
request; and (ii) a comfort letter or letters from the independent
certified public accountants of Acquiror addressed to the underwriters,
covering such customary matters as such underwriters and sellers may
reasonably request, in which letters such accountants shall state, without
limiting the generality of the foregoing, that they are independent
certified public accountants within the meaning of the Securities Act and
that in the opinion of such accountants the financial statements and other
financial data of Acquiror included in the registration statement, the
prospectus, or any amendment or supplement thereto comply in all material
respects with the applicable accounting requirements of the SEC;
(o) Permit the Stockholders, to the extent the Stockholders, in the
judgment of their counsel, might be deemed to be a "control person" of
Acquiror (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act), to participate in the preparation of such
registration statement and include therein material, furnished to Acquiror
in writing which, in the reasonable judgment of the Stockholders and their
counsel and counsel to Acquiror, is required to be included therein;
(p) If any registration statement refers to any Stockholder or
Stockholder Affiliate by name or otherwise as the holder of any securities
of Acquiror, and if such Stockholder reasonably believes he or she is or
may be deemed to be a control person in relation to Acquiror, then the
Stockholder shall have the right to require (i) insertion in such
registration statement of language, in form and substance reasonably
satisfactory to the Stockholder, to the effect that the ownership by the
Stockholder of such securities is not to be construed as and is not
intended to be a recommendation by the Stockholder of the investment
quality of, or the relative merits and risks attendant to the purchase of,
Acquiror's securities covered thereby, and that such ownership does not
imply that the Stockholder will assist in meeting any future financial or
operating requirements of Acquiror, or (ii) in the case where the reference
to the Stockholder or Stockholder Affiliate by name or otherwise is not
required by the Securities Act or any similar federal or state statute then
in effect, the deletion of the reference to the Stockholder or Stockholder
Affiliate; and
(q) Cooperate in the marketing efforts of the underwriters and the
Stockholders, including, without limitation, by making available, as
reasonably requested by the underwriters and the Stockholders, the senior
executive officers of Acquiror for attendance at, and active participation
with the underwriters in, informational or so-called "road show" meetings
with prospective purchasers of the Registrable Shares being offered,
including meeting with groups of such purchasers or with individual
purchasers, providing information and answering questions about Acquiror at
such meetings, and traveling to locations in the United States and abroad
as reasonably selected by the underwriters.
6. Registration Expenses. All expenses of Acquiror incident to Acquiror's
performance of or compliance with this Agreement, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, all fees and expenses associated with
listing securities on exchanges or Nasdaq, all fees and other expenses
associated with filings with the NASD (including, if required, the fees
D-6
<PAGE>
and expenses of any "qualified independent underwriter" and its counsel)
printing expenses, messenger and delivery expenses, and fees and disbursements
of counsel for Acquiror and its independent certified public accountants (and
the expenses of any special audits or reviews performed by such accountants
required by or incidental to such performance and compliance), underwriters
(excluding discounts and commissions attributable to the securities included
in such registration) and other Persons retained by Acquiror (all such
expenses being herein called "Registration Expenses"), will be borne by
Acquiror. In addition, Acquiror will pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, and the expense of any liability insurance obtained by
Acquiror. Registration Expenses shall expressly exclude fees and disbursements
of counsel to the Stockholders.
7. Indemnification and Contribution.
(a) Acquiror agrees to indemnify the Stockholders, their officers and
trustees against all losses, claims, damages, liabilities and expenses
(including, without limitation, reasonable attorneys' fees except as limited
by Section 7(c)) caused by any untrue or alleged untrue statement of a
material fact contained in any registration statement, prospectus or
preliminary prospectus relating to the Registrable Shares or any amendment
thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in or based upon any information furnished in writing to Acquiror by
the Stockholders or any underwriter expressly for use therein or by the
Stockholders' or underwriter's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after
Acquiror has furnished the Stockholders or underwriter with a sufficient
number of copies of the same. In connection with an underwritten offering,
Acquiror will indemnify such underwriters, their officers and directors and
each Person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of the Stockholders. In connection with an underwritten
offering, the underwriters shall be required to agree to indemnify the
Stockholders, their officers and trustees, and Acquiror, its officers and
directors and each Person who controls Acquiror (within the meaning of the
Securities Act) to the same extent as Acquiror agrees to indemnify such
underwriters in this Section 7(a), but only as to statements contained in or
omitted from any registration statement, prospectus or preliminary prospectus
or any amendment thereof or supplement thereto in reliance upon written
information furnished to Acquiror by such underwriters for use in the
preparation thereof. The reimbursements required by this Section 7(a) will be
made by periodic payments during the course of the investigation or defense,
as and when bills are received or expenses incurred.
(b) In connection with any registration statement in which the Stockholders
are participating, it will furnish to Acquiror in writing such information,
questionnaires and affidavits as Acquiror reasonably requests for use in
connection with any such registration statement or prospectus and will
indemnify Acquiror, its directors and officers and each Person who controls
Acquiror (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) against any losses, claims, damages,
liabilities and expenses (including, without limitation, attorneys' fees
except as limited by Section 7(c)) caused by any untrue or alleged untrue
statement of a material fact contained in any registration statement,
prospectus or preliminary prospectus relating to the Registrable Shares or any
amendment thereof or supplement thereto or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so
furnished in writing by or on behalf of the Stockholders. The Stockholders
also agree to indemnify and hold harmless any underwriters of the Registrable
Shares, their officers and directors and each person who controls such
underwriters on substantially the same basis as that of the indemnification of
Acquiror provided in this Section 7(b).
(c) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably satisfactory to
the indemnified party. If such defense is assumed, the indemnifying party will
not be
D-7
<PAGE>
subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with
respect to such claim.
(d) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities. Acquiror also
agrees to make such provisions as are reasonably requested by any indemnified
party for contribution to such party in the event Acquiror's indemnification
is unavailable for any reason.
(e) If the indemnification from the indemnifying party as provided in this
Section 7 is unavailable or is otherwise insufficient to hold harmless any
Person entitled to indemnification in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party
shall, to the fullest extent permitted by law, contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and the Person entitled
to indemnification in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has
been made, or relates to information supplied by such indemnifying party, and
the parties, relative intent, knowledge, access to information and opportunity
to correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
preceding. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(e) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this Section 7(e). No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
8. Compliance with Rule 144. At the request of the Stockholders, Acquiror
will (i) forthwith furnish a written statement of its compliance with the
filing requirements of the SEC as set forth in Rule 144 or any similar rules
or regulations hereafter adopted by the SEC as such may be amended from time
to time, (ii) make available to the public and the Stockholders such
information and (iii) take such further actions as the Stockholders shall
reasonably request as will enable the Stockholders to be permitted to make
sales pursuant to Rule 144 or such similar rules and regulations. All sales of
Registrable Shares by the Stockholders must be effected in compliance with
applicable law.
9. Participation in Underwritten Registrations. The Stockholders and
Stockholder Affiliates may not participate in any registration hereunder which
is underwritten unless they (a) agree to sell Registrable Shares on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements, (b) complete and execute all
questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements, and (c) furnish in writing to Acquiror such
information regarding the Stockholders and Stockholder Affiliates, the plan of
distribution of the Registrable Shares and other information as Acquiror may
from time to time reasonably request or as may be legally required in
connection with such registration.
10. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
D-8
<PAGE>
(b) Successors and Assigns. This Agreement shall bind and inure to the
benefit of Acquiror and each Stockholder and each other Person who shall
become a registered holder of Registrable Shares and their respective
successors, heirs, personal representatives and permitted assigns.
(c) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated with respect to any
one or more Stockholders, except upon the execution and delivery of a written
agreement executed by the relevant parties hereto.
(d) Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received if so given) by hand delivery, telegram, telex or telecopy,
or by mail (registered or certified mail, postage prepaid, return receipt
requested) or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
If to Stockholders:
c/o Pulitzer Publishing Company
900 North Tucker Boulevard
St. Louis, Missouri 63101
If to Acquiror: Hearst-Argyle Television, Inc.
959 Eighth Avenue
New York, New York 10106
(212) 489-2314 (telecopier)
Attention: Dean H. Blythe
Copy to: Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
(212) 878-8375 (telecopier)
Attention: Steven A. Hobbs, Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(e) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
(f) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such breach the
aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
(g) Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
D-9
<PAGE>
(h) No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(i) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(j) Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware or the United
States District Court for the Southern District of New York or any court of
the State of New York located in the City of New York in any action, suit or
proceeding arising in connection with this Agreement, and agrees that any such
action, suit or proceeding shall be brought only in such court (and waives any
objection based on forum non conveniens or any other objection to venue
therein); provided, however, that such consent to jurisdiction is solely for
the purpose referred to in this paragraph (l) and shall not be deemed to be a
general submission to the jurisdiction of said courts or in the states of
Delaware or New York other than for such purposes. Each party hereto hereby
waives any right to a trial by jury in connection with any such action, suit
or proceeding.
(k) Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(l) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
[The remainder of this page intentionally left blank.]
D-10
<PAGE>
IN WITNESS WHEREOF, Acquiror and each Stockholder have caused this Agreement
to be duly executed as of the day and year first above written.
Hearst-Argyle Television, Inc.
By: _________________________________
Name:
Title:
_____________________________________
Emily Rauh Pulitzer
_____________________________________
David E. Moore
_____________________________________
Michael E. Pulitzer
D-11
<PAGE>
EXHIBIT E
FCC AGREEMENT
May 25, 1998
Shareholders listed on
Schedule A Attached Hereto
Dear Shareholders:
Reference is made to that certain Agreement and Plan of Merger by and among
Pulitzer Publishing Company ("Company"), Pulitzer Inc. ("Newco"), and Hearst-
Argyle Television, Inc. ("Acquiror"), dated as of May 25, 1998 (the "Merger
Agreement") (the Company, Newco and Acquiror, collectively herein, the
"Parties"). Capitalized terms used and not defined herein will have the same
meaning assigned to them in the Merger Agreement.
Pursuant to the terms of the Merger Agreement, upon consummation of the
Transactions, each Shareholder identified in Schedule A hereto (individually
herein a "Shareholder" and, collectively, the "Shareholders" or "you") will
receive shares of Acquiror Common Stock as specified in the Merger Agreement.
In addition, following the consummation of the Transactions, each of you will
continue to own certain shares in Newco. The Parties have determined that,
under certain circumstances, your respective ownership of shares in Newco and
in Acquiror may cause Acquiror to become non-compliant with the rules and
regulations of the Federal Communications Commission (the "FCC"), now in
effect or as hereafter amended, governing ownership of mass media facilities
by broadcast licensees including, but not limited to, the FCC's rules and
policies concerning attribution of ownership, see 47 C.F.R. (S) 73.3555 and
Notes thereto (collectively, the "FCC Cross-Ownership Rules"), as a
consequence of the coincidence of certain mass media properties owned or
hereafter acquired by Newco and media properties owned or hereafter acquired
by Acquiror.
The Parties desire to agree upon a plan to achieve compliance at all times
with the FCC Cross-Ownership Rules. Accordingly, for and in consideration of
the execution of the Merger Agreement, and in order to effectuate its terms,
Acquiror or each Shareholder, as the case may be, hereby agrees as follows:
(1) If any circumstances(s) (each, an "Ownership Conflict") arise(s) at any
time (including at the Effective Time), whether as a consequence of action by
a Shareholder, Newco or Acquiror (including, without limitation, the
acquisition or proposed acquisition of an ownership interest in, or management
or control of, or other relationship with, a radio or television broadcast
station by Acquiror or any of its subsidiaries) or otherwise, such that the
Shareholders' ownership of shares of Acquiror Common Stock would (i) cause
Acquiror to be non-compliant with the FCC Cross-Ownership Rules or any other
rule, regulation or policy of the FCC (together with the FCC Cross-Ownership
Rules, the "FCC Rules") or (ii) restrict or prohibit Acquiror's ability to
maintain, renew or obtain any license, approval or authorization granted by
the FCC, then each of the Shareholders whose ownership of shares of Acquiror
Common Stock is determined, according to the FCC's ownership attribution
principles, to be a contributing cause of Acquiror's non-compliance (the
"Attributable Shareholders") will exchange its shares of Acquiror Common Stock
for new shares in Acquiror (the "Replacement Shares") to the limited extent
necessary for Acquiror to be in compliance with the FCC's Cross-Ownership
Rules.
(2) The Replacement Shares shall possess characteristics identical in every
respect to the existing shares held by Shareholders, PROVIDED however, that
(i) they will be non-voting in nature, except on such matters as the Rules and
Regulations of the FCC and relevant decisions of the FCC would permit,
consistent with preserving the non-attributable status of the Replacement
Shares, and except as otherwise required by law and (ii) to the extent the
Replacement Shares are shares of preferred stock of Acquiror, such replacement
Shares shall be senior to the shares of common stock of Acquiror in
liquidation as to the par value of such shares. In addition, each Replacement
Share shall be convertible into a full voting common share in Acquiror at the
Attributable
<PAGE>
Shareholder's election at such time as an Ownership Conflict no longer would
exist upon such conversion, including, without limitation, in the event that:
(i) a change in either Acquiror's ownership of mass media facilities or
Newco's ownership of mass media facilities, or both, makes the Replacement
Shares no longer necessary to preserve Acquiror's compliance with the FCC
Rules; (ii) the FCC Rules are repealed or amended or other circumstances arise
such that the Replacement Shares are no longer necessary to preserve
Acquiror's compliance therewith; or (iii) any Attributable Shareholder desires
to sell or otherwise transfer the Replacement Shares to a person or persons
whose ownership of such shares will not result in an Ownership Conflict; it
being agreed that, except in the case of an open market sale or public
offering, Acquiror may require an opinion of counsel to the Attributable
Shareholder, which opinion shall be reasonably acceptable to Acquiror as a
condition to such conversion.
(3) Unless otherwise agreed upon by the Shareholders and Acquiror, the
Replacement Shares shall be exchanged for shares of Acquiror Common Stock on a
pro-rata basis among the Attributable Shareholders.
(4) For, and in consideration of, the exchange of the Replacement Shares for
the shares of Acquiror Common Stock, each Attributable Shareholder shall,
concurrently with such exchange, surrender to Acquiror a number of the
Shareholder's existing shares in Acquiror equal to the number of Replacement
Shares received.
(5) As a condition of any transfer of Acquiror Common Stock by Shareholder,
as a result of which the transferee shall hold a direct or indirect interest
in 5% or more of Acquiror's outstanding shares of voting capital stock, the
Shareholder shall cause such transferee to execute and deliver to Acquiror a
joinder agreement whereby such transferee shall agree to take and hold such
Acquiror Common Stock subject to this Letter Agreement and to all the
obligations and restrictions upon the transferor Shareholder and to observe
and comply with this Letter Agreement and with such obligations and
restrictions. Each Shareholder understands that stop transfer instructions
will be given to Acquiror's transfer agents with respect to Acquiror Common
Stock and that there will be placed on the certificates for Acquiror Common
Stock issued to the Shareholder, or any substitutions therefor, a legend
stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY
BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED MAY 25, 1998 BETWEEN THE REGISTERED
HOLDER HEREOF AND HEARST-ARGYLE TELEVISION, INC., A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF HEARST-ARGYLE TELEVISION, INC.
(6) Acquiror shall take any and all actions necessary to deliver the
Replacement Shares in exchange for each Shareholder's existing shares of
Acquiror Common Stock in accordance with the terms of this Letter Agreement.
From time to time, the Shareholder shall provide to Acquiror and Acquiror
shall provide to Shareholder such information as shall be reasonably necessary
to effectuate this Letter Agreement.
If you agree to the terms of this Letter Agreement, please indicate your
assent by countersigning where indicated below and returning this letter to
us.
Very truly yours,
Hearst-Argyle Television, Inc.
By:__________________________________
Name:
Title:
2
<PAGE>
Agreed to and Accepted by:
EMILY RAUH PULITZER, JAMES V.
MALONEY AND WILLIAM BUSH, SUCCESSOR
TRUSTEES OF MARITAL TRUST A U/T
JOSEPH PULITZER, JR. DTD 6/12/74, AS
AMENDED 10/20/92
By:__________________________________
Emily Rauh Pulitzer, Trustee
By:__________________________________
James V. Maloney, Trustee
By:__________________________________
William Bush, Trustee
EMILY RAUH PULITZER, JAMES V.
MALONEY AND WILLIAM BUSH, SUCCESSOR
TRUSTEES OF MARITAL TRUST B U/T
JOSEPH PULITZER, JR. DTD 6/12/74, AS
AMENDED 10/20/92
By:__________________________________
Emily Rauh Pulitzer, Trustee
By:__________________________________
James V. Maloney, Trustee
By:__________________________________
William Bush, Trustee
_____________________________________
Emily Rauh Pulitzer
EMILY RAUH PULITZER, AS TRUSTEE OF
THE PULITZER FAMILY TRUST
By:__________________________________
Emily Rauh Pulitzer, Trustee
SPRING FOUNDATION
By:__________________________________
Name: Emily Rauh Pulitzer
Title:
_____________________________________
David E. Moore
3
<PAGE>
DAVID E. MOORE, TRUSTEE OF DAVID E.
MOORE 1998 GRANTOR ANNUITY TRUST DTD
2/5/98
By:__________________________________
David E. Moore, Trustee
MICHAEL E. PULITZER, TRUSTEE OF U/A
DTD 3/22/82 F/B/O MICHAEL E.
PULITZER
By:__________________________________
Michael E. Pulitzer, Trustee
RICHARD A. PALMER, TRUSTEE OF U/A
DTD 8/16/83 F/B/O MICHAEL E.
PULITZER
By:__________________________________
Richard A. Palmer, Trustee
THE CEIL AND MICHAEL E. PULITZER
FOUNDATION, INC.
By:__________________________________
Michael E. Pulitzer, President
4
<PAGE>
SCHEDULE A
Shareholders of Company to Receive Shares In Acquiror
Emily Rauh Pulitzer, James V. Maloney
and William Bush, Successor Trustees
of Marital Trust A U/T Joseph Pulitzer, Jr.
dtd. 6/12/74, As Amended 10/20/92
Emily Rauh Pulitzer, James V. Maloney
and William Bush, Successor Trustees
of Marital Trust B U/T Joseph Pulitzer, Jr.
dtd. 6/12/74, As Amended 10/20/92
Emily Rauh Pulitzer
Emily Rauh Pulitzer, as Trustee of
the Pulitzer Family Trust
Spring Foundation
David E. Moore
David E. Moore, Trustee
of David E. Moore
1998 Grantor Annuity Trust dtd 2/5/98
Michael E. Pulitzer, Trustee of U/A
dtd 3/22/82 F/B/O Michael E. Pulitzer
Richard A. Palmer, Trustee of U/A
dtd 8/16/83 F/B/O Michael E. Pulitzer
The Ceil and Michael E. Pulitzer Foundation,
Inc.
5
<PAGE>
EXHIBIT F
BOARD REPRESENTATION AGREEMENT
This Board Representation Agreement, dated as of May 25, 1998 (this
"Agreement"), is by and among Hearst-Argyle Television, Inc., a Delaware
corporation ("Acquiror"), Hearst Broadcasting, Inc. (the "Acquiror
Stockholder") and Emily Rauh Pulitzer, Michael E. Pulitzer and David E. Moore
(collectively, the "Pulitzer Class B Holders").
WHEREAS, the Acquiror Stockholder owns 41,298,648 shares of Acquiror's
Series B Common Stock, par value $.01 per share, and 774,027 shares of
Acquiror's Series A Common Stock, par value $.01 per share (all shares of such
stock now owned and which may hereafter be acquired by the Acquiror
Stockholder prior to the termination of this Agreement are referred to herein
as the "Acquiror Shares");
WHEREAS, Pulitzer Publishing Company, a Delaware corporation (the
"Company"), Pulitzer Inc., a Delaware corporation ("Newco") and wholly owned
subsidiary of the Company, and Acquiror have entered into a Merger Agreement,
dated May 25, 1998 (the "Merger Agreement"), which provides, among other
things, that the Company will merge with and into Acquiror (the "Merger")
(this and other capitalized terms used and not defined herein shall have the
meanings ascribed to such terms in the Merger Agreement);
WHEREAS, in connection with the Merger, the Pulitzer Class B Holders will be
entitled to receive beneficial ownership of shares of Series A Common Stock of
Acquiror in respect of 14,537,808 shares of Class B Common Stock of the
Company beneficially owned by the Pulitzer Class B Holders prior to the Merger
(all such shares received by the Pulitzer Class B Holders in the Merger, the
"PCBH Shares"), and it is the desire of the Pulitzer Class B Holders that they
have the right to designate for election one or two members of the board of
directors of Acquiror (the "Acquiror Board") following the consummation of the
Merger;
WHEREAS, pursuant to the Merger Agreement, Acquiror has agreed to cause
Michael E. Pulitzer and Ken J. Elkins (together, the "Initial PCBH Designees")
to be elected to the Acquiror Board as set forth herein following consummation
of the Merger; and
WHEREAS, it is a condition to the Company's and Newco's obligation to
consummate the Merger that the parties hereto enter into this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
1. REPRESENTATION ON ACQUIROR BOARD.
(a) Subject to Section 1(b), the Pulitzer Class B Holders shall be entitled
to representation on the Acquiror Board through the Initial PCBH Designees.
These designees shall be proposed for election to the Acquiror Board either:
(i) if following the consummation of the Merger there are one or more
vacancies on such Board or the members of such Board have the power to create
new directorships, at the first meeting of the Acquiror Board following
consummation of the Merger at which meeting the Initial PCBH Designees shall
be elected or (ii) if there are no such vacancies or power to create new
directorships, at the first meeting of stockholders of Acquiror held after
consummation of the Merger. Following such election of the Initial PCBH
Designees, in each instance in which individuals are nominated for election to
the Acquiror Board, Acquiror shall cause to be nominated for election to the
Acquiror Board the individuals designated by the Pulitzer Class B Holders (the
"PCBH Designees") as of the date of nomination, in the manner and subject to
the conditions set forth in this Section 1. Acquiror shall cause such PCBH
Designees to be validly and timely nominated for election to the Acquiror
Board in the same manner as other proposed directors who may be elected by the
Acquiror Stockholder are nominated, and the Acquiror Stockholder shall vote
its Acquiror Shares in favor of the election of the PCBH Designees, and
Acquiror shall use its best efforts to take such other action as may be
reasonably necessary to
<PAGE>
cause such PCBH Designees to be so elected. If any Initial PCBH Designee or
PCBH Designee who serves on the Acquiror Board ceases, for any reason, to
serve on the Acquiror Board (other than pursuant to Section 1(b) or Section 2
or as a result of the expiration of the specified term of such Initial PCBH
Designee or PCBH Designee), Acquiror shall use its best efforts to take all
actions reasonably necessary to cause the vacancy to be filled, as soon as
practicable, by an individual designated by the Pulitzer Class B Holders (a
"Replacement PCBH Designee"), but in any event no later than the first meeting
of the Acquiror Board following cessation of service by such Initial PCBH
Designee or PCBH Designee. Each Initial PCBH Designee, PCBH Designee or
Replacement PCBH Designee shall be reasonably acceptable to Acquiror and shall
be eligible to serve on the Acquiror Board under applicable law.
(b) Notwithstanding anything to the contrary herein, in the event that, as a
result of the nomination and/or appointment of, or the Pulitzer Class B
Holders' right to designate, a proposed Initial PCBH Designee, PCBH Designee
or Replacement PCBH Designee, the following (an "Ownership Conflict") shall
occur and be continuing: (i) Acquiror or any of its subsidiaries is (or, as a
result of any proposed acquisition of an ownership interest in, or management
or control of, or other relationship with, a radio or television broadcast
station by Acquiror or any of its subsidiaries, any of them would be) in
violation of the rules and regulations of the Federal Communications
Commission (the "FCC"), now in effect or as hereafter amended, governing
ownership of mass media facilities by broadcast licensees including, but not
limited to, the FCC's rules and policies concerning attribution of ownership,
see 47 C.F.R. (S) 73.3555 and Notes thereto (collectively, the "FCC Cross-
Ownership Rules") or any other rule, regulation or policy of the FCC, or (ii)
Acquiror or any of its subsidiaries is not (or, as a result of any proposed
acquisition of an ownership interest in, or management or control of, or other
relationship with, a radio or television broadcast station by Acquiror or any
of its subsidiaries, any of them would not be) entitled to maintain, renew or
obtain any license, approval or authorization granted by the FCC; then all
obligations on the part of Acquiror and the Acquiror Stockholder under this
Agreement shall be suspended until the Ownership Conflict shall cease to be
continuing. If the Pulitzer Class B Holders shall not be permitted by virtue
of this Section 1(b) to representation on the Acquiror Board as described
herein, or if the Pulitzer Class B Holders should elect from time to time
observer status in lieu of a seat or seats on the Acquiror Board by written
notice to Acquiror and the Acquiror Stockholder, then to the extent permitted
by law, including but not limited to the rules, regulations and policies of
the FCC, and except as would not cause any loss of attorney-client privilege
by Acquiror or any of its subsidiaries, the Pulitzer Class B Holders shall for
the period of this Agreement be entitled to designate a non-voting observer or
observers who shall be entitled to notice of and to attend all meetings of the
Acquiror Board and to receive or review, as the case may be, copies of all
documents provided to members of the Acquiror Board. Such observer or
observers shall enter into customary confidentiality arrangements with
Acquiror. Subject to the provisions of this Section 1(b), at any time and from
time to time, the Pulitzer Class B Holders may nominate for election pursuant
to Section 1(a) above a Replacement PCBH Designee in lieu of such observer or
observers.
2. TERMINATION OF RIGHTS. The rights of the Pulitzer Class B Holders under
Section 1 hereof shall terminate upon the earliest of (i) the date on which
the Pulitzer Class B Holders or their respective affiliates cease to
beneficially own at least an aggregate of 50% of the PCBH Shares (as equitably
adjusted for stock splits, combinations, dividends, corporate reorganizations
and similar events) or (ii) the date on which the Pulitzer Class B Holders
elect to terminate Section 1 of this Agreement by notice to the other parties
hereto.
3. REPRESENTATIONS AND WARRANTIES OF ACQUIROR. Acquiror represents and
warrants to the Pulitzer Class B Holders that:
(a) Acquiror has all necessary corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by Acquiror and the performance of
its obligations hereunder have been duly and validly authorized by
Acquiror, and no other proceedings on the part of Acquiror are necessary to
authorize the execution and delivery of this Agreement or to perform such
obligations except approval of Acquiror Board of a resolution increasing
the size of Acquiror Board as provided herein and election of the PCBH
Designees as provided herein. This Agreement has been duly and validly
executed and delivered by Acquiror and, assuming the due
2
<PAGE>
authorization, execution and delivery hereof by each other party hereto,
constitutes a legal, valid and binding obligation of Acquiror enforceable
against Acquiror in accordance with its terms, subject to (x) the
Enforceability Exceptions and (y) as the same may be limited under the FCC
Cross-Ownership Rules.
(b) The execution and delivery of this Agreement by Acquiror do not, and
the performance of this Agreement by Acquiror will not, (i) conflict with
or violate the Certificate of Incorporation or By-laws of Acquiror, (ii)
except as described in Section 3(c), conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Acquiror or by
which any of Acquiror's property may be bound or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the Acquiror's properties pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Acquiror is a
party or by which Acquiror or Acquiror's properties are bound or affected,
except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent
or materially delay the performance by Acquiror of its obligations under
this Agreement.
(c) The execution and delivery of this Agreement by Acquiror do not, and
the performance of this Agreement by Acquiror will not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any federal, state, local or foreign regulatory body,
except (i) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or materially delay the performance by Acquiror of Acquiror's
obligations under this Agreement, (ii) filings with the SEC under the
Exchange Act and (iii) any waiver, consent or declaratory ruling by, or any
filing with, the FCC with respect to the FCC Cross-Ownership Rules to the
extent that such Rules and Regulations may prohibit the performance of the
Acquiror's obligations hereunder, or as may be otherwise required by the
rules, regulations and policies of the FCC.
4. REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR STOCKHOLDER. The Acquiror
Stockholder represents and warrants to the Pulitzer Class B Holders as
follows:
(a) The Acquiror Stockholder has all necessary power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Acquiror
Stockholder and the performance of the Acquiror Stockholder's obligations
hereunder have been duly and validly authorized by the Acquiror
Stockholder, and no other corporate proceedings on the part of the Acquiror
Stockholder are necessary to authorize the execution and delivery of this
Agreement or to perform such obligations. This Agreement has been duly and
validly executed and delivered by the Acquiror Stockholder and, assuming
the due authorization, execution and delivery hereof by each other party
hereto, constitutes a legal, valid and binding obligation of the Acquiror
Stockholder enforceable against the Acquiror Stockholder in accordance with
its terms, subject to (x) the Enforceability Exceptions and (y) as the same
may be limited under the FCC Cross-Ownership Rules.
(b) The execution and delivery of this Agreement by the Acquiror
Stockholder do not, and the performance of this Agreement by the Acquiror
Stockholder will not, (i) conflict with or violate the Certificate of
Incorporation or By- laws of the Acquiror Stockholder, (ii) except as
described in Section 4(c) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to such Acquiror
Stockholder or by which the Acquiror Shares are bound or affected or (iii)
result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien on any Acquiror Shares pursuant to,
any note, bond, mortgage, indenture contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Acquiror
Stockholder is a party or by which the Acquiror Shares are bound or
affected, except, in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would
not prevent or materially delay the performance by the Acquiror Stockholder
of its obligations under this Agreement.
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<PAGE>
(c) The execution and delivery of this Agreement by the Acquiror
Stockholder do not, and the performance of this Agreement by such Acquiror
Stockholder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any federal, state, local or
foreign regulatory body, except (i) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or materially delay the performance by the
Acquiror Stockholder of its obligations under this Agreement, (ii) filings
with the SEC under the Exchange Act and (iii) any waiver, consent or
declaratory ruling by, or any filing with, the FCC with respect to the FCC
Cross- Ownership Rules, to the extent that such FCC Cross-Ownership Rules
may prohibit the performance of the Acquiror Stockholder's obligations
hereunder, or as may be otherwise required by the rules, regulations and
policies of the FCC.
(d) The Acquiror Stockholder is the owner of the Acquiror Shares free and
clear of all options, rights of first refusal, agreements, limitations on
voting rights, and Liens. The Acquiror Stockholder has sole voting power
with respect to the Acquiror Shares or has the power to direct the voting
of the Acquiror Shares. The Acquiror Stockholder has not appointed or
granted any proxy, which appointment or grant is still effective, with
respect to the Acquiror Shares, other than pursuant to the Acquiror Voting
Agreement, dated May 25, 1998, among the Acquiror Stockholder and the
Company, or as otherwise disclosed in Schedule 5.05(a) to the Merger
Agreement. The Acquiror Stockholder has sole voting power with respect to
the Acquiror Shares, and the person executing this Agreement on behalf of
the Acquiror Stockholder has the power to direct the voting of such
Acquiror Shares.
5. NO PROHIBITION ON TRANSFERS. Nothing in this Agreement shall prevent the
Acquiror Stockholder from offering, selling, transferring, pledging or in any
other way disposing of or placing encumbrances upon the Acquiror Shares.
6. COMPENSATION, EXPENSES, INSURANCE. The Initial PCBH Designees, PCBH
Designees and Replacement PCBH Designees serving on the Acquiror Board shall
be entitled to fees and other compensation, participation in option, stock or
other benefit plans for which directors are eligible, reimbursement of
expenses, and directors and officers liability insurance and indemnities on an
equal basis with other members of the Acquiror Board.
7. PROVISIONS SPECIFICALLY ENFORCEABLE.
(a) The obligations of Acquiror and the Acquiror Stockholder under this
Agreement are unique. Acquiror and the Acquiror Stockholder acknowledge that
it would be extremely difficult or impracticable to measure the resulting
damages caused by any breach of this Agreement. Acquiror and the Acquiror
Stockholder agree that, in the event of a breach of this Agreement by either
Acquiror or the Acquiror Stockholder, the Pulitzer Class B Holders, in
addition to any other available rights or remedies, shall be entitled to
specific performance of the obligations of Acquiror and the Acquiror
Stockholder under this Agreement, and Acquiror and the Acquiror Stockholder
expressly agree that a remedy in damages will not be adequate.
(b) The remedies provided in this Section 7 are cumulative and are in
addition to any other remedies in law or equity which may be available to the
Pulitzer Class B Holders. The election of one or more remedies shall not bar
the use of other remedies unless circumstances make the remedies incompatible.
8. CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware regardless of the laws that
might otherwise govern under principles of conflicts of law applicable hereto.
9. ATTORNEY'S FEE. In any action to enforce the terms of this Agreement, the
prevailing party shall be entitled to recover its attorneys' fees and court
costs and other nonreimbursable litigation expenses, such as expert witness
fees and investigation expenses.
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<PAGE>
10. MERGER AND MODIFICATION. This Agreement sets forth the entire agreement
between the parties relating to the subject matter hereof, and supersedes all
other oral or written agreements. This Agreement may be modified or terminated
only in a writing signed by all parties.
11. BINDING ON SUCCESSORS. This Agreement shall be binding upon Acquiror,
the Acquiror Stockholder and their respective successors and assigns.
12. RULES OF CONSTRUCTION. All section captions are for convenience of
reference only, and shall not be considered in construing this Agreement.
13. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person,
by telecopy with answerback, by express or overnight mail delivered by a
nationally recognized air courier (delivery charges prepaid) or by registered
or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows: (a) if to the Pulitzer Class B Holders, c/o
Pulitzer Publishing Company, 900 North Tucker Boulevard, St. Louis, Missouri
63101, (b) if to the Acquiror Stockholder, Hearst Broadcasting, Inc., 959
Eighth Avenue, New York, New York 10166, attention: James M. Asher, with a
copy to Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166,
attention: Steven A. Hobbs, Esq., and (c) if to Acquiror, Hearst-Argyle
Television, Inc., 959 Eighth Avenue, New York, New York 10106, attention: Dean
H. Blythe, with a copy to Rogers & Wells LLP, 200 Park Avenue, New York, New
York 10166, attention: Steven A. Hobbs, Esq., or to such other address as the
party to whom notice is given may have previously furnished to the others in
writing in the manner set forth above. Any notice or communication delivered
in person shall be deemed effective on delivery. Any notice or communication
sent by telecopy or by air courier shall be deemed effective on the first
business day at the place at which such notice or communication is received
following the day on which such notice or communication was sent. Any notice
or communication sent by registered or certified mail shall be deemed
effective on the fifth business day at the place from which such notice or
communication was mailed following the day on which such notice or
communication was mailed.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding
when one or more counterparts hereof, individually or taken together, shall
bear the signatures of all of the parties reflected hereon as the signatories.
[The remainder of this page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
HEARST-ARGYLE TELEVISION, INC.
By:__________________________________
Name:
Title:
HEARST BROADCASTING, INC.
By:__________________________________
Name:
Title:
___________________________________
Emily Rauh Pulitzer
___________________________________
Michael E. Pulitzer
___________________________________
David E. Moore
6
<PAGE>
EXHIBIT G
May 25, 1998
Hearst-Argyle Television, Inc.
959 Eighth Avenue
New York, New York 10106
Ladies and Gentlemen:
Reference is made to that certain Agreement and Plan of Merger by and among
Pulitzer Publishing Company (the "Company"), Pulitzer Inc. ("Newco") and
Hearst-Argyle Television, Inc. ("Acquiror"), dated of even date herewith (the
"Merger Agreement") (the Company, Newco, and Acquiror, collectively herein,
the "Parties"). Capitalized terms used and not defined herein will have the
same meanings assigned to them in the Merger Agreement.
On the Consummation Date (as defined below), Acquiror shall acquire, and
Newco shall cause to be transferred, assigned and delivered to Acquiror (by
delivery of the stock certificates therefor accompanied by stock powers
endorsed in favor of Acquiror), all the issued and outstanding shares of
capital stock (the "Shares") of Pulitzer Sports, Inc. ("PSI"), free and clear
of all Liens other than the Baseball Consents (as defined below).
In consideration of the transfer, assignment and delivery of the Shares to
Acquiror, Acquiror shall wire transfer to Newco, on the Consummation Date, the
sum of $5,000,000.00.
The Consummation Date shall be the later of (i) the Effective Time or (ii)
three (3) business days after all necessary consents and authorizations of
Major League Baseball and the National League with respect to the transactions
contemplated hereby (the "Baseball Consents").
Newco represents, warrants and covenants that:
1. On the date hereof, all of the Shares are, and on the Consummation Date
the Shares will be, duly authorized, validly issued, fully paid and non-
assessable. There are no, and on the Consummation Date there will not be, any
voting trusts, proxies or other agreements to which PSI is a party with
respect to the voting of the capital stock of PSI. PBC owns, and on the
Consummation Date Newco will own, and Newco will convey to Acquiror valid
title to, the Shares, free and clear of all Liens other than the Baseball
Consents. The Shares constitute, and on the Consummation Date will constitute,
all of the issued and outstanding capital stock of PSI, and there are, and on
the Consummation Date there will be, no outstanding options, warrants, rights
or other securities which upon conversion, exchange or exercise would require
PSI to issue any shares of its capital stock.
2. PSI has, and on the Consummation Date will have, no liabilities or
obligations except pursuant to the Third Amended and Restated Agreement of
Limited Partnership of AZPB Limited Partnership, dated December 31, 1996, as
it may be amended from time to time (the "Partnership Agreement").
3. PSI owns, and on the Consummation Date will own, valid title to
partnership interests in AZPB Limited Partnership for which interests PSI paid
an aggregate of $6,000,000, free and clear of all Liens other than the
Baseball Consents, and subject to the terms and conditions of the Partnership
Agreement.
The Parties will cooperate with one another and take commercially reasonable
steps to obtain the Baseball Consents.
The rights and obligations of the Parties hereunder shall automatically
terminate upon termination of the Merger Agreement in accordance with Section
8.01 thereof, and thereafter no Party shall have any further obligation or
liability to any other Party hereto.
<PAGE>
This Letter Agreement incorporates by reference the provisions of Article IX
of the Merger Agreement, provided that all references to "this Agreement"
therein shall be deemed to refer to this Letter Agreement and the reference to
the "Closing Date" in Section 9.01 thereunder shall be deemed to refer to the
Consummation Date.
If this Letter Agreement correctly sets forth our agreement, please so
indicate in the space provided below.
Very truly yours,
PULITZER PUBLISHING COMPANY
PULITZER INC.
By: _________________________________
Name:
Title:
Agreed and Accepted
HEARST-ARGYLE TELEVISION, INC.
By: _________________________________
Name:
Title:
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<PAGE>
EXHIBIT H
ACQUIROR VOTING AGREEMENT
ACQUIROR VOTING AGREEMENT (this "Agreement"), dated May 25, 1998, between
Pulitzer Publishing Company, a Delaware corporation (the "Company") and Hearst
Broadcasting, Inc., a Delaware corporation (the "Acquiror Stockholder").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Hearst-Argyle Television, Inc., a Delaware
corporation ("Acquiror"), and the Company are entering into an Agreement and
Plan of Merger (as such agreement may hereafter be amended from time to time,
the "Merger Agreement"), pursuant to which the Company will be merged with and
into Acquiror (the "Merger");
WHEREAS, the Acquiror Stockholder controls or owns all of the issued and
outstanding shares of Series B Common Stock, par value $.01 per share, of
Acquiror; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, the Company has required that the Acquiror Stockholder agrees, and
the Acquiror Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. Capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement. For purposes of
this Agreement, "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Notwithstanding the
foregoing, securities Beneficially Owned by a Person shall not include
securities which are actually owned by other Persons but which such Person may
be deemed to Beneficially Own under Rule 13d-3 under the Exchange Act solely
because such Person may be deemed to be part of a "group" with such other
Persons as within the meaning of Section 13(d)(3) of the Exchange Act.
2. Provisions Concerning the Shares.
(a) The Acquiror Stockholder hereby agrees that during the period
commencing on the date hereof and continuing until the first to occur of
the Effective Time or the date on which the Merger Agreement is terminated
in accordance with its terms, at any meeting of the holders of any capital
stock of Acquiror ("Acquiror Stock"), however called, or in connection with
any written consent of the holders of Acquiror Stock, the Acquiror
Stockholder shall vote (or cause to be voted) all shares of Acquiror Stock
held of record or Beneficially Owned by the Acquiror Stockholder, whether
heretofore owned or hereafter acquired (collectively, the "Shares"), (i) in
favor of the Merger, the execution and delivery by Acquiror of the Merger
Agreement and the approval of the terms thereof, and each of the other
transactions and actions contemplated by the Merger Agreement and this
Agreement (and the matters related to the consummation thereof) and any
actions required in furtherance thereof and hereof; and (ii) against any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement
of Acquiror under the Merger Agreement or this Agreement or that would
result in any of the conditions to the obligations of Acquiror under the
Merger Agreement not being fulfilled.
(b) In the event of a stock dividend or distribution, or any change in
Acquiror Stock by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares"
<PAGE>
shall be deemed to refer to and include the Shares as well as all such
stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
3. Other Representations, Warranties and Covenants. The Acquiror Stockholder
hereby represents, warrants and covenants to the Company as follows:
(a) Ownership of Shares. The Acquiror Stockholder Beneficially Owns all
of the Shares, free and clear of all Liens, constituting all of the issued
and outstanding shares of Series B Common Stock, and has sole voting power
or sole power to issue instructions with respect to the matters covered
hereby.
(b) Power; Binding Agreement. The Acquiror Stockholder has the legal
capacity, power and authority to enter into and perform all of the Acquiror
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by the Acquiror Stockholder will not violate
any other agreement to which the Acquiror Stockholder is a party,
including, without limitation, any voting agreement, stockholders agreement
or voting trust. This Agreement has been duly and validly executed and
delivered and authorized by the Acquiror Stockholder and constitutes a
valid and binding agreement of the Acquiror Stockholder, enforceable
against the Acquiror Stockholder in accordance with its terms.
(c) No Conflicts. (i) No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by the Acquiror Stockholder
and the consummation by the Acquiror Stockholder of the transactions
contemplated hereby (other than filings with the SEC or FCC), and (ii) none
of the execution and delivery of this Agreement by the Acquiror
Stockholder, the consummation by the Acquiror Stockholder of the
transactions contemplated hereby or compliance by the Acquiror Stockholder
with any of the provisions hereof shall (A) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or
other instrument or obligation of any kind to which the Acquiror
Stockholder is a party or by which the Acquiror Stockholder or any of the
Acquiror Stockholder's properties or assets may be bound, or (B) violate
any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to the Acquiror Stockholder or any of the Acquiror
Stockholder's properties or assets.
(d) Restriction on Transfers, Proxies and Non-Interference. Beginning on
the date hereof and continuing until this Agreement terminates pursuant to
Section 4, except as applicable in connection with the transactions
contemplated by the Merger Agreement, the Acquiror Stockholder shall not,
directly or indirectly, (i) except as contemplated by this Agreement, grant
any proxies or powers of attorney, deposit any Shares into a voting trust
or enter into or amend a voting agreement with respect to any Shares, or
(ii) take any action that would have the effect of preventing or disabling
the Acquiror Stockholder from performing the Acquiror Stockholder's
obligations under this Agreement.
(e) Reliance by the Company. The Acquiror Stockholder understands and
acknowledges that the Company is entering into the Merger Agreement in
reliance upon the Acquiror Stockholder's execution and delivery of this
Agreement.
(f) Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action
as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
4. Termination. Except as otherwise provided in Section 2 of this Agreement,
this Agreement shall terminate (a) in the event the Merger Agreement is
terminated in accordance with its terms upon such termination, and (b) in the
event the Merger is consummated, upon the Effective Time; provided that no
such termination shall relieve any party of liability for a breach hereof
prior to termination.
5. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof.
2
<PAGE>
(b) Certain Events. The Acquiror Stockholder agrees that (i) this
Agreement and the obligations hereunder shall attach to the Acquiror
Stockholder's Shares and shall be binding upon any Person to which legal or
beneficial ownership of such Shares shall pass, whether by operation of law
or otherwise, including, without limitation, the Acquiror Stockholder's
heir, guardians, administrators or successors and (ii) it shall not sell,
transfer, pledge, assign or otherwise dispose of ("Transfer"), or enter
into any contract, option or other arrangement with respect to the Transfer
of, any shares of Acquiror Stock held by the Acquiror Stockholder, unless
as a condition of such Transfer, the transferee agrees in writing to be
bound by the terms and conditions of this Agreement.
(c) Assignment. This Agreement shall not be assigned by operation of law
or otherwise without the prior written consent of the other party, and any
purported assignment in violation hereof shall be null and void.
(d) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties
hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if so given) by hand delivery,
telegram, telex or telecopy, or by mail (registered or certified mail,
postage prepaid, return receipt requested) or by any courier service, such
as Federal Express, providing proof of delivery. All communica- tions
hereunder shall be delivered to the respective parties at the following
addresses:
If to Acquiror Stockholder: Hearst Broadcasting, Inc.
959 Eighth Avenue
New York, New York 10106
Attention: James M. Asher
Copy to: Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
(212) 878-8417 (telecopier)
Attention: Steven A. Hobbs, Esq.
If to the Company: Pulitzer Publishing Company
900 North Tucker Boulevard
St. Louis, Missouri 63101
(314) 340-3125 (telecopier)
Attention: Michael E. Pulitzer
Copy to: Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
(212) 752-5958 (telecopier)
Attention: Richard A. Palmer, Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such
jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
or portion of any provision had never been contained herein.
3
<PAGE>
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained
in this Agreement will cause the other party to sustain damages for which
it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such
breach the aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by
any party shall not preclude the simultaneous or later exercise of any
other such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or
other right, power or remedy or to demand such compliance.
(j) No Third Party Beneficiaries. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any Person who or
which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(l) Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware or the
United States District Court for the Southern District of New York or any
court of the State of New York located in the City of New York in any
action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in
such court (and waives any objection based on forum non conveniens or any
other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (l)
and shall not be deemed to be a general submission to the jurisdiction of
said courts or in the States of Delaware or New York other than for such
purposes. Each party hereto hereby waives any right to a trial by jury in
connection with any such action, suit or proceeding.
(m) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the Company and the Acquiror Stockholder have caused
this Agreement to be duly executed as of the day and year first above written.
Pulitzer Publishing Company
By: _________________________________
Name:
Title:
Hearst Broadcasting, Inc.
By: _________________________________
Name:
Title:
4
<PAGE>
EXHIBIT I
AMENDED AND RESTATED PULITZER VOTING AGREEMENT
AMENDED AND RESTATED PULITZER VOTING AGREEMENT (this "Agreement"), dated as
of May 25, 1998, among Hearst-Argyle Television, Inc., a Delaware corporation
("Acquiror"), and each of the stockholders of Pulitzer Publishing Company, a
Delaware corporation (the "Company"), listed on Schedule I hereto (each a
"Stockholder" and, collectively, the "Stockholders").
WITNESSETH:
WHEREAS, concurrently herewith, Acquiror and the Company are entering into
an Agreement and Plan of Merger (as such agreement may hereafter be amended
from time to time, the "Merger Agreement"), pursuant to which the Company will
be merged with and into Acquiror (the "Merger");
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Acquiror has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement; and
WHEREAS, the parties hereto have determined to amend certain provisions of
this Agreement and to amend and restate this Agreement in accordance herewith.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. Capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement. For purposes of
this Agreement:
(a) "Company Stock" shall mean at any time, collectively, the Company
Common Stock and the Company Class B Common Stock.
(b) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), including pursuant to any
agreement, arrangement or understanding, whether or not in writing.
Notwithstanding the foregoing, securities Beneficially Owned by a Person
shall not include securities which are actually owned by other Persons but
which such Person may be deemed to Beneficially Own under Rule 13d-3 under
the Exchange Act solely because such Person may be deemed to be part of a
"group" with such other Persons as within the meaning of Section 13(d)(3)
of the Exchange Act.
2. Provisions Concerning Company Stock.
(a) Each Stockholder hereby agrees that during the period commencing on the
date hereof and continuing until the first to occur of the Effective Time or
the date on which the Merger Agreement is terminated in accordance with its
terms, at any meeting of the holders of Company Stock, however called, or in
connection with any written consent of the holders of Company Stock, such
Stockholder shall vote (or cause to be voted) all shares of Company Stock held
of record or Beneficially Owned by such Stockholder, whether heretofore owned
or hereafter acquired (collectively, the "Shares"), (i) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the Contribution Agreement, and the approval of the terms thereof, and each of
the other transactions and actions contemplated by the Merger Agreement (and
the matters related to the consummation thereof), the Contribution Agreement
and this Agreement and any actions required in furtherance thereof and hereof;
(ii) against any action or agreement that would result in a breach in any
respect of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement, the Contribution
Agreement or this Agreement or that would result in any of the conditions to
the obligations of the Company under the Merger Agreement not being fulfilled;
and (iii) except as otherwise agreed to in writing in advance by Acquiror,
against the following actions (other than the Merger and the transactions
contemplated by the Merger Agreement and the Contribution Agreement): (A) any
extraordinary corporate
<PAGE>
transaction, such as a merger, consolidation or other business combination
involving the Company or its Subsidiaries; (B) a sale, lease or transfer of a
material amount of assets of the Company or its Subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its Subsidiaries; (C) any change in a majority of the Persons who constitute
the board of directors of the Company; (D) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or Bylaws; (E) any other material change in the Company's
corporate structure or business; or (F) any other action involving the Company
or its Subsidiaries which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or materially adversely affect the
Merger and the transactions contemplated by the Merger Agreement, the
Contribution Agreement and this Agreement.
(b) In the event that any Stockholder desires to sell any shares of Company
Common Stock prior to the Effective Time, Acquiror shall cooperate (at the
Stockholder's or the Company's expense) in the marketing efforts of the
underwriters and/or the Stockholder and any underwriter retained by the
Stockholder, including, without limitation, by making available, as reasonably
requested by the underwriters and/or the Stockholder, the senior executive
officers of Acquiror for attendance at, and active participation with the
underwriters in, informational or so-called "road show" meetings with
prospective purchasers of the Company Common Stock being offered, including
meeting with groups of such purchasers or with individual purchasers,
providing information and answering questions about Acquiror at such meetings,
and traveling to locations in the United States and abroad as reasonably
selected by the Stockholder and/or underwriters.
(c) In the event of a stock dividend or distribution, or any change in the
Company Stock by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall be deemed
to refer to and include the Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the Shares
may be changed or exchanged.
3. Other Representations, Warranties and Covenants. Each Stockholder hereby
represents, warrants and covenants to Acquiror as follows:
(a) Ownership of Shares. Such Stockholder is, as of the date hereof, the
record holder of, in his or her capacity as trustee under the Voting Trust
Agreement (as defined below), and Beneficially Owns the number of shares of
Company Stock set forth opposite such Stockholder's name on Schedule I
hereto. As of the date hereof, the Shares set forth opposite such
Stockholder's name on Schedule I hereto constitute all of the Shares owned
of record or Beneficially Owned by such Stockholder. Such Stockholder has
sole voting power or sole power to issue instructions with respect to the
matters covered hereby, except as provided by that certain Voting Trust
Agreement, dated as of June 19, 1995, among the Stockholders and the other
Persons named therein (the "Voting Trust Agreement").
(b) Power; Binding Agreement. Such Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance
of this Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party including, without limitation, the
Voting Trust Agreement and any other voting agreement, stockholders
agreement or voting trust and, with respect to any Stockholder that is not
a natural person, the trust agreement or other applicable constituent
document of such Stockholder. This Agreement has been duly and validly
executed and delivered and authorized, to the extent required, by such
Stockholder and constitutes a valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its
terms. There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which such Stockholder is a trustee whose
consent is required for the execution and delivery of this Agreement or the
consummation by such Stockholder of the transactions contemplated hereby.
If such Stockholder is married and such Stockholder's Shares constitute
community property, this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, such
Stockholder's spouse, enforceable against such Person in accordance with
its terms. A true and complete copy of the Voting Trust Agreement has been
delivered to Acquiror.
2
<PAGE>
(c) No Conflicts. (i) No filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby
(other than filings with the SEC or FCC), and (ii) none of the execution
and delivery of this Agreement by such Stockholder, the consummation by
such Stockholder of the transactions contemplated hereby or compliance by
such Stockholder with any of the provisions hereof shall (A) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which such
Stockholder is a party or by which such Stockholder or any of such
Stockholder's properties or assets may be bound, or (B) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to such Stockholder or any of such Stockholder's properties or
assets.
(d) No Encumbrances. Except for transfers of a Stockholder's Shares made
without violation of Section 6(b), such Stockholder's Shares and the
certificates representing such Shares are now, and at all times during the
term hereof will be, held by the trustees under the Voting Trust Agreement
for the benefit of such Stockholder.
(e) Restriction on Transfers, Proxies and Non-Interference. Beginning on
the date hereof and continuing until this Agreement terminates pursuant to
Section 4, except as applicable in connection with the transactions
contemplated by the Merger Agreement, no Stockholder shall, directly or
indirectly, (i) except as contemplated by this Agreement, grant any proxies
or powers of attorney, deposit any Shares into a voting trust or enter into
or amend a voting agreement (except as the Voting Trust Agreement may be
amended to permit conversion of shares of Class B Common Stock into Common
Stock) with respect to any Shares, or (ii) take any action that would have
the effect of preventing or disabling such Stockholder from performing such
Stockholder's obligations under this Agreement; provided, however, that
nothing contained in this Agreement shall restrict the ability of any
Stockholders to convert his, her or its shares of Class B Common Stock into
Common Stock.
(f) Reliance by Acquiror. Such Stockholder understands and acknowledges
that Acquiror is entering into the Merger Agreement in reliance upon such
Stockholder's execution and delivery of this Agreement.
(g) Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action
as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
4. Termination. Except as otherwise provided in Section 2 of this Agreement,
this Agreement shall terminate (a) in the event the Merger Agreement is
terminated in accordance with its terms (including, without limitation,
Section 8.01(d) of the Merger Agreement), upon such termination, and (b) in
the event the Merger is consummated, upon the Effective Time; provided, that
no such termination shall relieve any party of liability for a breach hereof
prior to termination.
5. Stockholder Capacity. No Person executing this Agreement who is or
becomes during the term hereof a director of the Company makes any agreement
or understanding herein in his or her capacity as such director. Each
Stockholder signs solely in his or her capacity as the record and/or
beneficial owner of, or the trustee of a trust whose beneficiaries are the
beneficial owners of, such Stockholder's Shares.
6. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
3
<PAGE>
(b) Certain Events. Each Stockholder agrees that (i) this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any Person to which legal or beneficial ownership of such Shares
shall pass, whether by operation of law or otherwise, including, without
limitation, such Stockholder's heir, guardians, administrators or successors
and (ii) such Stockholder shall not sell, transfer, pledge, assign or
otherwise dispose of ("Transfer"), or enter into any contract, option or other
arrangement with respect to the Transfer of any, of such Stockholder's Shares
or of any voting certificates such Stockholder may hold in connection with the
Voting Trust Agreement or instruct or permit the trustees under the Voting
Trust Agreement to Transfer or enter into any contract, option or other
arrangement with respect to the Transfer of such Stockholder's Shares, unless
as a condition of such Transfer the transferee agrees in writing to be bound
by the terms and conditions of this Agreement; provided, however, that each
Stockholder shall be entitled to Transfer without such a condition, and this
Agreement and the obligations hereunder shall not so attach to, any Shares
which are sold, gifted or otherwise transferred, whether in a single or
multiple transaction(s), to an unaffiliated third party in a bona fide
transaction; provided, further, that the total number of Shares so sold,
gifted or otherwise transferred by each Stockholder shall not reduce at any
time during the term of this Agreement the number of shares held in the
aggregate by all of the Stockholders below 51% of the issued and outstanding
shares of Class B Common Stock.
(c) Assignment. This Agreement shall not be assigned by operation of law or
otherwise by any party without the prior written consent of the other parties,
and any purported assignment in violation hereof shall be null and void,
provided that Acquiror may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly owned subsidiary of
Acquiror, but no such assignment shall relieve Acquiror of its obligations
hereunder if such assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, with respect to, any
one or more Stockholders, except upon the execution and delivery of a written
agreement executed by the relevant parties hereto; provided that Schedule I
hereto may be supplemented by Acquiror by adding the name and other relevant
information concerning any other stockholder of the Company who agrees to be
bound by the terms of this Agreement without the agreement of any other party
hereto, and thereafter such added stockholder shall be treated as a
"Stockholder" for all purposes of this Agreement.
(e) Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received if so given) by hand delivery, telegram, telex or telecopy,
or by mail (registered or certified mail, postage prepaid, return receipt
requested) or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
If to Stockholders:
At the addresses and telecopier numbers set forth on
Schedule I hereto
If to Acquiror: Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10019
(212) 887-6855 (telecopier)
Attention: Dean H. Blythe
Copy to: Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
(212) 878-8375 (telecopier)
Attention: Steven A. Hobbs, Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
4
<PAGE>
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such breach the
aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(j) No Third Party Beneficiaries. This Agreement is not intended to be for
the benefit of, and shall not be enforceable by, any Person who or which is
not a party hereto.
(k) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(l) Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware or the United
States District Court for the Southern District of New York or any court of
the State of New York located in the City of New York in any action, suit or
proceeding arising in connection with this Agreement, and agrees that any such
action, suit or proceeding shall be brought only in such court (and waives any
objection based on forum non conveniens or any other objection to venue
therein); provided, however, that such consent to jurisdiction is solely for
the purpose referred to in this paragraph (l) and shall not be deemed to be a
general submission to the jurisdiction of said courts or in the States of
Delaware or New York other than for such purposes. Each party hereto hereby
waives any right to a trial by jury in connection with any such action, suit
or proceeding.
(m) Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
[The remainder of this page intentionally left blank]
5
<PAGE>
IN WITNESS WHEREOF, Acquiror and each Stockholder have caused this Agreement
to be duly executed as of the day and year first above written.
Hearst-Argyle Television, Inc.
By: ---------------------------------
Name: Dean H. Blythe
Title: Senior Vice-President
Secretary and General
Counsel
Emily Rauh Pulitzer, James V.
Maloney and William Bush, Successor
Trustees of Marital Trust A U/T
Joseph Pulitzer, Jr. dtd 6/12/74, As
Amended 10/20/92
By: ---------------------------------
Emily Rauh Pulitzer, Trustee
By: ---------------------------------
James V. Maloney, Trustee
By: ---------------------------------
William Bush, Trustee
Emily Rauh Pulitzer, James V.
Maloney and William Bush, Successor
Trustees of Marital Trust B U/T
Joseph Pulitzer, Jr. dtd 6/12/74, As
Amended 10/20/92
By: ---------------------------------
Emily Rauh Pulitzer, Trustee
By: ---------------------------------
James V. Maloney, Trustee
By: ---------------------------------
William Bush, Trustee
-------------------------------------
Emily Rauh Pulitzer
6
<PAGE>
Emily Rauh Pulitzer, as Trustee of
the Pulitzer Family Trust
By: ---------------------------------
Emily Rauh Pulitzer, Trustee
Spring Foundation
By: ---------------------------------
Name: Emily Rauh Pulitzer
Title:
-------------------------------------
David E. Moore
David E. Moore, Trustee of David E.
Moore 1998 Grantor Annuity Trust dtd
2/5/98
By: ---------------------------------
David E. Moore, Trustee
Michael E. Pulitzer, Trustee of U/A
dtd 3/22/82 F/B/O Michael E.
Pulitzer
By: ---------------------------------
Michael E. Pulitzer, Trustee
Richard A. Palmer, Trustee of U/A
dtd 8/16/83 F/B/O Michael E.
Pulitzer
By: ---------------------------------
Richard A. Palmer, Trustee
The Ceil and Michael E. Pulitzer
Foundation, Inc.
By: ---------------------------------
Michael E. Pulitzer, President
7
<PAGE>
SCHEDULE I
TO
PULITZER VOTING AGREEMENT
Record Ownership of Class B Common Stock
<TABLE>
<CAPTION>
Number of
Shares
as of
May 25,
Name and Address of Stockholder 1998
- ------------------------------- ---------
<S> <C>
Emily Rauh Pulitzer, James V. Maloney and William Bush, Successor Trustees of
Marital Trust A U/T Joseph Pulitzer, Jr. dtd. 6/12/74, As Amended 10/20/92 10,560
Emily Rauh Pulitzer, James V. Maloney and William Bush, Successor Trustees of
Marital Trust B U/T Joseph Pulitzer, Jr. dtd. 6/12/74, As Amended 10/20/92 5,929,733
Emily Rauh Pulitzer 5,289
Emily Rauh Pulitzer, as Trustee of the Pulitzer Family Trust 815,935
Spring Foundation 22,860
David E. Moore 3,212,458
David E. Moore, Trustee of David E. Moore 1998 Grantor Annuity Trust dtd.
2/5/98 800,000
Michael E. Pulitzer, Trustee of U/A dtd. 3/22/82 F/B/O Michael E. Pulitzer 3,649,820
Richard A. Palmer, Trustee of U/A dtd. 8/16/83 F/B/O Michael E. Pulitzer 46,170
The Ceil and Michael E. Pulitzer Foundation, Inc. 44,983
1. Emily Rauh Pulitzer 6,784,377
2. David E. Moore 4,012,458
3. Michael E. Pulitzer 3,740,973
</TABLE>
1
<PAGE>
EXHIBIT J
AFFILIATE LETTER
, 1998
Hearst-Argyle Television, Inc.
959 Eighth Avenue
New York, New York 10106
Attention: Dean H. Blythe
Dear Sirs:
Reference is made to the Agreement and Plan of Merger, dated as of May 25,
1998 (the "Merger Agreement"), by and among Pulitzer Publishing Company, a
Delaware corporation ("Pulitzer"), Pulitzer Inc., a Delaware corporation, and
Hearst-Argyle Television, Inc., a Delaware corporation ("Acquiror").
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings ascribed thereto in the Merger Agreement.
In connection with the transactions contemplated by the Merger Agreement,
the undersigned will receive shares of Series A Common Stock, par value $.01
per share ("Acquiror Common Stock"), of Acquiror. The undersigned acknowledges
that the undersigned may be deemed an "affiliate" of Pulitzer within the
meaning of Rule 145 ("Rule 145") promulgated under the Securities Act of 1933,
as amended (the "Act"), by the Securities and Exchange Commission (the "SEC"),
although nothing contained herein should be construed as an admission of such
fact.
If in fact the undersigned is an affiliate under the Act, the undersigned's
ability to sell, assign or transfer the Acquiror Common Stock received by the
undersigned in connection with the Merger may be restricted unless such
transaction is registered under the Act or an exemption from such registration
is available. The undersigned understands that such exemptions are limited and
the undersigned has obtained advice of counsel as to the nature and conditions
of such exemptions, including information with respect to the applicability to
the sale of such securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with Acquiror that the
undersigned will not sell, assign or transfer any of the Acquiror Common Stock
received by the undersigned in connection with the Merger, except (i) pursuant
to an effective registration statement under the Act or (ii) in a transaction
which, in the reasonable opinion of Acquiror's counsel, is not required to be
registered under the Act and is pursuant to procedures permitted under Rule
145.
In the event of a sale or other disposition by the undersigned of Acquiror
Common Stock pursuant to Rule 145, the undersigned will supply Acquiror with
evidence of compliance with such Rule, in the form of a broker's letter in
customary form or other evidence reasonably satisfactory to Acquiror and its
counsel. The undersigned understands that Acquiror may instruct its transfer
agent to withhold the transfer of any Acquiror Common Stock disposed of by the
undersigned, but that, provided such transfer is not prohibited by any other
provision of this letter agreement, upon receipt of such evidence of
compliance, the transfer agent shall effectuate the transfer of the Acquiror
Common Stock sold as indicated in such evidence.
The undersigned acknowledges and agrees that the legend set forth below will
be placed on certificates representing Acquiror Common Stock received by the
undersigned in connection with the Merger or held by a transferee thereof,
which legend will be removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to
Acquiror from its counsel to the effect that such legend is no longer required
for purposes of the Act or the applicable provisions of this letter agreement.
<PAGE>
There will be placed on the certificates for the Acquiror Common Stock
issued to the undersigned, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate were issued in a transaction
to which Rule 145 promulgated under the Securities Act of 1933 applies. The
shares have been acquired by the holder not with a view to, or for resale
in connection with, any distribution thereof within the meaning of the
Securities Act of 1933 and may not be sold, pledged or otherwise
transferred except in accordance with an exemption from the registration
requirement of the Securities Act of 1933."
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Acquiror
Common Stock and (ii) the receipt by Acquiror of this letter is an inducement
and a condition to Acquiror's obligations to consummate the Merger.
Very truly yours,
_____________________________________
(Signature)
_____________________________________
(Print Name)
<PAGE>
ANNEX II
FORM OF AMENDMENT TO HEARST-ARGYLE'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
The initial paragraph of ARTICLE FOUR of the Amended and Restated
Certificate of Incorporation of Hearst-Argyle Television, Inc. (the
"Certificate of Incorporation") shall be deleted in its entirety and the
following new initial paragraph shall be substituted in lieu thereof:
"The aggregate number of shares of stock that the Corporation shall have
authority to issue is 301 million. Three hundred million of such shares
shall be of the par value of $.01 per share, shall be of the same class and
shall be designated as "Common Stock," and one million of such shares shall
be of the par value of $.01 per share, shall be of the same class and shall
be designated as "Preferred Stock."
Section 1. A. 1. of ARTICLE FOUR of the Certificate of Incorporation shall
also be deleted in its entirety and the following new Section 1. A. 1. shall
be substituted in lieu thereof:
"1. Of the 300 million authorized shares of Common Stock, 200 million
shares shall be designated as Series A Common Stock (the "Series A Common
Stock") and 100 million shares shall be designated as Series B Common Stock
(the "Series B Common Stock")."
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<PAGE>
ANNEX III
FORM OF AMENDMENT OF PULITZER'S RESTATED CERTIFICATE OF INCORPORATION
Section (2)B of Article III of the Restated Certificate of Incorporation of
Pulitzer Publishing Company shall be deleted in its entirety and substituting
in lieu thereof the following new Section (2)B:
B. Dividends and Distributions. Except as otherwise expressly provided in
the last sentence of this Section (2)B, at any time shares of Class B
Common Stock are outstanding, as and when dividends or other distributions
payable in either cash, capital stock of the Corporation (other than Common
Stock or Class B Common Stock) or other property of the Corporation may be
declared by the Board of Directors, the amount of any such dividend or
other distribution payable on each share of Common Stock shall in all cases
be equal to the amount of such dividend or other distribution payable on
each share of Class B Common Stock, and the amount of any such dividend or
other distribution payable on each share of Class B Common Stock shall in
all cases be equal to the amount of the dividend or other distribution
payable on each share of Common Stock. Dividends or other distributions
payable in shares of Class B Common Stock may not be made on or to shares
of any class of the Corporation's capital stock other than the Class B
Common Stock and dividends payable in shares of Common Stock may not be
made on or to shares of any class of the Corporation's capital stock other
than the Common Stock. If a dividend or other distribution payable in
shares of Common Stock shall be made on the shares of Common Stock, a
dividend or other distribution payable in shares of Class B Common Stock
shall be made simultaneously on the shares of Class B Common Stock, and the
number of shares of Class B Common Stock payable on each share of Class B
Common Stock pursuant to such dividend or other distribution shall be equal
to the number of shares of Common Stock payable on each share of Common
Stock pursuant to such dividend or distribution. Notwithstanding the
foregoing provisions of this Section (2)B, in the case of any dividend or
other distribution payable in stock of Pulitzer Inc., a Delaware
corporation and wholly-owned subsidiary of the Corporation, (i) only shares
of Class B Common Stock of Pulitzer Inc. shall be distributed with respect
to shares of Class B Common Stock and only shares of Common Stock of
Pulitzer Inc. shall be distributed with respect to shares of Common Stock;
(ii) the number of shares of Class B Common Stock of Pulitzer Inc. payable
on each share of Class B Common Stock pursuant to such dividend or other
distribution shall be equal to the number of shares of Common Stock of
Pulitzer Inc. payable on each share of Common Stock pursuant to such
dividend or other distribution; and (iii) such dividends or other
distributions of shares of Common Stock of Pulitzer Inc. and Class B Common
Stock of Pulitzer Inc. shall be made simultaneously.
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<PAGE>
ANNEX IV
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
PERSONAL AND CONFIDENTIAL
- ----------------------------
February 11, 1999
Board of Directors
Pulitzer Publishing Company
900 North Tucker Boulevard
St. Louis, Missouri 63101
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $.01
per share and Class B Common Stock, par value $.01 per share (together, the
"Shares"), of Pulitzer Publishing Company (the "Company") of the consideration
to be received by the holders of Shares in the Merger and the Distribution
(each as defined below) taken as a whole. We understand that pursuant to the
Amended and Restated Agreement and Plan of Merger (the "Merger Agreement" and
together with the anciliary agreements thereto, the "Agreement"), dated as of
May 25, 1998 by and among Hearst-Argyle Television, Inc. ("Hearst-Argyle"),
Pulitzer Inc., a Delaware corporation and wholly owned subsidiary of the
Company ("Newco"), and the Company, at the Effective Time (as defined in the
Merger Agreement) the Company will be merged with and into Hearst-Argyle (the
"Merger"). Prior to the effectiveness of the Merger, pursuant to a
Contribution Agreement (the "Contribution Agreement"), to be entered into
among the Company and Newco, the Company will contribute to Newco certain
assets of the Company (other than those assets described in the Contribution
Agreement as being retained by the Company) and Newco will assume certain
liabilities of the Company (other than those liabilities described in the
Contribution Agreement as being retained by the Company); Newco's Common Stock
will then be distributed (the "Distribution") pro rata to holders of Shares.
In the Merger, each issued and outstanding Share will be cancelled and
converted into that number of shares of Series A Common Stock, par value $.01
per share of Hearst-Argyle ("Hearst-Argyle Common Stock") determined by
dividing (1) the quotient obtained by dividing $1,150,000,000 by $31.00 by (2)
the number of Shares outstanding immediately prior to the Effective Time.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company having acted as its financial
advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. In addition, we intend to serve as
managing underwriter of an offering of the Shares by certain shareholders of
the Company prior to the effectiveness of the Merger.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Contribution Agreement; Annual Reports to Stockholders and
Annual Reports on Form 10-K of the Company for the five years ended December
31, 1997, of Argyle Television, Inc., a predecessor of Hearst-Argyle, for the
two years ended December 31, 1996 and of Hearst-Argyle for the year ended
December 31, 1997; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company and Hearst-Argyle; certain other
communications from the Company and Hearst-Argyle to their respective
stockholders; and certain internal financial estimates, analyses and forecasts
for the Company and Hearst-Argyle prepared by their respective managements. We
also have held discussions with members of the senior management of the
Company and Hearst-Argyle regarding the strategic rationale for, and the
potential benefits of, the transactions contemplated by the Agreement and the
past and current business operations, financial condition and future prospects
of their respective companies. In addition, we have reviewed the reported
price and trading activity for the Shares and Hearst-Argyle Common Stock,
compared certain financial and stock market information for the Company and
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<PAGE>
Hearst-Argyle with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the television broadcasting industry
specifically and performed such other studies and analyses as we considered
appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard we have
assumed, with your consent, that the financial forecasts provided by the
respective managements of the Company and Hearst-Argyle have been reasonably
prepared on a basis reflecting the best currently available judgments and
estimates of the managements of the Company and Hearst-Argyle. In addition, we
have not made an independent evaluation or appraisal of the assets and
liabilities of the Company or Hearst-Argyle or any of their subsidiaries and
we have not been furnished with any such evaluation or appraisal. With your
consent, we have assumed that obtaining any necessary regulatory and third-
party consents and approvals will not have an adverse effect on the Company or
Hearst-Argyle, as applicable. We further assume, with your consent, that the
Merger will be tax-free to the Company and that the receipt of shares of
Hearst-Argyle Common Stock and Newco Common Stock by the holders of Shares
will be tax-free to such holders. We have further assumed, with your consent,
that the level of income tax incurred by the Company as a result of the
Distribution will be consistent with levels described to us. We have not been
asked to solicit, and accordingly, we have not solicited third parties with
respect to potential alternative structures, including the sale of the entire
Company. We are not expressing any opinion herein as to the prices at which
Newco Common Stock or Hearst-Argyle Common Stock may trade if and when they
are issued. Our advisory services and the opinion expressed herein are
provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated
by the Agreement and such opinion does not constitute a recommendation as to
how any holder of Shares should vote with respect to such transactions.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
consideration to be received by the holders of Shares in the Merger and the
Distribution, taken as a whole, is fair from a financial point of view to such
holders.
Very truly yours,
Goldman, Sachs & Co.
- ----------------
(Goldman, Sachs & Co.)
IV-2
<PAGE>
ANNEX V
CREDIT FIRST CREDIT SUISSE FIRST BOSTON CORPORATION
SUISSE BOSTON
Eleven Madison Avenue Telephone 212 325 2000
New York, NY 10010-3629
January 15, 1999
Board of Directors
Hearst-Argyle Television, Inc
959 Eighth Avenue
New York, NY 10019
Members of the Board:
You have asked us to advise you with respect to the fairness to Hearst-
Argyle Television, Inc. ("Hearst-Argyle") from a financial point of view
of the consideration to be paid by Hearst-Argyle pursuant to the proposed
terms of the amendment to the Agreement and Plan of Merger, dated as of
May 25, 1998 (the "Merger Agreement"), among Hearst-Argyle, Pulitzer
Publishing Company ("PPC") and Pulitzer, Inc. ("Pulitzer, Inc.").
Representatives of Hearst-Argyle have advised us that the Merger
Agreement, as amended, will provide for, among other things, the merger
of PPC with and into Hearst-Argyle (the "Merger") pursuant to which all
outstanding shares of the Common Stock, par value $0.01 per share, and
Class B Common Stock, par value $0.01 per share, of PPC (other than
certain shares to be canceled pursuant to the Merger Agreement and shares
held by stockholders who exercise their dissenter's rights), will be
converted into the right to receive 37,096,774 shares of Series A Common
Stock, par value $0.01 per share, of Hearst-Argyle ("Hearst- Argyle
Series A Common Stock"), as more fully described in the Merger Agreement,
as amended.
In arriving at our opinion, we have reviewed the Merger Agreement and the
proposed terms of the amendment to the Merger Agreement as described to
us by representatives of Hearst-Argyle, and certain publicly available
business and financial information relating to PPC and Hearst-Argyle. We
have also reviewed certain other information relating to PPC and Hearst-
Argyle, including financial forecasts, provided to or discussed with us
by PPC and Hearst-Argyle and have met with PPC's and Hearst-Argyle's
managements to discuss the businesses and prospects of PPC and Hearst-
Argyle.
We have also considered certain financial and stock market data of PPC
and Hearst-Argyle, and we have compared certain financial and stock
market data for PPC with certain financial and stock market data for
other publicly held companies in businesses similar to PPC and Hearst-
Argyle, and we have considered, to the extent publicly available, the
financial terms of certain other business combinations and other
transactions which have recently been effected. We also considered such
other information, financial studies, analyses and investigations and
financial, economic and market criteria which we deemed relevant. In
connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have
relied on its being complete and accurate in all material respects. With
respect to the financial forecasts, we have assumed that such forecasts
have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of PPC's and Hearst-Argyle's
managements as to the future financial performance of PPC and Hearst-
Argyle, and the cost savings and other potential synergies (including the
amount, timing, and achievability thereof) anticipated to result from the
Merger. In addition, we have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of PPC or Hearst-Argyle, nor have we been
furnished with any such evaluations or appraisals. We have assumed, with
your consent, that
<PAGE>
CREDIT FIRST CREDIT SUISSE FIRST BOSTON CORPORATION
SUISSE BOSTON
Board of Directors
Hearst-Argyle Television, Inc.
January 15, 1999
Page 2
the final terms of the amendment to the Merger Agreement will not vary
materially from the terms described to us by representatives of Hearst-
Argyle. Our opinion is necessarily based upon information available to
us, and financial, economic, market and other conditions as they exist
and can be evaluated, on the date hereof. We are not expressing any
opinion as to what the value of the Hearst-Argyle Series A Common Stock
actually will be when issued to PPC's shareholders pursuant to the Merger
or the prices at which the Hearst-Argyle Series A Common Stock will trade
subsequent to the Merger.
We have acted as financial advisor to Hearst-Argyle in connection with
the Merger and will receive a fee for our services, which fee is
contingent upon the consummation of the Merger. In the past, we have
provided certain financial services to Hearst-Argyle unrelated to the
proposed Merger, for which services we have received compensation.
In the ordinary course of our business, Credit Suisse First Boston and
its affiliates may actively trade the debt and equity securities of both
Hearst-Argyle and PPC for their own accounts and for the accounts of
customers and, accordingly, may at any time hold a long or short position
in such securities.
It is understood that this letter is for the information of the Board of
Directors of Hearst-Argyle in connection with its evaluation of the
Merger, does not constitute a recommendation to any stockholder as to how
such stockholder should vote on any matter relating to the proposed
Merger and is not to be quoted or referred to, in whole or in part, in
any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities
nor shall this letter be used for any other purposes, without our prior
written consent.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the consideration to be paid by Hearst-Argyle in the
Merger is fair to Hearst-Argyle from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
<PAGE>
ANNEX VI
262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholders' shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which
stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251 (other than a merger effected pursuant to
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263, or (S)264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) at the effective date of the merger or consolidation
will be either listed on a national securities exchange or designated
as a national market system security on an interdealer quotation system
by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all
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or substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 or this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall also notify such stockholders of
the effective date of the merger or consolidation. Any stockholder entitled
to appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts state therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not be not
more than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise
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entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the effective
date of the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitle
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder of the stockholder entitled to an appraisal. Any stockholder whose
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under
this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of
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Chancery may be enforced, whether such surviving or resulting corporation be a
corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded such stockholder's appraisal rights as provided
in subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at
a date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of such stockholder's demand for an appraisal and an acceptance of the merger
or consolidation, either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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ANNEX VII
RESTATED CERTIFICATE OF INCORPORATION OF PULITZER INC.
* * * *
PULITZER INC., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "GCL")
DOES HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is Pulitzer Inc. and the date of
filing of its original Certificate of Incorporation with the Secretary of
State of the State of Delaware (the "Secretary of State") was May 22, 1998.
SECOND: The Board of Directors of the Corporation, by unanimous written
consent pursuant to Section 141(f) of the GCL, adopted resolutions
proposing and declaring advisable that the Certificate of Incorporation of
the Corporation be restated and amended and directing submission of the
following resolution to the sole stockholder of the Corporation for its
consideration thereof.
RESOLVED, that the text of the Certificate of Incorporation be restated and
amended as follows:
"ARTICLE I
NAME
The name of the corporation is Pulitzer Inc. (hereinafter referred to as the
"Corporation").
ARTICLE II
AGENT FOR SERVICE
The name and address of the Corporation's agent for service of process in
Delaware is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware
County of New Castle
ARTICLE III
CAPITAL
(1) Classes and Number of Shares.
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 300,000,000 shares. The classes and the
aggregate number of shares of stock of each class which the Corporation shall
have authority to issue are as follows:
A. 100,000,000 shares of Common Stock, $0.01 par value ("Common Stock").
B. 100,000,000 shares of Class B Common Stock, $0.01 par value ("Class B
Common Stock").
C. 100,000,000 shares of Preferred Stock, $0.01 par value ("Preferred
Stock").
(2) Powers and Rights of the Common Stock and the Class B Common Stock.
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A. Voting Rights and Powers. Except as otherwise provided in this Restated
Certificate of Incorporation or required by law, with respect to all matters
upon which stockholders are entitled to vote, the holders of the outstanding
shares of Common Stock and the holders of any outstanding shares of Class B
Common Stock shall vote together with the holders of any other outstanding
shares of voting capital stock of the Corporation, without regard to class,
and every holder of outstanding shares of Common Stock shall be entitled to
cast thereon one vote in person or by proxy for each share of Common Stock
standing in his name, and every holder of the outstanding shares of Class B
Common Stock shall be entitled to cast thereon ten votes in person or by proxy
for each share of Class B Common Stock standing in his name. The holders of
shares of Common Stock shall have the relevant class voting rights set forth
in Article XIV.
B. Dividends and Distributions.
(i) Except as otherwise expressly provided in clause (ii) of this Section
(2)B, at any time shares of Class B Common Stock are outstanding, as and when
dividends or other distributions payable in either cash, capital stock of the
Corporation (other than Common Stock or Class B Common Stock) or other
property of the Corporation may be declared by the Board of Directors, the
amount of any such dividend payable on each share of Common Stock shall in all
cases be equal to the amount of such dividend payable on each share of Class B
Common Stock, and the amount of any such dividend payable on each share of
Class B Common Stock shall in all cases be equal to the amount of the dividend
payable on each share of Common Stock. Dividends and distributions payable in
shares of Class B Common Stock may not be made on or to shares of any class of
the Corporation's capital stock other than the Class B Common Stock, and
dividends payable in shares of Common Stock may not be made on or to shares of
any class of the Corporation's capital stock other than the Common Stock. If a
dividend or distribution payable in shares of Common Stock shall be made on
the shares of Common Stock, a dividend or distribution payable in shares of
Class B Common Stock shall be made simultaneously on the shares of Class B
Common Stock, and the number of shares of Class B Common Stock payable on each
share of Class B Common Stock pursuant to such dividend or distribution shall
be equal to the number of shares of Common Stock payable on each share of
Common Stock pursuant to such dividend or distribution.
(ii) In the case of any dividend or other distribution payable in stock of
any corporation which immediately prior to the time of such dividend or other
distribution is a wholly-owned subsidiary of the Corporation and which
possesses authority to issue shares of capital stock with voting
characteristics substantially similar to those of the shares of Common Stock
and Class B Common Stock, respectively, provided in this Restated Certificate
of Incorporation (an "Article III(2)B Subsidiary"), including a distribution
pursuant to a stock dividend or division or split-up of the shares of the
Corporation, (X) only shares of capital stock of an Article III(2)B Subsidiary
with voting characteristics substantially similar to those of the Class B
Common Stock ("Article III(2)B Subsidiary Class B Common Stock") shall be
distributed with respect to shares of Class B Common Stock and only shares of
capital stock of an Article III(2)B Subsidiary with voting characteristics
substantially similar to those of the Common Stock ("Article III(2)B
Subsidiary Common Stock") shall be distributed with respect to shares of
Common Stock; (Y) the number of shares of Article III(2)B Subsidiary Class B
Common Stock payable on each share of Class B Common Stock pursuant to such
dividend or other distribution shall be equal to the number of shares of
Article III(2)B Subsidiary Common Stock payable on each share of Common Stock
pursuant to such dividend or other distribution; and (Z) such dividends or
other distributions of shares of Article III(2)B Subsidiary Common Stock and
Article III(2)B Subsidiary Class B Common Stock shall be made simultaneously.
C. Distribution of Assets Upon Liquidation. In the event the Corporation
shall be liquidated, dissolved or wound up, whether voluntarily or
involuntarily, after there shall have been paid or set aside for the holders
of all shares of the Preferred Stock then outstanding the full preferential
amounts to which they are entitled under the resolutions authorizing the
issuance of such Preferred Stock, the net assets of the Corporation remaining
thereafter shall be divided among the holders of the Common Stock and Class B
Common Stock in such a manner that the amount of such net assets distributed
to each share of Common Stock shall be equal to the amount of such net assets
distributed to each share of Class B Common Stock.
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D. Issuance of the Class B Common Stock. Class B Common Stock may only be
issued (i) in accordance with and pursuant to the terms of that certain
Agreement and Plan of Merger among Pulitzer Publishing Company, a Delaware
corporation which immediately prior to the filing of this Restated Certificate
of Incorporation owned all of the issued and outstanding shares of capital
stock of the Corporation ("Pulitzer Publishing"), the Corporation and Hearst-
Argyle Television, Inc. (as amended, the "Merger Agreement") or (ii) in the
form of a distribution or distributions pursuant to a stock dividend or
division or split-up of the shares of Class B Common Stock and only then in
respect of the issued shares of Class B Common Stock.
E. Restrictions on Transfer of Class B Common Stock.
(i) No record holder of shares of Class B Common Stock (each a "Class B
Holder") may transfer, and the Corporation shall not register the transfer of,
any shares of Class B Common Stock, whether by sale, assignment, gift,
bequest, appointment or otherwise, except (X) in accordance with and pursuant
to the terms of the Merger Agreement or (Y) to a Permitted Transferee (each a
"Permitted Transfer"). The term Permitted Transferee has the following
meanings with respect to each Class B Holder:
(a) The following persons shall be "Permitted Transferees" of each Class
B Holder who is a natural person:
1. The spouse or former spouse of such Class B Holder; any Original
Holder (as defined in clause (iii) of this Section (2)E) or the spouse
or former spouse of any Original Holder; any lineal descendant of any
Original Holder or of the spouse or former spouse of any Original
Holder; and any spouse or former spouse of such lineal descendant
(hereinafter such Class B Holder's "Family Members");
2. The trustee or trustees of a voting trust of which a Controlling
Number (as defined in clause (iii) of this Section (2)E) of such
trustees are any of the following (each a "Qualified Person"): (i) such
Class B Holder, (ii) one of such Class B Holder's Family Members, (iii)
an executive officer (as defined in Rule 3b-7 of the General Rules and
Regulations under the Exchange Act, as in effect on December 31, 1998)
of the Corporation or any wholly-owned subsidiary of the Corporation,
(iv) a director of the Corporation, or (v) any person who is the duly
designated initial or subsequent successor of an Original Holder in
accordance with the terms of such voting trust;
3. The trustee or trustees of a trust (other than a voting trust)
solely for the benefit of such Class B Holder or one or more of such
Class B Holder's Permitted Transferees described in each subclause of
this clause (a) other than subclause (2) or this subclause (3);
4. Any organization contributions to which are deductible for federal
income, estate or gift tax purposes or any split interest trust
described in Section 4947 of the Internal Revenue Code as it may from
time to time be amended, and of which a Controlling Number of the
members of the Board of Directors or other governing body or group
having the ultimate authority, inter alia, to vote, dispose or direct
the voting or disposition of the shares of Class B Common Stock held by
such organization ("Governing Body") are Qualified Persons (a
"Charitable Organization");
5. A corporation of which a majority of the outstanding shares of
capital stock entitled to vote generally for the election of directors
is beneficially owned by, or a partnership of which a majority of the
partnership interests entitled to participate in the management of the
partnership are beneficially owned by, or a limited liability company
of which a majority of the membership interests entitled to participate
in the management of the limited liability company are beneficially
owned by, such Class B Holder or his or her Permitted Transferees
described in each subclause of this clause (a) other than this
subclause (5); and
6. If the Class B Holder is deceased, bankrupt or insolvent, the
estate of such Class B Holder.
(b) In the case of one or more Class B Holders holding shares of Class B
Common Stock as trustees pursuant to a voting trust or any other trust
(other than a Charitable Organization or a trust described in clause (d)
below) as a result of a Permitted Transfer, "Permitted Transferee" means,
with respect to each share of Class B Common Stock so transferred to such
trustees, (X) any person who transferred such share
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of Class B Common Stock to such trustees and (Y) any Permitted Transferee
of any such transferor, and, with respect to each Subsequent Class B Share
(as defined in clause (iii) of this Section (2)E) held by such trustees,
any person who is a Permitted Transferee with respect to the share of Class
B Common Stock in respect of which such Subsequent Class B Share was
issued.
(c) In the case of one or more Class B Holders holding shares of Class B
Common Stock as trustees pursuant to a trust (other than a voting trust or
a Charitable Organization) in effect immediately prior to the issuance of
shares of Class B Common Stock in accordance with this Section (2)D,
"Permitted Transferee" means (X) with respect to each share of Class B
Common Stock so held, (i) any person who originally established the trust
and any person who would be a Permitted Transferee thereof, (ii) any
Original Holder or a Permitted Transferee thereof and (iii) any person to
whom or for whose benefit any portion of the principal of the trust may be
distributed either during or at the end of the term of such trust whether
by power of appointment or otherwise and (Y) with respect to each
Subsequent Class B Share so held, any person who is a Permitted Transferee
with respect to the share of Class B Common Stock in respect of which such
Subsequent Class B Share was issued.
(d) In the case of any Charitable Organization that is a Class B Holder,
"Permitted Transferee" means, (X) with respect to any share of Class B
Common Stock transferred to such Charitable Organization in a Permitted
Transfer, the transferor in such Permitted Transfer and any Permitted
Transferee of such transferor and (Y) with respect to each Subsequent Class
B Share held by such Charitable Organization, any person who is a Permitted
Transferee with respect to the share of Class B Common Stock in respect of
which such Subsequent Class B Share was issued.
(e) In the case of a Class B Holder that is a corporation, partnership or
limited liability company (other than a Charitable Organization) holding
shares of Class B Common Stock as a result of a Permitted Transfer,
"Permitted Transferee" means with respect to each share of Class B Common
Stock so transferred to such corporation, partnership or limited liability
company (X) any person who transferred such share of Class B Common Stock
to such corporation, partnership or limited liability company and (Y) any
Permitted Transferee of any such transferor, and, with respect to each
Subsequent Class B Share held by such corporation, partnership or limited
liability company, any person who is a Permitted Transferee with respect to
the share of Class B Common Stock in respect of which such Subsequent Class
B Share was issued.
(f) In the case of a Class B Holder that is the estate of a deceased,
bankrupt or insolvent Class B Holder, "Permitted Transferee" means a
Permitted Transferee of such deceased, bankrupt or insolvent Class B
Holder.
(ii) Notwithstanding anything to the contrary set forth herein, any Class B
Holder may (X) transfer shares of Class B Common Stock to any person who or
which would have been a "Permitted Transferee" of shares of Class B Common
Stock of Pulitzer Publishing in accordance with and pursuant to the terms of
that certain Restated Certificate of Incorporation of Pulitzer Publishing,
dated December 4, 1986, filed with the Secretary of State of Delaware on
December 8, 1986 and in effect on December 31, 1998 and (Y) pledge shares of
Class B Common Stock to a pledgee pursuant to a bona fide pledge of such
shares as collateral security for indebtedness due to the pledgee, provided
that such shares shall not be transferred to or registered in the name of the
pledgee and shall remain subject to the provisions of this Section (2)E. In
the event of foreclosure or other similar action with respect to such shares
by the pledgee, such pledged shares of Class B Common Stock may only be
transferred to a Permitted Transferee of the pledgor or converted into shares
of Common Stock, as the pledgee may elect.
(iii) For purposes of this Section (2)E:
(a) The term "Controlling Number" means the minimum number of trustees,
in the case of a trust, or members of a Governing Body, in the case of any
other form of entity, whose affirmative vote is necessary to take any
action on, or whose negative vote, abstention or failure to attend is
sufficient to prevent any action with respect to the voting or disposition
of shares of capital stock held by such entity;
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(b) The term "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(c) The term "Original Holder" means any person to whom or to which
Pulitzer Publishing distributed and transferred shares of Class B Common
Stock of the Corporation in accordance with and pursuant to the terms of
the Merger Agreement.
(d) The term "Subsequent Class B Share" means any share of Class B Common
Stock issued by the Corporation to a Class B Holder in respect of an
existing share of Class B Common Stock held by such Class B Holder.
(e) The relationship of any person that is derived by or through legal
adoption shall be considered a natural one.
(f) A minor for whom shares of Class B Common Stock are held pursuant to
the Uniform Gifts to Minors Act, as in effect in any state, or any similar
law, shall be considered a Class B Holder.
(g) Unless otherwise specified, the term "person" means both natural
persons and legal entities.
(h) Without derogating from the election conferred upon the Corporation
pursuant to paragraph (iv) below, each reference to a corporation shall
include any successor corporation resulting from merger or consolidation;
each reference to a partnership shall include any successor partnership
resulting from the death or withdrawal of a partner; and each reference to
a limited liability company shall include any successor legal entity
resulting from merger or consolidation.
(i) The term "beneficial owner" has the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as
in effect on December 31, 1998.
(j) All references to "spouse or former spouse" shall include a deceased
spouse.
(iv) If at any time after the effective date of this Restated Certificate of
Incorporation, any of the following events shall occur:
(a) A Controlling Number of the trustees of any voting trust that is a
Class B Holder shall cease to be Qualified Persons;
(b) A Controlling Number of the Governing Body of any Charitable
Organization that is a Class B Holder shall cease to be Qualified Persons;
or
(c) A corporation, partnership or limited liability company that first
became a Class B Holder as a result of a Permitted Transfer shall
thereafter by reason of any transfer of the beneficial ownership of the
capital stock, partnership interests or membership interests thereof cease
to be a Permitted Transferee of the transferor in such Permitted Transfer;
then, at any time after the occurrence of any such event, upon the election of
the Corporation given by written notice to the trustees of such voting trust,
Charitable Organization, corporation, partnership or limited liability
company, as the case may be, without further action on anyone's part, each
share of Class B Common Stock held by such entity shall be converted into one
share of Common Stock, effective upon the giving of such notice, and the stock
certificates formerly representing the shares of Class B Common Stock held by
such entity shall thereupon and thereafter be deemed to represent such shares
of Common Stock.
(v) Anything contained in this Section (2)E to the contrary notwithstanding:
(a) Shares of Class B Common Stock may be registered in the names of more
than one person only if each person in whose name the shares of Class B
Common Stock are to be registered is a Permitted Transferee of each such
other person. If shares of Class B Common Stock are registered in the names
of more than one person in accordance with this subclause (a), then any
subsequent transfer of such shares of Class B Common Stock to any Permitted
Transferee of any person in whose name such shares are registered shall be
a Permitted Transfer.
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(b) Any transfer of shares of Class B Common Stock to the Corporation or
any wholly-owned subsidiary of the Corporation, to an employee benefit plan
established and maintained by the Corporation or any wholly-owned
subsidiary of the Corporation or to any trustee or fiduciary with respect
to any such plan in such capacity shall be a Permitted Transfer, and the
Corporation or any wholly-owned subsidiary of the Corporation and any such
plan, trustee or fiduciary shall be a Permitted Transferee of any Class B
Holder.
(vi) Any purported transfer of record or beneficial ownership of shares of
Class B Common Stock other than in accordance with the terms of this Section
(2)E shall, without any action on anyone's part, result in the conversion of
each share of the purportedly transferred share of Class B Common Stock into
one share of Common Stock effective on the date of such purported transfer,
and the stock certificates formerly representing such shares of Class B Common
Stock shall thereupon and thereafter be deemed to represent such number of
shares of Common Stock.
(vii) Shares of Class B Common Stock shall be issued to or registered in the
names of the beneficial owners thereof and not in "street" or "nominee" name.
The Corporation may, in connection with preparing a list of stockholders
entitled to vote at any meeting of stockholders, or as a condition to the
transfer or the registration of shares of Class B Common Stock on the
Corporation's books, require the furnishing of such affidavits or other proof
as it deems necessary to establish that the registered owner of such shares is
in fact the beneficial owner of such shares. Notwithstanding the foregoing,
shares of Class B Common Stock may be issued to or registered in the name(s)
of the trustee(s) of any trust who or which is a Permitted Transferee.
(viii) The Corporation shall note on the certificates for shares of Class B
Common Stock that the shares represented by such certificates are subject to
the restrictions on transfer and registration of transfer imposed by this
Section (2)E.
F. Conversion of the Class B Common Stock. Each share of the Class B Common
Stock may at any time be converted at the election of the holder thereof into
one share of the Common Stock. Any holder of shares of Class B Common Stock
may elect to convert any or all of such shares at one time or at various times
in such holder's discretion. Such right shall be exercised by the surrender of
the certificate representing each share of Class B Common Stock to be
converted to the Corporation at its principal executive offices, accompanied
by a written notice of the election by the holder thereof to convert and (if
so required by the Corporation) by instruments of transfer, in form
satisfactory to the Corporation, duly executed by such holder or his duly
authorized attorney. The issuance of a certificate or certificates for shares
of the Common Stock upon conversion of shares of Class B Common Stock shall be
made without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate or certificates for shares of
Common Stock is or are to be issued in a name other than that of the holder of
the shares of Class B Common Stock to be converted, the person or persons
requesting the issuance thereof shall pay to the Corporation the amount of any
tax which may be payable in respect of any such transfer, or shall establish
to the satisfaction of the Corporation that such tax has been paid. As
promptly as practicable after the surrender for conversion of a certificate or
certificates representing shares of Class B Common Stock and the payment of
any tax as hereinabove provided, the Corporation will deliver to, or upon the
written order of, the holder of such certificate or certificates, a
certificate or certificates representing the number of shares of Common Stock
issuable upon such conversion, issued in such name or names as such holder may
direct. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of the surrender of the certificate or
certificates representing shares of Class B Common Stock (or, if on such date
the transfer books of the Corporation shall be closed, then immediately prior
to the close of business on the first date thereafter that said books shall be
open), and all rights of such holder arising from ownership of shares of Class
B Common Stock shall cease at such time, and the person or persons in whose
name or names the certificate or certificates representing shares of Common
Stock are to be issued shall be treated for all purposes as having become the
record holder or holders of such shares of Common Stock at such time and shall
have and may exercise all the rights and powers appertaining thereto. No
adjustments in respect of past cash dividends shall be made upon the
conversion of any share of Class B Common Stock;
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provided, that, if any shares of Class B Common Stock shall be converted into
shares of Common Stock subsequent to the record date for the payment of a
dividend or other distribution on shares of Class B Common Stock but prior to
such payment, the registered holder of such shares of Class B Common Stock at
the close of business on such record date shall be entitled to receive on the
payment date, with respect to the shares of Common Stock received upon such
conversion, the dividend or other distribution which would have been payable
had such shares of Common Stock been outstanding and held of record on such
dividend record date by the registered holder on such dividend record date of
the shares of Class B Common Stock so converted in lieu of the dividend
otherwise payable on the shares of Class B Common Stock so converted. The
Corporation shall at all times reserve and keep available, solely for the
purpose of issuance upon conversion of outstanding shares of Class B Common
Stock, such number of shares of Common Stock as may be issuable upon the
conversion of all such outstanding shares of Class B Common Stock; provided,
that, the Corporation may deliver shares of Common Stock which are held in the
treasury of the Corporation for shares of Class B Common Stock to be
converted. If any share of Common Stock requires registration with or approval
of any governmental authority under any federal or state law before such share
of Common Stock may be issued upon conversion, the Corporation will endeavor
to cause such share to be duly registered or approved, as the case may be. The
Corporation will endeavor to list shares of Common Stock required to be
delivered upon conversion prior to such delivery upon any national securities
exchange or national market system on which the outstanding shares of Common
Stock may be listed at the time of such delivery. All shares of Common Stock
which may be issued upon conversion of shares of Class B Common Stock will,
upon issuance, be fully paid and nonassessable. The aggregate amount of stated
capital represented by shares of Common Stock issued upon conversion of shares
of Class B Common Stock shall be the same as the aggregate amount of stated
capital represented by the shares of Class B Common Stock so converted.
G. Mandatory Conversion of Class B Common Stock. At any time when the
aggregate voting power of all outstanding shares of Class B Common Stock as
reflected on the stock transfer books of the Corporation falls below 20% of
the aggregate voting power of all outstanding shares of Common Stock and Class
B Common Stock of the Corporation, or when the Board of Directors and the
holders of a majority of the outstanding shares of Class B Common Stock
approve the conversion of all of the shares of Class B Common Stock into
Common Stock, then, immediately upon the occurrence of either such event,
without any action on anyone's part, the outstanding shares of Class B Common
Stock shall be converted into shares of Common Stock in accordance with
Section (2)F above. In the event of such a conversion, certificates formerly
representing outstanding shares of Class B Common Stock shall thereupon and
thereafter be deemed to represent the number of shares of Common Stock into
which such shares of Class B Common Stock are convertible.
H. Other Rights. Except as otherwise required by the General Corporation Law
of the State of Delaware or as otherwise provided in this Restated Certificate
of Incorporation, each share of Common Stock and each share of Class B Common
Stock shall have identical powers, preferences and rights.
(3) Powers and Rights of the Preferred Stock.
The Preferred Stock may be issued from time to time in one or more series,
with such distinctive serial designations as may be stated or expressed in the
resolution or resolutions providing for the issue of such stock adopted from
time to time by the Board of Directors; and in such resolution or resolutions
providing for the issuance of shares of each particular series, the Board of
Directors is also expressly authorized to fix: the right to vote, if any; the
consideration for which the shares of such series are to be issued; the number
of shares constituting such series, which number may be increased (except as
otherwise fixed by the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time by action of the
Board of Directors; the rate of dividends upon which and the times at which
dividends on shares of such series shall be payable and the preference, if
any, which such dividends shall have relative to dividends on shares of any
other class or classes or any other series of stock of the Corporation;
whether such dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which dividends on shares of such series
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shall be cumulative; the rights, if any, which the holders of shares of such
series shall have in the event of any voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets, dissolution or winding
up of the affairs of the Corporation; the rights, if any, which the holders of
shares of such series shall have to convert such shares into or exchange such
shares for shares of any other class or classes or any other series of stock
of the Corporation (other than shares of Class B Common Stock) and the terms
and conditions, including price and rate of exchange, of such conversion or
exchange; whether shares of such series shall be subject to redemption, and
the redemption price or prices and other terms of redemption, if any, for
shares of such series including, without limitation, a redemption price or
prices payable in shares of Common Stock; the terms and amounts of any sinking
fund for the purchase or redemption of shares of such series; and any and all
other powers, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof
pertaining to shares of such series permitted by law. The holders of shares of
Preferred Stock shall have the relevant class voting rights set forth in
Article XIV.
(4) Issuance of the Common Stock and the Preferred Stock.
The Board of Directors of the Corporation may from time to time authorize by
resolution the issuance of any or all shares of the Common Stock and the
Preferred Stock herein authorized in accordance with the terms and conditions
set forth in this Restated Certificate of Incorporation for such purposes, in
such amounts, to such persons, corporations, or entities, for such
consideration, and in the case of the Preferred Stock, in one or more series,
all as the Board of Directors in its discretion may determine and without any
vote or other action by the stockholders, except as otherwise required by law.
ARTICLE IV
NAME AND ADDRESS OF INCORPORATOR
The name and mailing address of the sole incorporator is as follows:
Richard A. Palmer, Esq.
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
ARTICLE V
DIRECTORS
(l) Power of the Board of Directors. The property and business of the
Corporation shall be controlled and managed by or under the direction of its
Board of Directors. In furtherance, and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized:
(a) To make, alter, amend or repeal the By-Laws of the Corporation, but
only in accordance with the provisions of Article XIII; provided, that no
By-Laws hereafter adopted shall invalidate any prior act of the directors
that would have been valid if such By-Laws had not been adopted;
(b) To determine the rights, powers, duties, rules and procedures that
affect the power of the Board of Directors to manage and direct the
property, business and affairs of the Corporation, including the power to
designate and empower committees of the Board of Directors, to elect,
appoint and empower the officers and other agents of the Corporation, and
to determine the time and place of, and the notice requirements for Board
meetings, as well as the manner of taking Board action; and
(c) To exercise all such powers and do all such acts as may be exercised
by the Corporation, subject to the provisions of the laws of the State of
Delaware, this Restated Certificate of Incorporation, and the By-Laws of
the Corporation.
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(2) Number and Qualifications of Directors; Classified Board of
Directors. The number of directors constituting the entire Board of Directors
shall be fixed at a number not less than six by, or in the manner provided in,
the By-Laws. The Board of Directors shall be divided into three classes, as
nearly equal in number as possible, with the mode of such classification to be
set forth in the By-Laws. Except as otherwise provided in the By-Laws with
respect to the implementation of this Article V, directors shall be elected to
hold office for a term of three years, with the term of office of one class of
directors expiring each year. As used in this Restated Certificate of
Incorporation, the term "entire Board of Directors" means the total number of
directors fixed by, or in the manner provided in, the By-Laws.
(3) Nominations. Subject to the rights of holders of any series of Preferred
Stock or any other class of capital stock of the Corporation (other than the
Common Stock and the Class B Common Stock) then outstanding, nominations for
the election of directors may be made by the affirmative vote of a majority of
the entire Board of Directors or by any stockholder of record entitled to vote
generally in the election of directors. However, any stockholder of record
entitled to vote generally in the election of directors desiring to nominate
one or more persons for election as directors at any meeting of stockholders
may do so only if written notice of such stockholder's intent to make such
nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Corporation not
less than 50 days nor more than 75 days prior to the meeting; provided,
however, that in the event that less than 60 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close
of business on the tenth day following the day on which such notice of the
date of meeting was mailed or such public disclosure was made, whichever first
occurs. Each such notice to the Secretary shall set forth: (i) the name and
address of record of the stockholder who intends to make the nomination; (ii)
a representation that the stockholder is a holder of record of shares of
capital stock of the Corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (iii) the name, age, business and residence
addresses, and principal occupation or employment of each nominee; (iv) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (v) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission;
and (vi) the consent of each nominee to serve as a director of the Corporation
if so elected. The Corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as a director of
the Corporation. The presiding officer of the meeting may, if the facts
warrant, determine that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(4) Vacancies. Subject to the rights of the holders of any series of
Preferred Stock or any other class of capital stock of the Corporation (other
than the Common Stock and the Class B Common Stock) then outstanding, any
vacancies in the Board of Directors for any reason, including by reason of any
increase in the number of directors, shall, if occurring prior to the
expiration of the term of office of the class in which such vacancy occurs, be
filled only by the Board of Directors, acting by the affirmative vote of a
majority of the remaining directors then in office, although less than a
quorum, and any directors so elected shall hold office until the next election
of directors.
(5) Removal of Directors. Subject to the rights of the holders of any series
of Preferred Stock or any other class of capital stock of the Corporation
(other than the Common Stock and the Class B Common Stock) then outstanding,
(i) any director, or the entire Board of Directors, may be removed from office
at any time prior to the expiration of his term of office, with or without
cause, only by the affirmative vote of the holders of record of at least 66
2/3% of the aggregate voting power of all outstanding shares of capital stock
of the Corporation then entitled to vote generally in the election of
directors, voting together as a single class, at a special meeting of
stockholders called expressly for that purpose; and (ii) any director may be
removed from office by the
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affirmative vote of a majority of the entire Board of Directors, at any time
prior to the expiration of his term of office, as provided by law, in the
event a director fails to meet the qualifications stated in the By-Laws for
election as a director or in the event such director is in breach of any
agreement between such director and the Corporation relating to such
director's service as a director or employee of the Corporation.
ARTICLE VI
DURATION
The Corporation shall have perpetual existence.
ARTICLE VII
PURPOSES
The nature of the business or purposes to be conducted or promoted by the
Corporation shall be to engage in any lawful act or activity for which a
corporation may be organized under the General Corporation Law of Delaware.
ARTICLE VIII
STOCKHOLDERS' MEETINGS
Special meetings of stockholders of the Corporation may be called only by
(i) the Board of Directors pursuant to a resolution adopted by the affirmative
vote of a majority of the entire Board of Directors, (ii) the Chairman of the
Board, (iii) the Vice Chairman of the Board, (iv) the President, or (v) by the
holders of record of at least 50.1% of the aggregate voting power of all
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, acting together as a single class.
ARTICLE IX
BUSINESS COMBINATIONS
(1) Certain Definitions. For the purposes of this Article:
A. "Affiliate" or "Associate" have the meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as
in effect on December 31, 1998.
B. "Beneficial Owner" has the meaning ascribed to such term in Rule 13d-3
of the General Rules and Regulations under the Exchange Act, as in effect
on December 31, 1998.
C. "Business Combination" means:
(i) any merger or consolidation of the Corporation or any Subsidiary
with (a) an Interested Stockholder or (b) any other Person (whether or
not itself an Interested Stockholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an Interested
Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or
with, or proposed by or on behalf of, an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder of any assets of
the Corporation or any Subsidiary including, without limitation, any
voting securities of a Subsidiary having an aggregate Fair Market Value
of not less than 1% of the total assets of the Corporation as reported
in the consolidated balance sheet of the Corporation as of the end of
the most recent quarter with respect to which such balance sheet has
been prepared; or
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(iii) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to or with, or proposed by or on
behalf of, an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair Market
Value of not less than 1% of the total assets of the Corporation as
reported in the consolidated balance sheet of the Corporation as of the
end of the most recent quarter with respect to which such balance sheet
has been prepared; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or any spin-off or split-up of any kind
of the Corporation or any Subsidiary, proposed by or on behalf of an
Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder; or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any Subsidiary or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly,
of increasing the percentage of the outstanding shares of (a) any class
of equity securities of the Corporation or any Subsidiary or (b) any
class of securities of the Corporation or any Subsidiary convertible
into equity securities of the Corporation or any Subsidiary,
represented by securities of such class which are directly or
indirectly owned by an Interested Stockholder and all of its Affiliates
and Associates; or
(vi) any other transaction with an Interested Stockholder or its
Affiliates or Associates which requires the approval of the
stockholders under the General Corporation Law of Delaware; or
(vii) any agreement, contract or other arrangement providing for any
one or more of the actions specified in clauses (i) through (vi) of
this Section (1)C.
D. "Fair Market Value" means: (i) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered
under the Exchange Act on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing sale price, or if
closing sale prices are not reported, the closing bid quotation with
respect to a share of such stock during the 30-day period preceding the
date in question on the Nasdaq Stock Market, Inc. or any similar
interdealer quotation system then in use, or, if no such quotation is
available, the fair market value on the date in question of a share of such
stock as determined by a majority of the Board of Directors in good faith;
and (ii) in the case of property other than cash or stock, the fair market
value of such property on the date in question as is determined by a
majority of the Board of Directors in good faith.
E. "Interested Stockholder" means any Person (other than the Corporation
or any Subsidiary, any employee benefit plan maintained by the Corporation
or any Subsidiary or any trustee or fiduciary with respect to any such plan
when acting in such capacity) who or which:
(i) is, or was at any time within the two-year period immediately
prior to the date in question, the Beneficial Owner of 10% or more of
the then outstanding Voting Stock of the Corporation, provided,
however, that any Person who or which, immediately prior to the
effective time of the impending merger between Pulitzer Publishing and
Hearst-Argyle Television, Inc., a Delaware corporation, is the
Beneficial Owner of 10% or more of the outstanding Class B Common Stock
of the Corporation, or the Permitted Transferee of any such Person,
shall not be an Interested Stockholder; or
(ii) is an assignee of, or has otherwise succeeded to, any shares of
Voting Stock of the Corporation of which an Interested Stockholder was
the Beneficial Owner at any time within the two-year period immediately
prior to the date in question, if such assignment or succession shall
have occurred in the course of a transaction, or series of
transactions, not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
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For the purpose of determining whether a Person is an Interested
Stockholder, the outstanding Voting Stock of the Corporation shall include
unissued shares of Voting Stock of the Corporation of which the Interested
Stockholder is the Beneficial Owner but shall not include any other shares
of Voting Stock of the Corporation which may be issuable pursuant to any
agreement, arrangement or understanding, or upon the exercise of conversion
rights, warrants or options, or otherwise, to any Person who is not the
Interested Stockholder.
F. A "Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as
any syndicate or group deemed to be a person under Section 14(d)(2) of the
Exchange Act.
G. "Subsidiary" means any corporation of which the Corporation owns,
directly or indirectly, (i) a majority of the outstanding shares of equity
securities of such corporation, or (ii) shares having a majority of the
aggregate voting power of all outstanding shares of Voting Stock of such
corporation. For the purpose of determining whether a corporation is a
Subsidiary, the outstanding Voting Stock and shares of equity securities
thereof shall include unissued shares of which the Corporation is the
Beneficial Owner but shall not include any other shares of Voting Stock of
such corporation which may be issuable pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
warrants, or options, or otherwise, to any Person other than the
Corporation.
H. "Voting Stock" means outstanding shares of capital stock of the
relevant corporation entitled to vote generally in the election of
directors.
(2) Vote for Business Combinations. In addition to any affirmative vote
required by law or by this Restated Certificate of Incorporation, unless a
Business Combination shall have been approved by the affirmative vote of not
less than a majority of the entire Board of Directors, any Business
Combination shall require the affirmative vote of the holders of record of at
least 66 2/3% of the aggregate voting power of all outstanding shares of the
Voting Stock of the Corporation, voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that no vote may
be required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
(3) Powers of Board of Directors. A majority of the Board of Directors shall
have the power and duty to determine, on the basis of information known to
them after reasonable inquiry, all facts necessary to determine compliance
with this Article, including, without limitation, (A) whether a Person is an
Interested Stockholder, (B) the number of shares of Voting Stock of the
Corporation beneficially owned by any Person, (C) whether a Person is an
Affiliate or Associate of another, and (D) whether the assets which are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregate Fair Market Value of
not less than 1% of the total assets of the Corporation as reported in the
consolidated balance sheet of the Corporation as of the end of the most recent
quarter with respect to which such balance sheet has been prepared; and the
good faith determination of a majority of the Board of Directors on such
matters shall be conclusive and binding for all the purposes of this Article.
(4) Amendment, Repeal. Notwithstanding any other provisions of this Restated
Certificate of Incorporation or By-Laws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, the
other provisions of this Restated Certificate of Incorporation or the By-Laws
of the Corporation), and in addition to any requirement of the General
Corporation Law of Delaware, the affirmative vote of the holders of record of
at least 66 2/3% of the aggregate voting power of all outstanding shares of
Voting Stock of the Corporation held by stockholders other than an Interested
Stockholder or its Affiliates or Associates, voting together as a single
class, shall be required to amend or repeal, or to adopt any provisions
inconsistent with, this Article IX; provided, however, that the preceding
provision shall not be applicable to any amendment or repeal or adoption of
any provision inconsistent with this Article IX, and such amendment or repeal
or adoption of any provision inconsistent with this Article IX shall require
only such affirmative vote as is required by law and any other provisions of
this Restated Certificate of Incorporation, if such amendment or repeal or
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adoption shall have been approved by a majority vote of the members of the
Board of Directors who are not Interested Stockholders or Affiliates or
Associates of Interested Stockholders.
(5) No Effect on Fiduciary Obligations. Nothing contained in this Article
shall be construed to relieve the members of the Board of Directors or an
Interested Stockholder from any fiduciary obligation imposed by law.
ARTICLE X
DELIBERATIONS OF DIRECTORS
The Board of Directors of the Corporation, when evaluating any offer of
another party to make a tender or exchange offer for any equity security of
the Corporation, to merge or consolidate the Corporation with another
corporation or to purchase or otherwise acquire all or substantially all of
the properties and assets of the Corporation, shall, in connection with the
exercise of its judgment in determining what is in the best interests of the
Corporation and its stockholders, give due consideration to the effect of such
a transaction on the editorial and publishing integrity and the character and
quality of the Corporation's newspaper and other operations, all other
relevant factors, including, without limitation, the social, legal and
economic effects on the employees, customers, suppliers and other affected
persons, firms and corporations and on the communities and geographical areas
in which the Corporation and its subsidiaries operate or are located and on
any of the businesses and properties of the Corporation or any of its
subsidiaries, as well as such other factors as the directors deem relevant.
ARTICLE XI
INDEMNIFICATION
(1) Action Not By or on Behalf of Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that the person is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the person's conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(2) Action By or on Behalf of Corporation. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
the Corporation, except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation unless and only to the extent that the Delaware
Court of Chancery or
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the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all of
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Delaware Court of Chancery or such
other court shall deem proper.
(3) Successful Defense. To the extent that a present or former director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section (1) or (2) of
this Article XI, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(4) Determination of Right to Indemnification in Certain Circumstances. Any
indemnification under Section (1) or (2) of this Article XI (unless ordered by
a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because
the person has met the applicable standard of conduct set forth in this
Article. Such determination shall be made, with respect to a person who is a
director or officer at the time of such determination, (A) by a majority vote
of the directors who are not parties to such action, suit or proceeding , even
though less than a quorum, or (B) by a committee of such directors designated
by majority vote of such directors, even though less than a quorum, or (C) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (D) by the stockholders.
(5) Advance Payment of Expenses. Expenses (including attorneys' fees)
incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon such
terms and conditions, if any, as the Corporation deems appropriate.
(6) Not Exclusive. The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article XI shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office. Without limiting the foregoing, the Corporation is
authorized to enter into an agreement with any director, officer, employee or
agent of the Corporation providing indemnification for such person against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement that result from any threatened, pending or completed action, suit,
or proceeding, whether civil, criminal, administrative or investigative,
including any action by or in the right of the Corporation, that arises by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the full extent
allowed by law, except that no such agreement shall provide for
indemnification for any actions that constitute fraud, actual dishonesty or
willful misconduct.
(7) Insurance. The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article XI.
(8) Certain Definitions. For the purposes of this Article XI, (A) any
director, officer, employee or agent of the Corporation who shall serve as a
director, officer, employee or agent of any other corporation, joint venture,
trust or other enterprise of which the Corporation, directly or indirectly, is
or was a stockholder or
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creditor, or in which the Corporation is or was in any way interested, or (B)
any director, officer, employee or agent of any subsidiary corporation, joint
venture, trust or other enterprise wholly-owned by the Corporation, shall be
deemed to be serving as such director, officer, employee or agent at the
request of the Corporation, unless the Board of Directors of the Corporation
shall determine otherwise. In all other instances where any person shall serve
as a director, officer, employee or agent of another corporation, joint
venture, trust or other enterprise of which the Corporation is or was a
stockholder or creditor, or in which it is or was otherwise interested, if it
is not otherwise established that such person is or was serving as such
director, officer, employee or agent at the request of the Corporation, the
Board of Directors of the Corporation may determine whether such service is or
was at the request of the Corporation, and it shall not be necessary to show
any actual or prior request for such service. For purposes of this Article XI,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
XI with respect to the resulting or surviving corporation as such person would
have with respect to such constituent corporation if its separate existence
had continued. For purposes of this Article XI, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article XI.
(9) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article XI shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(10) The Delaware Court of Chancery shall have exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this Article XI or under any By-Law, agreement, vote of
stockholders or disinterested directors, or otherwise. The Delaware Court of
Chancery may summarily determine the Corporation's obligation to advance
expenses (including attorneys' fees).
(11) A director's liability to the Corporation for breach of duty to the
Corporation or its stockholders shall be limited to the fullest extent
permitted by Delaware law as now in effect or hereafter amended. In
particular, no director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (A) for any breach of the
director's duty of loyalty to the Corporation or its stockholders; (B) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law; (C) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended; or (D) for
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Delaware General Corporation Law. Any repeal or
modification of this Article by the stockholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of
such repeal or modification.
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ARTICLE XII
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power; provided, that, notwithstanding the fact that a lesser percentage may
be specified by the General Corporation Law of Delaware, the affirmative vote
of the holders of record of at least 66 2/3% of the aggregate voting power of
all outstanding shares of capital stock of the Corporation then entitled to
vote generally in the election of directors, voting together as a single
class, shall be required to amend, alter, change, repeal, or adopt any
provision or provisions inconsistent with, Section (2), (3) or (4) of Article
III, Articles V, VIII, IX, XI, XIII, XIV or this Article XII of this Restated
Certificate of Incorporation unless such amendment, alteration, repeal or
adoption of any inconsistent provision or provisions is declared advisable by
the Board of Directors by the affirmative vote of a majority of the entire
Board of Directors, in which case the percentage required shall be as
specified by the General Corporation Law of Delaware.
ARTICLE XIII
AMENDMENT OF BY-LAWS
The By-Laws of the Corporation may be amended, altered, changed or repealed,
and a provision or provisions inconsistent with the provisions of the By-Laws
as they exist from time to time may be adopted, only by the majority of the
entire Board of Directors or by the affirmative vote of the holders of record
of at least 66 2/3% of the aggregate voting power of all outstanding shares of
capital stock of the Corporation then entitled to vote generally in the
election of directors, voting together as a single class, notwithstanding the
fact that a lesser percentage may be specified by the General Corporation Law
of Delaware.
ARTICLE XIV
VOTING RIGHTS
(1) Common Stock. In addition to any other approval required by law or by
this Restated Certificate of Incorporation, the affirmative vote of a majority
of the then outstanding shares of Common Stock, voting separately as a class,
shall be necessary to approve any consolidation of the Corporation with
another corporation, any merger of the Corporation into another corporation or
any merger of any other corporation into the Corporation pursuant to which
shares of Common Stock or Class B Common Stock are converted into or exchanged
for any securities or any other consideration, unless, pursuant to such
consolidation or merger, each share of Common Stock will receive consideration
of a type identical to the type to be received by each share of Class B Common
Stock and each share of Common Stock will receive consideration in an amount
equal to the amount to be received by each share of Class B Common Stock.
(2) Preferred Stock. In addition to any other approval required by law or by
this Restated Certificate of Incorporation, each particular series of any
class of Preferred Stock shall have such right to vote, if any, as shall be
fixed in the resolution or resolutions, adopted by the Board of Directors,
providing for the issuance of shares of such particular series.
(3) Agreement of Merger or Consolidation. In addition to any other approval
required by law or by this Restated Certificate of Incorporation, the
affirmative vote of the holders of record of at least 66 2/3% of the aggregate
voting power of all outstanding shares of capital stock of the Corporation
then entitled to vote generally in the election of directors, voting together
as a single class, shall be required to approve any consolidation of the
Corporation with another corporation, any merger of the Corporation into
another corporation or any merger of any other corporation into the
Corporation other than any merger between the
16
<PAGE>
Corporation and any corporation in which at least 90 percent of the
outstanding shares of each class of stock is owned by the Corporation, unless
any such transaction is approved by the Board of Directors by the affirmative
vote of a majority of the entire Board of Directors, in which case the
percentage required shall be as specified by the General Corporation Law of
Delaware.
(4) Sale of Assets. In addition to any other approval required by law or by
this Restated Certificate of Incorporation, the affirmative vote of the
holders of record of at least 66 2/3% of the aggregate voting power of all
outstanding shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class,
shall be required to authorize any sale, lease, or exchange of all or
substantially all of the Corporation's property and assets, including its
goodwill and its corporate franchises, unless any such transaction is deemed
expedient and for the best interests of the Corporation by the Board of
Directors by the affirmative vote of a majority of the entire Board of
Directors, in which case the percentage required shall be as specified by the
General Corporation Law of Delaware.
ARTICLE XV
Whenever a compromise or arrangement is proposed between the Corporation and
its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation."
THIRD: Effective upon filing with the Secretary of State, this Restated
Certificate of Incorporation restates and amends the Certificate of
Incorporation of the Corporation.
FOURTH: In lieu of a special meeting, the sole stockholder of the
Corporation has given its written consent to said restatement and amendment in
accordance with the provisions of Section 228 of the GCL.
FIFTH: This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 228, 242 and 245 of the GCL.
SIXTH: The capital of the Corporation will not be reduced under or by reason
of any amendment in this Restated Certificate of Incorporation.
17
<PAGE>
IN WITNESS WHEREOF, PULITZER INC. has caused this Restated Certificate of
Incorporation to be signed by its Senior Vice President--Finance and attested
to by its Secretary this 5th day of February, 1999.
PULITZER INC.
/s/ Ronald H. Ridgway
By: _________________________________
Ronald H. Ridgway
Senior Vice President--Finance
Attest:
/s/ James V. Maloney
- -------------------------------------
James V. Maloney
Secretary
18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Subsection (a) of Section 145 of the Delaware General Corporation Law (the
"DGCL") empowers a corporation to indemnify any director or officer, or former
director or officer, who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the corporation), against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding provided that such
director or officer acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, provided that such director or
officer had no reasonable cause to believe his or her conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of
the capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement
of such action or suit provided that such director or officer acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such director or officer
shall have been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action was
brought shall determine that despite the adjudication of liability such
director or officer is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a present or
former director or officer of a corporation has been successful in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith; that
indemnification provided for in Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and that the
corporation shall have power to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him or her or incurred by him or her in any such capacity or arising out of
his or her status as such whether or not the corporation would have the power
to indemnify him or her against such liabilities under Section 145.
Article Seven of the Hearst-Argyle Amended and Restated Certificate of
Incorporation provides that Hearst-Argyle shall indemnify to the fullest
extent permitted by the DGCL any and all of its directors and officers, or
former directors and officers, or any person who may have served at Hearst-
Argyle's request as a director or officer of another corporation, partnership,
limited liability company, joint venture, trust or other entity or enterprise.
Article Eight of the Hearst-Argyle Amended and Restated Certificate of
Incorporation provides that to the fullest extent permitted by the DGCL a
director or former director of Hearst-Argyle shall not be personally liable to
Hearst-Argyle or its stockholders for monetary damages for breach of fiduciary
duty as a director.
Hearst-Argyle maintains liability insurance insuring its officers and
directors against liabilities that they may incur in such capacities,
including liabilities arising under the Federal securities laws other than
liabilities arising out of the filing of a registration statement with the
Securities and Exchange Commission.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of May
25, 1998, by and among Pulitzer Publishing Company, Pulitzer Inc.
and the Company (included herewith as Appendix A to the Joint Proxy
Statement/Prospectus).
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Appendix C of the Company's
Registration Statement on Form S-4 (File No. 333-32487)).
3.2 Amended and Restated Bylaws of the Company.
4.1 Form of Indenture relating to the Senior Subordinated Notes due 2005
(including form of security) (incorporated by reference to Exhibit
4.1 of Argyle's Form 10-K for the fiscal year ending December 31,
1996).
4.2 First Supplemental Indenture dated as of June 1, 1996 among KHBS
Argyle Television, Inc. and Arkansas Argyle Television, Inc. and
United States Trust Company of New York (incorporated by reference
to Argyle's Current Report on Form 8-K dated June 11, 1996).
4.3 Second Supplemental Indenture dated as of August 29, 1997 among KMBC
Hearst-Argyle Television, Inc., WBAL Hearst-Argyle Television, Inc.,
WCVB Hearst-Argyle Television, Inc., WISN Hearst-Argyle Television,
Inc., WTAE Hearst-Argyle Television, Inc. and United States Trust
Company of New York (incorporated by reference to Exhibit 4.8 of the
Company's Registration Statement on Form S-3 (File No. 333-32487)).
4.4 Third Supplemental Indenture dated as of February 26, 1998 among the
Company, Hearst-Argyle Television Stations, Inc., KMBC Hearst-Argyle
Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-
Argyle Television, Inc., WISN Hearst-Argyle Television, Inc., WTAE
Hearst-Argyle Television, Inc., WAPT Hearst-Argyle Television, Inc.,
KITV Hearst-Argyle Television, Inc., KHBS Hearst-Argyle Television,
Inc., Ohio/Oklahoma Hearst-Argyle Television, Inc., Jackson Hearst-
Argyle Television, Inc., Hawaii Hearst-Argyle Television, Inc.,
Arkansas Hearst-Argyle Television, Inc. and United States Trust
Company of New York (incorporated by reference to Exhibit 4.1 of the
Company's Form 10-K for the fiscal year ending December 31, 1997).
4.5 Form of Note for Senior Subordinated Notes due 2005 (included in
Exhibit 4.1).
4.6 Indenture, dated as of November 13, 1997, between the Company and
Bank of Montreal Trust Company, as trustee (incorporated by
reference to Exhibit 4.1 of the Company's Current Report on Form 8-K
dated November 13, 1997).
4.7 First Supplemental Indenture, dated as of November 13, 1997, between
the Company and Bank of Montreal Trust Company, as trustee
(incorporated by reference to Exhibit 4.2 of the Company's Current
Report on Form 8-K dated November 13, 1997).
4.8 Global Note representing $125,000,000 of 7% Senior Notes Due
November 15, 2007 (incorporated by reference to Exhibit 4.3 of the
Company's Current Report on Form 8-K dated November 13, 1997).
4.9 Global Note representing $175,000,000 of 7 1/2% Debentures Due
November 15, 2027 (incorporated by reference to Exhibit 4.4 of the
Company's Current report on Form 8-K dated January 13, 1998).
4.10 Second Supplemental Indenture, dated as of January 13, 1998, between
the Company and Bank of Montreal Trust Company, as trustee
(incorporated by reference to Exhibit 4.3 of the Company's Current
report on Form 8-K dated January 13, 1998).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
4.11 Specimen of the stock certificate for the Company's Series A Common
Stock, $.01 par value per share (incorporated by reference to
Exhibit 4.3 of the Company's Form 8A/A dated September 5, 1997).
4.12 Form of Registration Rights Agreement among the Company and the
Holders (incorporated by reference to Exhibit B to Exhibit 2.1 of
the Company's Registration Statement on Form S-4 (File No. 333-
32487)).
4.13 Form of Note Purchase Agreement, dated December 1, 1998, by and
among the Company, as issuer of the notes to be purchased thereunder
and the note purchasers named therein (including form of note
attached as an exhibit thereto).
5.1 Opinion of Rogers & Wells LLP regarding legality of securities to be
issued.
8.1 Opinion of Rogers & Wells LLP regarding federal tax matters.
8.2 Opinion of Fulbright & Jaworski L.L.P. regarding federal tax
matters.
23.1 Consent of Rogers & Wells LLP (contained in the opinions filed as
Exhibits 5.1 and 8.1).
23.2 Consent of Fulbright & Jaworski L.L.P. (contained in the opinion
filed as Exhibit 8.2).
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Ernst & Young LLP.
23.6 Consent of PricewaterhouseCoopers, LLP.
23.7 Consent of Credit Suisse First Boston Corporation (see Exhibit No.
99.1).
23.8 Consent of Goldman, Sachs & Co. (see Exhibit No. 99.2).
23.9 Consent of Michael E. Pulitzer.
23.10 Consent of Ken J. Elkins.
24.1 Powers of Attorney (contained on signature page hereto).
99.1 Consent of Credit Suisse First Boston Corporation.
99.2 Consent of Goldman, Sachs & Co.
</TABLE>
(b) Financial Statement Schedules:
None.
(c) Reports, Opinions and Appraisals:
The opinion of Goldman, Sachs & Co. (attached as Annex IV to the Joint Proxy
Statement/Prospectus forming a part of this Registration Statement and
therefore not filed as an exhibit to this Registration Statement).
The opinion of Credit Suisse First Boston Corporation (attached as Annex V
to the Joint Proxy Statement/Prospectus forming a part of this Registration
Statement and therefore not filed as an exhibit to this Registration
Statement).
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of
II-3
<PAGE>
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless, in the opinion of its counsel, the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first
class mail
or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to this request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Hearst-Argyle Television, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-4 and has
duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
11th day of February, 1999.
Hearst-Argyle Television, Inc.
/s/ Bob Marbut
By __________________________________
Bob Marbut Chairman of the Board
and
Co-Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Bob Marbut, John G. Conomikes
and Dean H. Blythe, and each of them, such individual's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such individual and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement on Form S-4 and any and
all applications and other documents in connection therewith, with the
Securities and Exchange Commission and any state or other securities
authority, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully and to
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
/s/ Bob Marbut Chairman of the February 11,
- ------------------------------------- Board and Co-Chief 1999
Bob Marbut Executive Officer
(Principal
Executive Officer)
/s/ John G. Conomikes President and Co- February 11,
- ------------------------------------- Chief Executive 1999
John G. Conomikes Officer (Principal
Executive Officer)
/s/ David J. Barrett Executive Vice February 11,
- ------------------------------------- President, Chief 1999
David J. Barrett Operating Officer
and Director
/s/ Harry T. Hawks Chief Financial February 11,
- ------------------------------------- Officer, Senior 1999
Harry T. Hawks Vice President and
Principal Financial
Officer
<PAGE>
/s/ Teresa Lopez Vice President and February 11,
- ------------------------------------ Controller 1999
Teresa Lopez (Principal
Accounting
Officer)
/s/ Frank A. Bennack, Jr. Director February 11,
- ------------------------------------ 1999
Frank A. Bennack, Jr.
/s/ Victor F. Ganzi Director February 11,
- ------------------------------------ 1999
Victor F. Ganzi
Director
- ------------------------------------
George R. Hearst, Jr.
/s/ William R. Hearst III Director February 11,
- ------------------------------------ 1999
William R. Hearst III
Director
- ------------------------------------
Gilbert C. Maurer
/s/ David Pulver Director February 11,
- ------------------------------------ 1999
David Pulver
/s/ Virginia H. Randt Director February 11,
- ------------------------------------ 1999
Virginia H. Randt
/s/ Caroline L. Williams Director February 11,
- ------------------------------------ 1999
Caroline L. Williams
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of May
25, 1998, by and among Pulitzer Publishing Company, Pulitzer Inc.
and the Company (included herewith as Appendix A to the Joint Proxy
Statement/Prospectus).
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Appendix C of the Company's
Registration Statement on Form S-4 (File No. 333-32487)).
3.2 Amended and Restated Bylaws of the Company.
4.1 Form of Indenture relating to the Senior Subordinated Notes due 2005
(including form of security) (incorporated by reference to Exhibit
4.1 of Argyle's Form 10-K for the fiscal year ending December 31,
1996).
4.2 First Supplemental Indenture dated as of June 1, 1996 among KHBS
Argyle Television, Inc. and Arkansas Argyle Television, Inc. and
United States Trust Company of New York (incorporated by reference
to Argyle's Current Report on Form 8-K dated June 11, 1996).
4.3 Second Supplemental Indenture dated as of August 29, 1997 among KMBC
Hearst-Argyle Television, Inc., WBAL Hearst-Argyle Television, Inc.,
WCVB Hearst-Argyle Television, Inc., WISN Hearst-Argyle Television,
Inc., WTAE Hearst-Argyle Television, Inc. and United States Trust
Company of New York (incorporated by reference to Exhibit 4.8 of the
Company's Registration Statement on Form S-3 (File No. 333-32487)).
4.4 Third Supplemental Indenture dated as of February 26, 1998 among the
Company, Hearst-Argyle Television Stations, Inc., KMBC Hearst-Argyle
Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-
Argyle Television, Inc., WISN Hearst-Argyle Television, Inc., WTAE
Hearst-Argyle Television, Inc., WAPT Hearst-Argyle Television, Inc.,
KITV Hearst-Argyle Television, Inc., KHBS Hearst-Argyle Television,
Inc., Ohio/Oklahoma Hearst-Argyle Television, Inc., Jackson Hearst-
Argyle Television, Inc., Hawaii Hearst-Argyle Television, Inc.,
Arkansas Hearst-Argyle Television, Inc. and United States Trust
Company of New York (incorporated by reference to Exhibit 4.1 of the
Company's Form 10-K for the fiscal year ending December 31, 1997).
4.5 Form of Note for Senior Subordinated Notes due 2005 (included in
Exhibit 4.1).
4.6 Indenture, dated as of November 13, 1997, between the Company and
Bank of Montreal Trust Company, as trustee (incorporated by
reference to Exhibit 4.1 of the Company's Current Report on Form 8-K
dated November 13, 1997).
4.7 First Supplemental Indenture, dated as of November 13, 1997, between
the Company and Bank of Montreal Trust Company, as trustee
(incorporated by reference to Exhibit 4.2 of the Company's Current
Report on Form 8-K dated November 13, 1997).
4.8 Global Note representing $125,000,000 of 7% Senior Notes Due
November 15, 2007 (incorporated by reference to Exhibit 4.3 of the
Company's Current Report on Form 8-K dated November 13, 1997).
4.9 Global Note representing $175,000,000 of 7 1/2% Debentures Due
November 15, 2027 (incorporated by reference to Exhibit 4.4 of the
Company's Current report on Form 8-K dated January 13, 1998).
4.10 Second Supplemental Indenture, dated as of January 13, 1998, between
the Company and Bank of Montreal Trust Company, as trustee
(incorporated by reference to Exhibit 4.3 of the Company's Current
report on Form 8-K dated January 13, 1998).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
4.11 Specimen of the stock certificate for the Company's Series A Common
Stock, $.01 par value per share (incorporated by reference to
Exhibit 4.3 of the Company's Form 8A/A dated September 5, 1997).
4.12 Form of Registration Rights Agreement among the Company and the
Holders (incorporated by reference to Exhibit B to Exhibit 2.1 of
the Company's Registration Statement on Form S-4 (File No. 333-
32487)).
4.13 Form of Note Purchase Agreement, dated December 1, 1998, by and
among the Company, as issuer of the notes to be purchased thereunder
and the note purchasers named therein (including form of note
attached as an exhibit thereto).
5.1 Opinion of Rogers & Wells LLP regarding legality of securities to be
issued.
8.1 Opinion of Rogers & Wells LLP regarding federal tax matters.
8.2 Opinion of Fulbright & Jaworski L.L.P. regarding federal tax
matters.
23.1 Consent of Rogers & Wells LLP (contained in the opinions filed as
Exhibits 5.1 and 8.1).
23.2 Consent of Fulbright & Jaworski L.L.P. (contained in the opinion
filed as Exhibit 8.2).
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Ernst & Young LLP.
23.6 Consent of PricewaterhouseCoopers, LLP.
23.7 Consent of Credit Suisse First Boston Corporation (see Exhibit No.
99.1).
23.8 Consent of Goldman, Sachs & Co. (see Exhibit No. 99.2).
23.9 Consent of Michael E. Pulitzer.
23.10 Consent of Ken J. Elkins.
24.1 Powers of Attorney (contained on signature page hereto).
99.1 Consent of Credit Suisse First Boston Corporation.
99.2 Consent of Goldman, Sachs & Co.
</TABLE>
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
HEARST-ARGYLE TELEVISION, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I OFFICES................................................. 3
Section 1. Registered Office....................................... 3
Section 2. Other Offices........................................... 3
ARTICLE II MEETINGS OF THE STOCKHOLDERS............................ 3
Section 1. Place of Meetings....................................... 3
Section 2. Annual Meeting.......................................... 3
Section 3. Special Meeting......................................... 3
Section 4. Notice of Annual or Special Meeting..................... 3
Section 5. Business at Special Meeting............................. 3
Section 6. Quorum of Stockholders.................................. 3
Section 7. Act of Stockholders' Meeting............................ 4
Section 8. Voting of Shares........................................ 4
Section 9. Proxies................................................. 4
Section 10. Voting List............................................. 4
Section 11. Action by Written Consent Without a Meeting............. 4
ARTICLE III BOARD OF DIRECTORS...................................... 5
Section 1. Powers.................................................. 5
Section 2. Number of Directors..................................... 5
Section 3. Election and Term....................................... 5
Section 4. Vacancies............................................... 5
Section 5. Resignation and Removal................................. 5
Section 6. Compensation of Directors............................... 5
Section 7. Chairman of the Board................................... 5
ARTICLE IV MEETINGS OF THE BOARD................................... 6
Section 1. First Meeting........................................... 6
Section 2. Regular Meetings........................................ 6
Section 3. Special Meetings........................................ 6
Section 4. Business at Regular or Special Meeting.................. 6
Section 5. Quorum of Directors..................................... 6
Section 6. Act of Directors' Meeting............................... 6
Section 7. Action by Unanimous Written Consent Without a Meeting... 6
Section 8. Interested Directors.................................... 6
ARTICLE V COMMITTEES.............................................. 7
ARTICLE VI NOTICES................................................. 7
Section 1. Methods of Giving Notice................................ 7
Section 2. Waiver of Notice........................................ 7
Section 3. Attendance as Waiver.................................... 7
ARTICLE VII DIRECTORS' ACTION WITHOUT A MEETING BY USE OF CONFERENCE
TELEPHONE............................................... 7
ARTICLE VIII OFFICERS................................................ 8
Section 1. Executive Officers...................................... 8
Section 2. Election and Qualification.............................. 8
Section 3. Salaries................................................ 8
</TABLE>
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<TABLE>
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Section 4. Term, Removal and Vacancies............................... 8
Section 5. Chief Executive Officer................................... 8
Section 6. President................................................. 8
Section 7. Vice Presidents........................................... 8
Section 8. Secretary................................................. 8
Section 9. Chief Financial Officer................................... 9
Section 10. Assistant Secretaries..................................... 9
Section 11. Treasurer................................................. 9
Section 12. Assistant Treasurer....................................... 9
Section 13. Officers' Bond............................................ 9
ARTICLE IX CERTIFICATES FOR SHARES................................... 9
Section 1. Certificates Representing Shares.......................... 9
Section 2. Restriction on Transfer of Shares......................... 10
Section 3. Voting Agreements......................................... 10
Section 4. Transfer of Shares........................................ 10
Section 5. Lost, Stolen or Destroyed Certificate..................... 10
Section 6. Closing of Transfer Books and Fixing Record Date.......... 10
Section 7. Registered Stockholders................................... 11
ARTICLE X GENERAL PROVISIONS........................................ 11
Section 1. Dividends................................................. 11
Section 2. Reserves.................................................. 11
Section 3. Negotiable Instruments.................................... 11
Section 4. Fiscal Year............................................... 11
Section 5. Seal...................................................... 11
Section 6. Books and Records......................................... 11
ARTICLE XI INDEMNIFICATION........................................... 12
Section 1. Mandatory Indemnification................................. 12
Section 2. Mandatory Advancement of Expenses......................... 12
ARTICLE XII AMENDMENTS................................................ 12
</TABLE>
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
HEARST-ARGYLE TELEVISION, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be located in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The corporation also may have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or as the business of the
corporation may require.
ARTICLE II
MEETINGS OF THE STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other proper purpose shall be held at such
place either within or without the State of Delaware as the Board of Directors
may from time to time designate, as stated in the notice of such meeting or a
duly executed waiver of notice thereof.
Section 2. Annual Meeting. An annual meeting of the stockholders shall be
held at such time and date as the Board of Directors may determine. At such
meeting the stockholders entitled to vote thereat shall elect a Board of
Directors and may transact such other business as properly may be brought
before the meeting.
Section 3. Special Meeting. Special meetings of the stockholders may be
called by the Chairman of the Board of Directors, the President, the Board of
Directors or the holders of not less than ten percent (10%) of all shares
entitled to vote at the meeting.
Section 4. Notice of Annual or Special Meeting. Written or printed notice
stating the location, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) nor more than sixty (60) days before the date
of the meeting, either personally or by mail, by or at the direction of the
Chairman of the Board, the President, the Secretary, or the officer or person
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, addressed to the stockholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid.
Section 5. Business at Special Meeting. The business transacted at any
special meeting of the stockholders shall be limited to the purposes stated in
the notice thereof.
Section 6. Quorum of Stockholders. Unless otherwise provided in the
Certificate of Incorporation or applicable law, the holders of a majority of
the shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of the stockholders. If, however, a quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders present in person or represented by proxy shall have power to
adjourn the meeting from time to time, without notice other than announcement
of location, day, and hour of the adjourned meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified, unless the adjournment is
for more than thirty (30) days or a new record date is fixed for the adjourned
meeting, in which case notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at such meeting. The stockholders
present at a duly organized meeting may continue to transact business until
adjournment, and the subsequent withdrawal of any stockholder or the refusal
of any stockholder to vote shall not affect the presence of quorum at the
meeting.
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Section 7. Act of Stockholders' Meeting. Except with respect to the election
of directors, the vote of the holders of a majority of the shares entitled to
vote and represented in person or by proxy at a meeting at which a quorum is
present shall be the act of the stockholders' meeting, unless the vote of a
greater number is required by law or the Certificate of Incorporation. Unless
otherwise provided in the Certificate of Incorporation, directors shall be
elected by a plurality of the votes cast by the holders of shares entitled to
vote in the election of directors at a meeting of stockholders at which a
quorum is present and all elections of directors shall be by written ballot.
Where a separate vote by a class or classes is required, a majority of the
outstanding shares of such class or classes, present in person or represented
by proxy, shall constitute a quorum entitled to take action with respect to
that vote on that matter and the affirmative vote of the majority of shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class.
Section 8. Voting of Shares. Each outstanding share shall be entitled to one
vote on each matter submitted to a vote at a meeting of the stockholders,
except to the extent that the voting rights of the shares of any class are
limited or denied by the Certificate of Incorporation or by a resolution of
the Board of Directors designating a series of preferred stock. At each
election for directors, every stockholder entitled to vote at such election
shall have the right to vote, in person or by proxy, the number of shares
owned by him for as many persons as there are directors to be elected and for
whose election he has the right to vote. Unless permitted by the Certificate
of Incorporation, no stockholder shall be entitled to cumulate his votes by
giving one candidate as many votes as the number of such directors to be
elected multiplied by the number of shares owned by such stockholder or by
distributing such votes on the same principle among any number of such
candidates.
Section 9. Proxies. At any meeting of the stockholders, each stockholder
having the right to vote shall be entitled to vote either in person or by
proxy executed in writing by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after three (3) years from its date
of execution unless otherwise provided in the proxy. Each proxy shall be
revocable unless expressly provided therein to be irrevocable and the proxy is
coupled with an interest or otherwise made irrevocable by law.
Section 10. Voting List. The officer or agent having charge of the stock
ledger of the corporation shall make, at least ten (10) days before each
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical
order, with the address of and number of shares held by each, which list shall
be maintained, for a period of ten (10) days prior to such meeting, either at
a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held, and shall be subject to inspection by any
stockholder at any time during ordinary business hours. Such list shall also
be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The original stock ledger shall be the only evidence as to who are
the stockholders entitled to examine such list or transfer books of the
corporation or to vote at any such meeting of stockholders.
Section 11. Action by Written Consent Without a Meeting. Any action required
or permitted by law, the Certificate of Incorporation, or these Bylaws to be
taken at a meeting of the stockholders may be taken without a meeting, without
prior notice, and without a vote, if a consent in writing, setting forth the
action so taken, is signed by the holders of stock having not less than the
minimum number of votes that would be necessary to take such action at a
meeting at which the holders of all shares entitled to vote on the action were
present and voting. Consent does not have to be unanimous. Every written
consent must bear the date of signature of each stockholder who signs the
consent. No written consent shall be effective to take the action that is the
subject of the consent unless, within sixty (60) days after the date of the
earliest dated consent delivered to the corporation in the manner required by
this Section 11, a consent or consents signed by the holder or holders of
shares having not less than the minimum number of votes that would be
necessary to take the action that is the subject of the consent are delivered
to the corporation by delivery to its registered office, its principal place
of business, or an officer or agent of the corporation having custody of the
books in which proceedings of meetings of stockholders are recorded. Delivery
shall be by hand or certified or registered mail, return receipt requested.
Delivery to the corporation's principal place of business shall be addressed
to the President or Chief Executive Officer of the Corporation. Prompt notice
of the taking of any action by stockholders without a meeting by less than
unanimous written consent shall be given to those stockholders who did not
consent in writing to the action.
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ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the corporation shall be
managed by or under the direction of its Board of Directors, which may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by
these Bylaws directed or required to be exercised and done by the
stockholders.
Section 2. Number of Directors. The number of directors shall be eleven
(11); thereafter, the number of directors shall consist of no fewer than seven
(7) members and no more than fifteen (15) members as determined from time to
time in accordance with these Bylaws by resolution of the Board of Directors,
but no decrease in the number of directors shall have the effect of shortening
the term of any incumbent director.
Section 3. Election and Term. The directors shall be elected at the annual
meetings of stockholders as specified in the Certificate of Incorporation
except as otherwise provided in the Certificate of Incorporation and in
Section 4 of this Article, and each director of the corporation shall hold
office until such director's successor is elected and qualified or until such
director's earlier death, resignation or removal. Unless required by the
Certificate of Incorporation, directors need not be residents of the State of
Delaware or stockholders of the corporation.
Section 4. Vacancies. Any vacancy occurring in the Board of Directors shall
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors, or by a sole remaining
director, or if no directors remain, by an election at an annual or special
meeting of the stockholders called for that purpose. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office. Any directorship to be filled by reason of an increase in the number
of directors may be filled by the affirmative vote of a majority of the
directors. A director elected to fill a newly created directorship shall hold
office until his successor is elected and qualified or until his death,
resignation or removal.
Notwithstanding the preceding provisions of this Section 4, whenever the
holders of any class or series of shares are entitled to elect one or more
directors by the provisions of the Certificate of Incorporation, any vacancies
in such directorships and any newly created directorships of such class or
series to be filled by reason of an increase in the number of such directors
may be filled by the affirmative vote of a majority of the directors elected
by such class or series then in office or by a sole remaining director so
elected.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws, when one (1) or more directors shall resign from the Board of
Directors effective at a future date, a majority of the directors then in
office, including those who so resigned, shall have power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this Section 4 in the filling of other vacancies.
Section 5. Resignation and Removal. Any director may resign at any time upon
giving written notice to the corporation. Except as otherwise provided by the
Certificate of Incorporation, at any meeting of stockholders called expressly
for the purpose of removing a director or directors, any director or the
entire Board of Directors may be removed, for cause, by a vote of the holders
of a majority of the shares then entitled to vote at an election of directors.
Section 6. Compensation of Directors. As specifically prescribed from time
to time by resolution of the Board of Directors, the directors of the
corporation may be paid their expenses of attendance at each meeting of the
Board and may be paid a fixed sum for attendance at each meeting of the Board
or a stated salary in their capacity as directors. This provision shall not
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 7. Chairman of the Board. The Board of Directors, at its first
meeting after each annual meeting of stockholders, shall elect one of its
members Chairman of the Board. The Chairman of the Board shall preside at all
meetings of the Board of Directors and shall have such other powers and duties
as usually pertain to such position or as may be delegated by the Board of
Directors.
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ARTICLE IV
MEETINGS OF THE BOARD
Section 1. First Meeting. The first meeting of each newly elected Board of
Directors shall be held immediately following the annual meeting of the
stockholders and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a
quorum shall be present.
Section 2. Regular Meetings. Regular meetings of the Board of Directors may
be held with or without notice at such time and at such place either within or
without the State of Delaware as from time to time shall be prescribed by the
Board of Directors.
Section 3. Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman of the Board, the President or by a majority of the
Board of Directors. Written notice of special meetings of the Board of
Directors shall be given to each director at least twenty-four (24) hours
before the time of the meeting.
Section 4. Business at Regular or Special Meeting. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 5. Quorum of Directors. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, unless a greater number
is required by law or the Certificate of Incorporation. If a quorum shall not
be present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 6. Act of Directors' Meeting. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors, unless the act of a greater number is required by law or
the Certificate of Incorporation.
Section 7. Action by Unanimous Written Consent Without a Meeting. Any action
required or permitted to be taken at a meeting of the Board of Directors or
any executive committee under the provisions of any applicable law, the
Certificate of Incorporation or these Bylaws may be taken without a meeting if
a consent in writing setting forth the action so taken is signed by all
members of the Board of Directors or of the executive committee, as the case
may be, and such consent is filed with the minutes of proceedings of the Board
of Directors or the executive committee, as the case may be. Such consent
shall have the same force and effect as a unanimous vote of the Board of
Directors or of the executive committee, as the case may be.
Section 8. Interested Directors. No contract or transaction between the
corporation and one or more of its directors or officers, or between the
corporation and any other corporation, partnership, association, or other
organization in which one (1) or more of its directors or officers are
directors or officers or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present
at or participates in the meeting of the Board of Directors or committee
thereof that authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee that
authorizes the contract or transaction.
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ARTICLE V
COMMITTEES
The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate from among its members an executive
committee and one or more other committees, each of which, to the extent
provided in such resolution or in the Certificate of Incorporation or in these
Bylaws, shall have and may exercise all the authority of the Board of
Directors, subject to the limitations imposed by applicable law. The Board of
Directors, by resolution adopted by a majority of the full Board of Directors,
may designate one or more of its members as alternate members of any
committee, who may, subject to any limitations imposed by the Board of
Directors, replace absent or disqualified members at any meeting of that
committee. Vacancies in the membership of any such committee shall be filled
by resolution adopted by the majority of the full Board of Directors at a
regular or special meeting of the Board. The designation of any such committee
and the delegation thereto of authority shall not operate to relieve the Board
of Directors, or any member thereof, of any responsibility imposed upon it or
him by law. All committees shall keep regular minutes of its proceedings and
report the same to the Board of Directors when required. To the extent
applicable, the provisions of Article IV of these Bylaws governing the
meetings of the Board of Directors shall likewise govern the meetings of any
committee thereof. Any member of the executive committee or any other
committee may be removed by the Board of Directors by the affirmative vote of
a majority of the full Board, whenever in its judgment the best interests of
the corporation will be served thereby.
ARTICLE VI
NOTICES
Section 1. Methods of Giving Notice. Whenever any notice is required to be
given to any stockholder or director under the provisions of any law, the
Certificate of Incorporation or these Bylaws, it shall be given in writing and
delivered personally or mailed to such stockholder or director at such address
as appears on the books of the corporation, and such notice shall be deemed to
be given at the time the same shall be deposited in the United States mail
with sufficient postage thereon prepaid. Notice to directors may also be given
by telegram, telex, telecopy or similar means of visual data transmission, and
notice given by any of such means shall be deemed to be delivered when
transmitted for delivery to the recipient.
Section 2. Waiver of Notice. Whenever any notice is required to be given to
any stockholder or director under the provisions of any law, the Certificate
of Incorporation or these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
Section 3. Attendance as Waiver. Attendance of a stockholder or director at
a meeting shall constitute a waiver of notice of such meeting, except where a
stockholder or director attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
on the ground that the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, a meeting need be specified
in any written waiver unless required by the Certificate of Incorporation or
these Bylaws.
ARTICLE VII
DIRECTORS' ACTION WITHOUT A MEETING BY USE
OF CONFERENCE TELEPHONE
Subject to the provisions required or permitted for notice of meetings,
unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, members of the Board of Directors or members of any committee
designated by such Board of Directors may participate in and hold a meeting of
such Board of Directors or
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committee by conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business on the ground that the meeting is not lawfully called or
convened.
ARTICLE VIII
OFFICERS
Section 1. Executive Officers. The officers of the corporation shall consist
of a President and a Secretary, and may also include one or more Vice
Presidents, a Treasurer, and such other officers as are provided for in this
Article VIII, each of whom shall be elected by the Board of Directors as
provided in Section 2 of this Article. Any two (2) or more offices may be held
by the same person.
Section 2. Election and Qualification. The Board of Directors, at its first
meeting held immediately after each annual meeting of stockholders, shall
choose a President and a Secretary. The Board of Directors also may elect one
or more Vice Presidents, a Treasurer, and such other officers, including
assistant officers and agents as may be deemed necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board of Directors.
Section 3. Salaries. The compensation of all officers and agents of the
corporation shall be determined by the Board of Directors.
Section 4. Term, Removal and Vacancies. Each officer of the corporation
shall hold office until his successor is chosen and qualified or until his
death, resignation, or removal. Any officer may resign at any time upon giving
written notice to the corporation. Any officer or agent or member of the
executive committee elected or appointed by the Board of Directors may be
removed by the Board of Directors with or without cause, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights. Any vacancy occurring in any office of the corporation
by death, resignation, removal or otherwise shall be filled by the Board of
Directors.
Section 5. Chief Executive Officer. Unless the Board of Directors designates
otherwise, the President shall be the Chief Executive Officer of the
corporation. The Chief Executive Officer shall preside at all meetings of the
stockholders. The Chief Executive Officer shall have such other powers and
duties as usually pertain to such office or as may be delegated by the Board
of Directors.
Section 6. President. The president shall be ex-officio a member of all
standing committees (except the corporation's Audit Committee) and shall have
general powers of oversight, supervision and management of the business and
affairs of the corporation, and shall see that all orders and resolutions of
the Board of Directors are carried into effect. The President shall have such
other powers and duties as usually pertain to such office or as may be
prescribed by the Board of Directors. He shall execute bonds, mortgages,
instruments, contracts, agreements, and other documentation, except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 7. Vice Presidents. Unless otherwise determined by the Board of
Directors, the Vice Presidents, in the order of their seniority as such
seniority may from time to time be designated by the Board of Directors, shall
perform the duties and exercise the powers of the President in the absence or
disability of the President. They shall perform such other duties and have
such other powers as the Board of Directors may from time to time prescribe.
Section 8. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders, and shall record all the
proceedings of the meetings of the stockholders and of the Board of Directors
in books to be kept for that purpose, and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings
8
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of the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors. He shall keep in safe custody the seal
of the corporation, and, when authorized by the Board of Directors, affix the
same to any instrument requiring it. When so affixed, such seal shall be
attested by his signature or by the signature of the Treasurer or an Assistant
Secretary.
Section 9. Chief Financial Officer. The Chief Financial Officer shall
oversee all financial affairs of the corporation and shall perform such other
duties as may be prescribed from time to time by the Board of Directors, the
Chief Executive Officer, or the President.
Section 10. Assistant Secretaries. Unless otherwise determined by the Board
of Directors, the Assistant Secretaries, in the order of their seniority as
such seniority may from time to time be designated by the Board of Directors,
shall perform the duties and exercise the powers of the Secretary in the
absence or disability of the Secretary. They shall perform such other duties
and have such other powers as the Board of Directors may from time to time
prescribe.
Section 11. Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Section 12. Assistant Treasurer. Unless otherwise determined by the Board of
Directors, the Assistant Treasurer shall perform the duties and exercise the
powers of the Treasurer in the absence or disability of the Treasurer. He
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Section 13. Officers' Bond. If required by the Board of Directors, any
officer so required shall give the corporation a bond (which shall be renewed
as the Board of Directors may require) in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of any and all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
ARTICLE IX
CERTIFICATES FOR SHARES
Section 1. Certificates Representing Shares. The corporation shall deliver
certificates representing all shares to which stockholders are entitled. Such
certificates shall be numbered and shall be entered in the books of the
corporation as they are issued, and shall be signed by the Chairman of the
Board of Directors, the President or a Vice President, and by the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, and may be sealed with the seal of the corporation or a facsimile
thereof. Any or all signatures on the certificate may be a facsimile. In case
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer at the date of its issuance. If the corporation is
authorized to issue shares of more than one class, there shall be set forth
upon the face or back of the certificate a statement that the corporation will
furnish to any stockholder upon request and without charge a full statement of
all of the powers, designations, preferences, limitations and relative,
participating, optional, or other special rights of the shares of each class
authorized to be issued and the qualifications, limitations or restrictions of
such preferences and/or rights and, if the corporation is authorized to issue
any preferred or special class in series, the variations in the relative
rights and preferences between the shares of each such series so far as the
same have been fixed and determined and the authority of the Board of
Directors to fix and determine the relative rights and preferences of
subsequent series. Each certificate representing shares shall state upon the
face thereof that the corporation is organized under the laws of the State of
Delaware, the name of the person to whom issued,
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the number and the class and the designation of the series, if any, which such
certificate represents and the par value of each share represented by such
certificate or a statement that the shares are without par value. No
certificate shall be issued for any share until the consideration therefor has
been fully paid.
Section 2. Restriction on Transfer of Shares. If any restriction on the
transfer, or registration of the transfer, of shares shall be imposed or
agreed to by the corporation, as permitted by law, the Certificate of
Incorporation, or these Bylaws, such restriction shall be noted conspicuously
on each certificate representing shares in accordance with applicable law.
Section 3. Voting Agreements. A written counterpart of any voting agreement
entered into among any number of stockholders of the corporation, or any
number of stockholders of the corporation and the corporation itself, for the
purpose of providing that shares of the corporation shall be voted in the
manner prescribed in the agreement shall be deposited with the corporation at
its registered office in Delaware and shall be subject to the inspection by
any stockholder of the corporation or any beneficiary of the agreement daily
during business hours. In addition, certificates of stock or uncertificated
stock shall be issued to the person or persons, or corporation or corporations
authorized to act as trustee for purposes of vesting in such person or
persons, corporation or corporations, the right to vote such shares, to
represent any stock of an original issue so deposited with him or them, and
any certificates of stock or uncertificated stock so transferred to the voting
trustee or trustees shall be surrendered and cancelled and new certificates or
uncertificated stock shall be issued therefore to the voting trustee or
trustees. In the certificate so issued, if any, it shall be stated that it is
issued pursuant to such agreement, and that fact shall also be stated in the
stock ledger of the corporation.
Section 4. Transfer of Shares. Subject to the provisions of Section 7 of
this Article IX, upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate, and record the transaction upon
its books.
Section 5. Lost, Stolen or Destroyed Certificate. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed upon the making of an affidavit of that
fact by the person claiming the certificate to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of such lost, stolen or destroyed certificate
or certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or to give the corporation a bond in such sum
as it may direct to indemnify the corporation against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
Section 6. Closing of Transfer Books and Fixing Record Date. For the purpose
of determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution, or in order to make a determination of
stockholders for any other proper purpose (other than determining stockholders
entitled to consent to action taken by stockholders that is proposed to be
taken without a meeting of stockholders), the Board of Directors may fix a
date as the record date for any such determination of stockholders, such date
to not precede the date of adoption of the resolution fixing the record date,
and such date to be not more than sixty (60) days, and, in case of a meeting
of stockholders, not less than ten (10) days, prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
If no record date is fixed for the determination of stockholders entitled to
notice of or to vote at a meeting of stockholders, or stockholders entitled to
receive payment of a dividend or other distribution, or for any other proper
purpose, the close of business on the day next preceding the date on which
notice of the meeting is mailed or if notice is waived, the close of business
on the day next preceding the day on which the meeting is held or the date on
which the resolution of the Board of Directors declaring such dividend or
relating to such other proper purpose is adopted, as the case may be, shall be
the record date for such determination of stockholders. When a determination
of stockholders entitled to vote at any meeting of stockholders has been made
as provided in this Section 6, such determination shall apply to any
10
<PAGE>
adjournment thereof; provided that the Board of Directors may fix a new record
date for the adjourned meeting. Whenever action by stockholders is proposed to
be taken by consent in writing without a meeting of stockholders, the Board of
Directors may fix a record date for the purpose of determining stockholders
entitled to consent to that action, which record date shall not precede, and
shall not be more than ten (10) days after, the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no record date
has been fixed by the Board of Directors and the prior action of the Board of
Directors is not required by law, the record date for determining stockholders
entitled to consent to action in writing without a meeting shall be the first
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation by delivery to its
registered office, its principal place of business, or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date shall have been fixed by the Board of Directors and prior
action of the Board of Directors is required by law, the record date for
determining stockholders entitled to consent to action in writing without a
meeting shall be at the close of business on the date on which the Board of
Directors adopts a resolution taking such prior action.
Section 7. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
the State of Delaware.
ARTICLE X
GENERAL PROVISIONS
Section 1. Dividends. The Board of Directors from time to time may declare,
and the corporation may pay, dividends on its outstanding shares in cash,
property, or its own shares pursuant to law and subject to the provisions of
the Certificate of Incorporation and these Bylaws.
Section 2. Reserves. The Board of Directors may by resolution create a
reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.
Section 3. Negotiable Instruments. All bills, notes, checks or instruments
for the payment of money shall be signed by such officer or officers or such
other person or persons as permitted by these Bylaws or in such manner as the
Board of Directors from time to time may designate.
Section 4. Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
Section 5. Seal. The corporate seal shall have inscribed thereon the name of
the corporation and may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
Section 6. Books and Records. The corporation shall keep books and records
of account and shall keep minutes of the proceedings of the stockholders, the
Board of Directors, and each committee of the Board of Directors. The
corporation shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of the
original issuance of shares issued by the corporation and a record of each
transfer of those shares that have been presented to the corporation for
registration of transfer. Such records shall contain the names and addresses
of all past and current stockholders of the corporation and the number and
class of shares issued by the corporation held by each of them. Any books,
records, minutes, and share transfer records may be in written form or in any
other form capable of being converted into written form within a reasonable
time.
11
<PAGE>
ARTICLE XI
INDEMNIFICATION
Section 1. Mandatory Indemnification. To the fullest extent permitted by the
General Corporation Law of Delaware, as the same may be amended from time to
time, the corporation shall indemnify any and all of its directors and
officers, or former directors and officers, or any person who is serving or
has served at the corporation's request as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise.
Section 2. Mandatory Advancement of Expenses. To the fullest extent
permitted by the General Corporation Law of Delaware, as the same may be
amended from time to time, the corporation shall pay in advance all expenses
(including attorneys' fees) incurred by any director or officer, or former
director or officer, or any person who is serving or has served at the
corporation's request as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, in defending any civil,
criminal, administrative or investigative action, suit or proceeding. Such
person shall repay such amount to the corporation if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized by this Article XI.
ARTICLE XII
AMENDMENTS
These Bylaws may be altered, amended, or repealed or new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the
Board, subject to the stockholders' right to adopt, amend or repeal these
Bylaws or adopt new Bylaws.
12
<PAGE>
EXHIBIT 4.13
================================================================================
HEARST-ARGYLE TELEVISION, INC.
7.18% Senior Notes due 2010
-----------------------
FORM OF NOTE PURCHASE AGREEMENT
-----------------------
Dated as of December 1, 1998
================================================================================
<PAGE>
Table of Contents
-----------------
Page
----
1. AUTHORIZATION OF NOTES..................................................1
2. SALE AND PURCHASE OF NOTES..............................................1
3. THE CLOSINGS............................................................2
4. CONDITIONS TO CLOSINGS..................................................2
4.1. Conditions to First Closing......................................2
4.2. Conditions to Each Closing.......................................3
4.3. Additional Conditions to Second Closing..........................5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................5
5.1. Organization; Power and Authority................................5
5.2. Authorization, etc...............................................5
5.3. Disclosure.......................................................6
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.6
5.5. Financial Statements.............................................7
5.6. Compliance with Laws, Other Instruments, etc.....................7
5.7. Governmental Authorizations, etc.................................8
5.8. Litigation; Observance of Agreements, Statutes and Orders........8
5.9. Taxes............................................................8
5.10.Title to Property; Leases........................................9
5.11. Licenses, Permits, Y2K, etc.....................................9
5.12. Compliance with ERISA...........................................10
5.13. Private Offering by the Company.................................11
5.14. Use of Proceeds; Margin Regulations.............................11
5.15. Existing Indebtedness...........................................12
5.16. Foreign Assets Control Regulations, etc.........................12
5.17. Status Under Certain Statutes...................................13
5.18. Environmental Matters...........................................13
6. REPRESENTATIONS OF THE PURCHASER........................................13
6.1. Purchase of Notes................................................13
6.2. Source of Funds..................................................14
7. INFORMATION AS TO COMPANY...............................................15
7.1. Financial and Business Information...............................15
7.2. Officer's Certificate............................................18
7.3. Inspection.......................................................19
8. PREPAYMENT OF THE NOTES.................................................20
8.1. Required Prepayments.............................................20
8.2. Optional Prepayments with Make-Whole Amount......................20
8.3. Prepayment in Connection with a Change of Control................21
8.4. Allocation of Partial Prepayments................................21
8.5. Maturity; Surrender, etc.........................................21
8.6. Purchase of Notes................................................22
<PAGE>
8.7. Make-Whole Amount..................................................22
9. AFFIRMATIVE COVENANTS....................................................24
9.1. Compliance with Law................................................24
9.2. Insurance..........................................................24
9.3. Maintenance of Properties..........................................25
9.4. Payment of Taxes and Claims........................................25
9.5. Corporate Existence, etc...........................................25
10. NEGATIVE COVENANTS.......................................................26
10.1. Liens.............................................................26
10.2. Limitation on Sale and Leaseback Transactions.....................27
10.3. Maintenance of Financial Conditions...............................28
10.4. Merger, Consolidation, etc........................................28
10.5. Lines of Business.................................................29
10.6. Transactions with Affiliates......................................29
10.7. Designation of Restricted and Unrestricted Subsidiaries...........30
11. EVENTS OF DEFAULT........................................................31
12. REMEDIES ON DEFAULT, ETC.................................................33
12.1. Acceleration......................................................33
12.2. Other Remedies....................................................34
12.3. Rescission........................................................34
12.4. No Waivers or Election of Remedies, Expenses, etc.................34
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES............................35
13.1. Registration of Notes.............................................35
13.2. Transfer and Exchange of Notes....................................35
13.3. Replacement of Notes..............................................36
14. PAYMENTS ON NOTES........................................................36
14.1. Place of Payment..................................................36
14.2. Home Office Payment...............................................37
15. EXPENSES, ETC............................................................37
15.1. Transaction Expenses..............................................37
15.2. Survival..........................................................38
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.............38
17. AMENDMENT AND WAIVER.....................................................38
17.1. Requirements......................................................38
17.2. Solicitation of Holders of Notes..................................39
17.3. Binding Effect, etc...............................................39
17.4. Notes held by Company, etc........................................40
18. NOTICES..................................................................40
19. REPRODUCTION OF DOCUMENTS................................................40
20. CONFIDENTIAL INFORMATION.................................................41
(ii)
<PAGE>
21. SUBSTITUTION OF PURCHASER................................................42
22. MISCELLANEOUS............................................................42
22.1. Successors and Assigns............................................42
22.2. Construction......................................................43
22.3. Payments Due on Non-Business Days.................................43
22.4. Severability......................................................43
22.5. Accounting Terms; Changes in GAAP.................................43
22.6. Counterparts......................................................44
22.7. Governing Law.....................................................44
<TABLE>
<S> <C> <C>
Exhibit 1 -- Form of 7.18% Senior Note due 2010
Exhibit 4.1(c)(i) -- Form of First Closing Opinion of Special Counsel for the
Company
Exhibit 4.1(c)(ii) -- Form of First Closing Opinion of Special Counsel for the
Purchasers
Exhibit 4.3(b)(i) -- Form of Second Closing Opinion of Special Counsel for the
Company
Exhibit 4.3(b)(ii) -- Form of Second Closing Opinion of Special Counsel for the
Purchasers
Schedule A -- Names and Addresses of Purchasers
Schedule B -- Defined Terms
Schedule 5.3 -- Disclosure Documents
Schedule 5.4 -- Subsidiaries
Schedule 5.5 -- Financial Statements
Schedule 5.8 -- Litigation
Schedule 5.11 -- Licenses, etc.
Schedule 5.15 -- Existing Indebtedness
Schedule 10.6 -- Certain Transactions
</TABLE>
(iii)
<PAGE>
HEARST-ARGYLE TELEVISION, INC.
888 Seventh Avenue
New York, NY 10166
Telephone: 212-887-6800
7.18% Senior Notes due 2010
As of December 1, 1998
TO EACH OF THE PURCHASERS LISTED
IN THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
HEARST-ARGYLE TELEVISION, INC., a Delaware corporation (the
"Company"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company has duly authorized the issue and sale of $450,000,000
aggregate principal amount of its 7.18% Senior Notes due 2010 (the "Notes"),
each such note to be substantially in the form set out in Exhibit 1. As used
herein, the term "Notes" shall mean all notes originally delivered pursuant to
this Agreement and the Other Agreements referred to below and all notes
delivered in substitution or exchange for any such note and, where applicable,
shall include the singular number as well as the plural. Certain capitalized
and other terms used in this Agreement are defined in Schedule B; references to
a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or
an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at one or
both of the Closings provided for in Section 3, Notes in the principal amount or
amounts specified opposite your name in Schedule A at the purchase price of 100%
of the principal amount thereof. Contemporaneously with entering into this
Agreement, the Company is entering into separate Note Purchase Agreements (the
"Other Agreements") identical with this Agreement with the other purchasers
named in Schedule A (the "Other Purchasers"), providing for the sale at one or
both of such Closings to each of the Other Purchasers of Notes in the principal
amount or amounts specified opposite its name in Schedule A. Your obligation
hereunder and the obligations of the Other Purchasers under the Other Agreements
are several and not joint obligations and you shall have no obligation under any
<PAGE>
-2-
Other Agreement and no liability to any Person for the performance or non-
performance by any Other Purchaser thereunder.
3. THE CLOSINGS.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Willkie Farr & Gallagher, 787
Seventh Avenue, New York, NY 10019 at 10:00 a.m., New York time, at two closings
(individually a "Closing" and respectively the "First Closing" and the "Second
Closing"). The First Closing shall be on December 15, 1998, or such other
Business Day thereafter on or prior to December 31, 1998 as may be agreed to by
the Company and you (if you are purchasing Notes at such Closing) and the Other
Purchasers then purchasing Notes. The Second Closing shall be on January 14,
1999, or such other Business Day on or prior to January 31, 1999 as may be
agreed to by the Company and you (if you are purchasing Notes at such Closing)
and the Other Purchasers then purchasing Notes. At each Closing for your
purchase of Notes the Company will deliver to you a single Note to be purchased
by you at such Closing (or such greater number of Notes, in denominations of at
least $100,000, as you may request, in an aggregate principal amount equal to
the principal amount of Notes to be purchased by you at such Closing), dated the
date of such Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to Account Number
9102723922 at The Chase Manhattan Bank, ABA number 021000021.
If the Company shall fail to tender such Notes to be purchased by you
at either Closing on or before the last date specified above in this Section 3
for such Closing, or if any of the conditions specified in Section 4 with
respect to such Closing shall not have been fulfilled to your satisfaction on or
before the last date specified above for such Closing, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSINGS.
4.1. Conditions to First Closing.
If you are purchasing Notes at the First Closing, your obligation to
purchase and pay for such Notes is subject to the fulfillment to your
satisfaction, prior to or at such Closing, of the following conditions:
(a) Officer's Certificate. The Company shall have delivered to you an
---------------------
Officer's Certificate, dated the date of such Closing, certifying that the
conditions specified in
<PAGE>
-3-
paragraphs (d) and (f) of this Section 4.1 and paragraphs (a) and (b) of
Section 4.2 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to you a
-----------------------
certificate of the Secretary or an Assistant Secretary of the Company,
dated the date of such Closing, certifying as to the resolutions attached
thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Notes and this Agreement and the Other
Agreements.
(c) Opinions of Counsel. You shall have received opinions in form and
-------------------
substance satisfactory to you, dated the date of such Closing, (i) from
Rogers & Wells LLP, special counsel for the Company, substantially in the
form set forth in Exhibit 4.1(c)(i) and covering such other matters
incident to the transactions contemplated hereby as you or your counsel may
reasonably request (and the Company hereby instructs its counsel to deliver
such opinion to you) and (ii) from Willkie Farr & Gallagher, your special
counsel in connection with such transactions, substantially in the form set
forth in Exhibit 4.1(c)(ii) and covering such other matters incident to
such transactions as you may reasonably request.
(d) Actions Prior to Closing. Neither the Company nor any Subsidiary
------------------------
shall have entered into any transaction since the date of the Memorandum
that would have been prohibited by Section 10.1, 10.2, 10.4 or 10.6 had
such Sections applied since such date.
(e) Private Placement Number. A Private Placement Number issued by
------------------------
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners)
shall have been obtained for the Notes.
(f) Changes in Corporate Structure. The Company shall not have changed
------------------------------
its jurisdiction of incorporation or, except in connection with the
Pulitzer Acquisition if then or theretofore consummated, been a party to
any merger or consolidation or succeeded to all or any substantial part of
the liabilities of any other entity at any time following the date of the
most recent financial statements referred to in Schedule 5.5.
4.2. Conditions to Each Closing.
Your obligation to purchase and pay for the Notes to be sold to you at
either Closing is subject to the fulfillment to your satisfaction, prior to or
at such Closing, of the following additional conditions:
<PAGE>
-4-
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Company in this Agreement shall be correct when made and at the time
of such Closing (including without limitation as to the Acquisition or
Acquisitions that have then been consummated, after giving effect thereto,
and excluding matters relating to an Acquisition that has not then been
consummated, in each case unless the context otherwise requires).
(b) Performance; No Default. The Company shall have performed and
-----------------------
complied with all agreements and conditions contained in this Agreement
required to be performed or complied with by it prior to or at such Closing
and after giving effect to the issue and sale of the Notes at such Closing
(and the application of the proceeds thereof as contemplated by Section
5.14) no Default or Event of Default shall have occurred and be continuing
and no Change of Control shall have occurred or, to the knowledge of the
Company, be contemplated.
(c) Purchase Permitted by Applicable Law, etc. On the date of such
-----------------------------------------
Closing your purchase of Notes shall (i) be permitted by the laws and
regulations of each jurisdiction to which you are subject, without recourse
to provisions (such as Section 1405(a)(8) of the New York Insurance Law)
permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (ii) not violate any
applicable law or regulation (including without limitation Regulation T, U
or X of the Board of Governors of the Federal Reserve System) and (iii) not
subject you to any tax, penalty or liability under or pursuant to any
applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you prior to such Closing, you shall have
received an Officer's Certificate certifying as to such matters of fact as
you may reasonably specify to enable you to determine whether such purchase
is so permitted.
(d) Payment of Special Counsel Fees. Without limiting the provisions
-------------------------------
of Section 15.1, the Company shall have paid on or before the date of such
Closing the fees, charges and disbursements of your special counsel
referred to in Section 4.1(c) to the extent reflected in a statement or
statements of such counsel rendered to the Company at least one Business
Day prior to such Closing.
(e) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified or
other copies of such documents as you or they may reasonably request.
<PAGE>
-5-
(f) Sale of Notes to Other Purchasers. The Company shall sell to the
---------------------------------
Other Purchasers and the Other Purchasers shall purchase the Notes to be
purchased by them at or before such Closing as specified in Schedule A.
4.3. Additional Conditions to Second Closing.
If you are purchasing Notes at the Second Closing, your obligation to
purchase and pay for such Notes is subject to the fulfillment to your
satisfaction, prior to or at such Closing, of the following additional
conditions:
(a) Officer's Certificate. The Company shall have delivered to you an
---------------------
Officer's Certificate, dated the date of such Closing, certifying that the
conditions specified in paragraphs (a) and (b) of Section 4.2 have been
fulfilled.
(b) Opinions of Counsel. You shall have received opinions in form and
-------------------
substance satisfactory to you, dated the date of such Closing, (i) from
Rogers & Wells LLP, special counsel for the Company, substantially in the
form set forth in Exhibit 4.3(b)(i), and covering such other matters
incident to the transactions contemplated hereby as you or your counsel may
reasonably request (and the Company hereby instructs its counsel to deliver
such opinion to you), and (ii) from Willkie Farr & Gallagher, your special
counsel, substantially in the form set forth in Exhibit 4.3(b)(ii) and
covering such other matters incident to such transactions as you may
reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. Organization; Power and Authority.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Other Agreements and the Notes and to perform the
provisions hereof and thereof.
5.2. Authorization, etc.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary corporate action on
<PAGE>
-6-
the part of the Company, and this Agreement constitutes, and upon execution and
delivery thereof each Note will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5.3. Disclosure.
The Company, through its agent, Credit Suisse First Boston
Corporation, has delivered to you a copy of a Confidential Private Placement
Memorandum, dated October 1998 (the "Memorandum"), relating to the transactions
contemplated hereby (including both Acquisitions). The Memorandum fairly
describes, in all material respects, the general nature of the business and
principal properties of the Company and its Subsidiaries before and after giving
effect to the Acquisitions. Except with respect to the revised presentation of
financial information described on Schedule 5.3, this Agreement, the Memorandum,
the documents, certificates or other writings delivered to you prior to the date
of the First Closing by or on behalf of the Company in connection with the
transactions contemplated hereby and described in Schedule 5.3 (together with
the Memorandum, the "Disclosure Documents"), and the financial statements listed
in Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Since December 31, 1997, there has been no change in the financial
condition, operations, business, properties or prospects of the Company or any
Subsidiary except as disclosed in the Disclosure Documents and other changes
that individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. There is no fact known to the Company that could
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the Memorandum or the other Disclosure Documents.
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.
(a) Schedule 5.4 contains complete and correct lists of the Company's
(i) Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the
jurisdiction of its organization, and the percentage of shares of each class of
its capital stock or similar equity interests outstanding owned by the Company
and each other Subsidiary and (ii) Affiliates, other than Subsidiaries. Schedule
5.4 also identifies each Restricted Subsidiary as of the date of this Agreement
and separately identifies each additional Subsidiary and Affiliate after giving
effect to consummation of the respective Acquisitions.
<PAGE>
-7-
(b) All of the outstanding shares of capital stock or similar equity interests
of each Subsidiary shown in Schedule 5.4 as being owned by the Company and
its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any
Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal restriction
or any agreement (other than this Agreement, the agreements listed on
Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits
or make any other similar distributions of profits to the Company or any of
its Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.
5.5. Financial Statements.
The Company has delivered to you copies of the financial statements of
the Company and its Subsidiaries listed in Schedule 5.5. All of said financial
statements (including in each case the related schedules and notes) fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
5.6. Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the
<PAGE>
-8-
Company or any Subsidiary is bound or by which the Company or any Subsidiary or
any of their respective properties may be bound or affected, (ii) conflict with
or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Subsidiary.
5.7. Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Notes.
5.8. Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against
or affecting the Company or any Subsidiary or any property of the Company
or any Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term of any
agreement or instrument to which it is a party or by which it is bound, or
any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance,
rule or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. Taxes.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction (or have been properly included
in the consolidated or combined tax returns of a parent company), and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (a) currently
payable without penalty or interest, (b) the amount of which is not individually
or in the aggregate Material or (c) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or a Subsidiary, as the case may be, has
<PAGE>
-9-
established adequate reserves in accordance with GAAP. The Company knows of no
basis for any other tax or assessment that could reasonably be expected to have
a Material Adverse Effect. The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of Federal, state or other taxes for
all fiscal periods are adequate. The Federal income tax liabilities of the
Company and its Subsidiaries have not been and currently are not the subject of
any Federal tax audit.
5.10. Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
listed on Schedule 5.5 or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens other than
Permitted Liens, Liens described in Schedule 5.15 and minor defects in title or
interests that do not interfere with the ordinary conduct of business of the
Company and its Subsidiaries. All leases that individually or in the aggregate
are Material are valid and subsisting and are in full force and effect in all
material respects.
5.11. Licenses, Permits, Y2K, etc.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, proprietary software,
service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict with
the rights of others;
(b) to the best knowledge of the Company, no product of the Company infringes
in any material respect any license, permit, franchise, authorization,
patent, copyright, proprietary software, service mark, trademark, trade
name or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material violation by any
Person of any right of the Company or any of its Subsidiaries with respect
to any patent, copyright, proprietary software, service mark, trademark,
trade name or other right owned or used by the Company or any of its
Subsidiaries.
The Company and its Subsidiaries have (a) initiated a review and
assessment of all areas within their respective businesses and operations
(including those affected by information received from suppliers and vendors)
that could
<PAGE>
-10-
reasonably be expected to be adversely affected by the Year 2000 Problem, (b)
developed a plan and timetable for addressing the Year 2000 Problem on a timely
basis, and (c) to date, implemented that plan substantially in accordance with
that timetable. The Company reasonably believes that all computer applications
(including those affected by information received from its suppliers and
vendors) that are material to the businesses and operations of the Company and
its Subsidiaries will on a timely basis be Year 2000 Compliant, except to the
extent that a failure to be so could not reasonably be expected to have a
Material Adverse Effect. The Company does not believe that the costs of ensuring
that the Company and its Subsidiaries will be Year 2000 Compliant will be
Material. As used in this Agreement, the term "Year 2000 Compliant" means all
computer applications (including those affected by information received from
suppliers and vendors) that are material to the businesses and operations of the
Company and its Subsidiaries will on a timely basis be able to perform properly
date-sensitive functions involving all dates on and after January 1, 2000; and
the term "Year 2000 Problem" means the risk that computer applications used by
the Company or any of its Subsidiaries (including those affected by information
received from suppliers and vendors) may be unable to recognize and perform
properly date-sensitive functions involving certain dates on and after January
1, 2000.
5.12. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and administered each
Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected
to result in a Material Adverse Effect. Neither the Company nor any ERISA
Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event, transaction
or condition has occurred or exists that could reasonably be expected to
result in the incurrence of any such liability by the Company or any ERISA
Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate
Material.
(b) The present value of the aggregate benefit liabilities under each of the
Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent
actuarial valuation report, did not exceed the aggregate current value of
the assets of such Plan allocable to such benefit liabilities by more than
$150,000. The term "benefit liabilities" has the meaning specified in
Section 4001 of ERISA
<PAGE>
-11-
and the terms "current value" and "present value" have the meaning
specified in Section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities)
under Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as of the last
day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B
of the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and sale of
the Notes at either Closing hereunder will not involve any prohibited
transaction (as such term is defined in Section 406(a) of ERISA and Section
4975(c)(1)(A)-(D) of the Code), that could subject the Company or any
holder of a Note to any tax or penalty on prohibited transactions imposed
under said Section 4975 of the Code or by Section 502(i) of ERISA, except
that no representation is made as to such matters as they may affect the
Company or you with respect to any Note to be purchased by you with funds
described in Section 6.2(d). The representation by the Company in the
preceding sentence of this Section 5.12(e) is made in reliance upon and
subject to the accuracy of your representation in Section 6.2 as to the
source of the funds used to pay the purchase price of the Notes to be
purchased by you.
5.13. Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof with,
any person other than you, the Other Purchasers and not more than ten other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.
5.14. Use of Proceeds; Margin Regulations.
The Company will apply the net proceeds of the sale of the Notes for
general corporate purposes (including without limitation to finance a portion of
one or both Acquisitions, if consummated). No part of the proceeds from the
sale of the Notes hereunder will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of Regulation
U of the Board of Governors of the Federal Reserve
<PAGE>
-12-
System (12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 1% of the value of the consolidated assets of the Company
and its Subsidiaries as of the date of this Agreement and the Company does not
have any present intention that margin stock will constitute more than 25% of
the value of such assets. As used in this Section, the terms "margin stock" and
"purpose of buying or carrying" shall have the meanings assigned to them in said
Regulation U.
5.15. Existing Indebtedness.
Schedule 5.15 sets forth a complete and correct list of all
outstanding Indebtedness of the Company and its Subsidiaries in an unpaid
principal amount exceeding $5,000,000 as of September 30, 1998, since which date
there has been no Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Indebtedness of the Company or its
Subsidiaries. Schedule 5.15 also lists additional Indebtedness anticipated to
be outstanding after giving effect to the consummation of the respective
Acquisitions. Neither the Company nor any Subsidiary is in default, and no
waiver of default is currently in effect, in the payment of any principal or
interest on any Indebtedness of the Company or such Subsidiary, and no event or
condition exists with respect to any such outstanding Indebtedness of the
Company or any Subsidiary listed in Schedule 5.15 that would permit (or that
with the giving of notice or the lapse of time, or both, would permit) one or
more Persons to cause such Indebtedness to become due and payable before its
stated maturity or before its regularly scheduled dates of payment.
Except as disclosed in Schedule 5.15, neither the Company nor any
Restricted Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 10.1 without equally and ratably securing the Notes.
5.16. Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
<PAGE>
-13-
5.17. Status Under Certain Statutes.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.18. Environmental Matters.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any facts which
would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring
on or in any way related to real properties now or formerly owned, leased
or operated by any of them or to other assets or their use, except, in each
case, such as could not reasonably be expected to result in a Material
Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any Hazardous
Materials on real properties now or formerly owned, leased or operated by
any of them and has not disposed of any Hazardous Materials in a manner
contrary to any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or operated by the
Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. Purchase of Notes.
You represent that you are purchasing the Notes for your own account
or for one or more separate accounts maintained by you or for the account of one
or more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have
<PAGE>
-14-
not been registered under the Securities Act and may be resold only if
registered pursuant to the provisions of the Securities Act or if an exemption
from registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
6.2. Source of Funds.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account", as such term is
defined in Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12,
1995), and there is no plan with respect to which the aggregate amount of
such general account's reserves and liabilities for the contracts held by
or on behalf of such plan and all other plans maintained by the same
employer (and affiliates thereof as defined in Section V(a)(1) of PTE 95-
60) or by the same employee organization (in each case determined in
accordance with PTE 95-60) exceeds or will exceed 10% of the total of all
reserves and liabilities of such general account (determined in accordance
with PTE 95-60, exclusive of separate account liabilities, plus any
applicable surplus) as of the date of the Closing for your purchase (or, if
you are purchasing Notes at both Closings, as of the respective dates of
such Closings); or
(b) the Source is either (i) an insurance company pooled separate account,
within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank
collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991) and, except as you have disclosed to the Company in writing
pursuant to this paragraph (b), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns
more than 10% of all assets allocated to such pooled separate account or
collective investment fund; or
(c) the Source is a governmental plan; or
(d) the Source is one or more employee benefit plans, or a separate account or
trust fund comprised of one or more employee benefit plans, each of which
has been identified to the Company in writing pursuant to this paragraph
(d); or
(e) the Source does not include assets of any employee benefit plan, other than
a plan exempt from the coverage of ERISA.
<PAGE>
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As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan" and "separate account" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. Financial and Business Information.
The Company shall deliver to you so long as you shall be obligated to
purchase Notes or shall be a holder of Notes and to each other holder of Notes
that is an Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of each quarterly
--------------------
fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of
(i) consolidated balance sheets of the Company and its Restricted Subsidiaries
and of the Company and its Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of operations, stockholders' equity and cash flows
of the Company and its Restricted Subsidiaries and of the Company and its
Subsidiaries for such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided that
delivery within the time period specified above of copies of the Company's
Quarterly Report on Form 10-Q prepared in compliance with the requirements
therefor and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this Section 7.1(a), unless the
financial statements included in said Form 10-Q include the accounts of any
Unrestricted Subsidiary;
(b) Annual Statements -- within 105 days after the end of each fiscal year of
-----------------
the Company, duplicate copies of,
(i) consolidated balance sheets of the Company and its Restricted Subsidiaries
and of the Company and its Subsidiaries as at the end of such year, and
<PAGE>
-16-
(ii) consolidated statements of operations, stockholders' equity and cash flows
of the Company and its Restricted Subsidiaries and of the Company and its
Subsidiaries for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP,
and accompanied by
(A) either (1) an opinion on such consolidated financial statement of the
Company and its Restricted Subsidiaries of independent public accountants
of recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the
financial position of the companies being reported upon and their results
of operations and cash flows and have been prepared in conformity with
GAAP, and that the examination by such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable basis for
such opinion in the circumstances or (2) an opinion as described in
subclause (1) above on such consolidated financial statements of the
Company and its Subsidiaries, a certificate of a Senior Financial Officer
stating that such financial statements of the Company and its Restricted
Subsidiaries fairly present, in all material respects, the financial
position of the Company and its Restricted Subsidiaries and their results
of operations and cash flows and have been prepared in conformity with GAAP
and also stating whether such financial statements reflect any interest of
the Company and its Restricted Subsidiaries in the undistributed net
earnings of any Unrestricted Subsidiary (and if any such undistributed net
earnings are reflected in such financial statements, such certificate shall
also be accompanied by calculations in reasonable detail eliminating the
effect of such undistributed earnings), and a report of such accountants
stating that the consolidated balance sheet and such other financial
statements of the Company and its Restricted Subsidiaries (x) have been
subjected to the auditing procedures applied in the audits of the
consolidated financial statements of the Company and its Subsidiaries, (y)
have been prepared in conformity with GAAP, and (z) are fairly stated, in
all material respects, in relation to such audited consolidated financial
statements of the Company and its Subsidiaries taken as a whole, and
(B) a certificate or written statement of such accountants stating that they
have reviewed this Agreement and stating further whether, in making their
<PAGE>
-17-
audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware that
any such condition or event then exists, specifying the nature and period
of the existence thereof (it being understood that such accountants shall
not be liable, directly or indirectly, for any failure to obtain knowledge
of any Default or Event of Default unless such accountants should have
obtained knowledge thereof in making an audit in accordance with generally
accepted auditing standards or did not make such an audit),
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountants' certificate described in clause
(B) above, shall be deemed to satisfy the requirements of this Section
7.1(b), unless the financial statements included in said Form 10-K include
the accounts of any Unrestricted Subsidiary;
(c) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial statement, report, notice or proxy statement
sent by the Company or any Restricted Subsidiary generally to its
shareholders or to its creditors (other than the Company or another
Subsidiary), and (ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such holder),
and each prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the Company or
any Restricted Subsidiary to the public concerning developments that are
Material;
(d) Notice of Default or Event of Default -- promptly, and in any
-------------------------------------
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect to
a claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days
-------------
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
<PAGE>
-18-
(i) with respect to any Plan, any reportable event, as defined in
Section 4043(b) of ERISA and the regulations thereunder, for which notice
thereof has not been waived pursuant to such regulations as in effect on
the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the threatening
by the PBGC of the institution of, proceedings under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Company or any ERISA Affiliate of a notice
from a Multiemployer Plan that such action has been taken by the PBGC with
respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in the
incurrence of any liability by the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans, or in the imposition of any Lien
on any of the rights, properties or assets of the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be expected to have a
Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any event
-----------------------------------
within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating to
any order, ruling, statute or other law or regulation that could reasonably
be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such other
---------------------
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Restricted Subsidiaries (including without limitation information regarding
the Year 2000 Problem) or relating to the ability of the Company to perform
its obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
7.2. Officer's Certificate.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
<PAGE>
-19-
(a) Covenant Compliance -- the information (including reasonably
-------------------
detailed calculations) showing whether the Company was in compliance with
the requirements of Sections 10.1, 10.2 and 10.3 during the quarterly or
annual period covered by the statements then being furnished (including
with respect to each such Section, where applicable, the calculations of
the maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of the
amount, ratio or percentage then in existence); and
(b) Default -- a statement that such Senior Financial Officer has
-------
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and conditions
of the Company and its Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date of
the certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
7.3. Inspection.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
----------
the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its Restricted
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and
properties of the Company and each Restricted Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing;
and
(b) Default -- if a Default or Event of Default then exists, at the
-------
expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent public accountants (and
<PAGE>
-20-
by this provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the Company and its Subsidiaries), all at
such times and as often as may be requested.
8. PREPAYMENT OF THE NOTES.
In addition to the payment of the entire unpaid principal amount of
the Notes at the final maturity thereof, the Company will make required
prepayments and may make optional prepayments in respect of the Notes, and under
certain circumstances may be required to offer to prepay Notes, all as
hereinafter provided.
8.1. Required Prepayments.
On the anniversary of the First Closing in 2006, 2007, 2008 and 2009,
the Company will prepay $90,000,000 principal amount (or such lesser principal
amount as shall then be outstanding) of the Notes (or if for any reason the
purchases of Notes at the Second Closing do not take place, an amount equal to
20% of the aggregate original principal amount of Notes issued at the First
Closing under this Agreement and the Other Agreements), at the principal amount
so to be prepaid, together with interest accrued thereon to the date of such
prepayment, without payment of the Make-Whole Amount or any premium, provided
that upon any partial prepayment of the Notes pursuant to Section 8.2 or 8.3 or
purchase of Notes permitted by Section 8.6 the principal amount of each required
prepayment of the Notes under this Section 8.1 on and after the date of such
prepayment or purchase shall be reduced in the same proportion as the aggregate
unpaid principal amount of the Notes is reduced as a result of such partial
prepayment or purchase.
8.2. Optional Prepayments with Make-Whole Amount.
The Company may, at its option and upon notice as provided below,
prepay at any time after January 31, 1999, all, or from time to time any part
of, the Notes (in a minimum amount of $15,000,000 and otherwise in multiples of
$1,000,000) at the principal amount so prepaid, together with interest accrued
thereon to the date of such prepayment, plus the Make-Whole Amount determined
for the prepayment date with respect to such principal amount.
The Company will give each holder of Notes written notice of each
optional prepayment under this Section 8.2 not less than 20 days and not more
than 60 days prior to the date fixed for such prepayment. Each such notice
shall specify the date fixed for such prepayment (which shall be a Business
Day), the aggregate principal amount of the Notes to be prepaid on such date,
the principal amount of Notes held by such holder to be prepaid (determined in
accordance with Section 8.4) and the interest to be paid on the prepayment date
with respect to such
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principal amount being prepaid, and shall be accompanied by a certificate of a
Senior Financial Officer as to the estimated Make-Whole Amount due in connection
with such prepayment (calculated as if the date of such notice were the date of
the prepayment), setting forth the details of such computation. Two Business
Days prior to such prepayment, the Company shall deliver to each holder of Notes
a certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
8.3. Prepayment in Connection with a Change of Control.
Promptly and in any event within five Business Days after the
occurrence of a Change of Control, the Company will give written notice thereof
(a "Change of Control Notice") to the holders of all outstanding Notes, which
Change of Control Notice shall (a) refer specifically to this Section 8.3, (b)
describe the Change of Control in reasonable detail and specify the Change of
Control Prepayment Date and the Response Date (as respectively defined below) in
respect thereof and (c) offer to prepay all Notes at the price specified below
on the date therein specified (the "Change of Control Prepayment Date"), which
shall be a Business Day not more than 90 days after the date of such Change of
Control Notice. Each holder of a Note will notify the Company of such holder's
acceptance or rejection of such offer by giving written notice of such
acceptance or rejection to the Company on or before the date for such notice
specified in such Change of Control Notice (the "Response Date"), which
specified date shall be not less than 30 days nor more than 60 days after the
date of such Change of Control Notice. The Company shall prepay on the Change
of Control Prepayment Date all of the Notes held by the holders as to which such
offer has been so accepted, at the principal amount of each such Note, together
with interest accrued thereon to the Change of Control Prepayment Date, without
prepayment of the Make-Whole Amount or any premium. If any holder shall reject
such offer or fail to accept such offer on or before the Response Date, such
holder shall be deemed to have waived its rights under this Section 8.3 to
require prepayment of all Notes held by such holder in respect of such Change of
Control but not in respect of any subsequent Change of Control.
8.4. Allocation of Partial Prepayments.
In the case of a partial prepayment of the Notes pursuant to Section
8.1 or 8.2, the principal amount of the Notes to be prepaid shall be allocated
among all of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof.
8.5. Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for
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such prepayment, together with interest on such principal amount accrued to such
date and the applicable Make-Whole Amount, if any. From and after such date,
unless the Company shall fail to pay such principal amount when so due and
payable, together with the interest and Make-Whole Amount, if any, as aforesaid,
interest on such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and canceled and shall not
be reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.
8.6. Purchase of Notes.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except (a) upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes or (b) pursuant to an
offer to purchase made by the Company or an Affiliate pro rata to the holders of
all Notes at the time outstanding upon the same terms and conditions. Any such
offer shall provide each holder with sufficient information to enable it to make
an informed decision with respect to such offer and shall remain open for at
least 30 days. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any such offer and no Notes may be issued in substitution
or exchange for any such Notes.
Promptly and in any event within ten Business Days after each such
purchase of Notes, the Company will furnish each holder of the Notes with a
certificate of a Senior Financial Officer describing such purchase (including
the aggregate principal amount of Notes so purchased and the purchase price
therefor) and certifying that such purchase was made in compliance with the
requirements of this Section.
8.7. Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
"Discounted Value" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the
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Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, 0.50% (50 basis points) over the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the second
Business Day preceding the Settlement Date with respect to such Called
Principal, on (x) the display designated as "Page 678" on the Telerate
service (or such other display as may replace Page 678 on the Telerate
service), or (y) if such on-line market data is not at the time provided by
the Telerate service, on the Bloomberg Financial Markets News screen PX1 or
the equivalent screen provided by Bloomberg Financial Markets News, in any
case for actively traded U.S. Treasury securities having a maturity equal
to the Remaining Average Life of such Called Principal as of such
Settlement Date, or (ii) if such yields are not reported as of such time or
the yields reported as of such time are not ascertainable (including by way
of interpolation), the Treasury Constant Maturity Series Yields reported,
for the latest day for which such yields have been so reported as of the
second Business Day preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively traded
U.S. Treasury security with a maturity closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with a maturity closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such
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Called Principal and interest thereon that would be due after the
Settlement Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date, provided that
if such Settlement Date is not a date on which interest payments are due to
be made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on such
Settlement Date pursuant to Section 8.2 or 12.1.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1. Compliance with Law.
The Company will and will cause each of its Restricted Subsidiaries to
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including without limitation Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2. Insurance.
The Company will and will cause each of its Restricted Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
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9.3. Maintenance of Properties.
The Company will and will cause each of its Restricted Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Company or any Restricted Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.4. Payment of Taxes and Claims.
The Company will and will cause each of its Restricted Subsidiaries to
file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Restricted
Subsidiary, provided that neither the Company nor any Restricted Subsidiary need
pay any such tax or assessment if (i) the amount, applicability or validity
thereof is contested by the Company or such Restricted Subsidiary on a timely
basis in good faith and in appropriate proceedings, and the Company or a
Restricted Subsidiary has established adequate reserves therefor in accordance
with GAAP on the books of the Company or such Restricted Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
9.5. Corporate Existence, etc.
Subject to Section 10.4, the Company will at all times preserve and
keep in full force and effect its corporate existence. The Company will at all
times preserve and keep in full force and effect the corporate existence of each
of its Restricted Subsidiaries (unless merged into the Company or a Restricted
Subsidiary) and all rights and franchises of the Company and its Restricted
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise could not, individually or in the aggregate, have
a Material Adverse Effect.
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10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. Liens.
The Company will not and will not permit any Restricted Subsidiary to
create, assume, incur or suffer to exist any Lien upon or with respect to any
property or assets, whether now owned or hereafter acquired, without making
effective provision (pursuant to documentation in form and substance reasonably
satisfactory to the Required Holders) whereby the Notes shall be secured by such
Lien equally and ratably with or prior to any and all Indebtedness and other
obligations to be secured thereby, provided that nothing in this Section 10.1
shall apply to
(a) Liens existing on the date of the First Closing in respect of
property of the Company or a Restricted Subsidiary and described in
Schedule 5.15;
(b) Liens in respect of property acquired or constructed by the
Company or a Restricted Subsidiary after the date of the First Closing,
which are created at the time of or within 180 days after acquisition or
completion of construction of such property to secure Indebtedness assumed
or incurred to finance all or any part of the purchase price or cost of
construction of such property, provided that in any such case
(i) no such Lien shall extend to or cover any other property of the
Company or such Restricted Subsidiary, as the case may be, and
(ii) the aggregate principal amount of Indebtedness secured by all
such Liens in respect of any such property shall not exceed the cost of
such property and any improvements then being financed;
(c) Liens in respect of property acquired by the Company or a
Restricted Subsidiary after the date of the First Closing, existing on such
property at the time of acquisition thereof (and not created in
anticipation thereof), or in the case of any Person that after the date of
the First Closing becomes a Restricted Subsidiary or is consolidated with
or merged with or into the Company or a Restricted Subsidiary or sells,
leases or otherwise disposes of all or substantially all of its property to
the Company or a Restricted Subsidiary, Liens existing at the time such
Person becomes a Restricted Subsidiary or is so consolidated or merged or
effects such sale, lease or other disposition of property (and not created
in anticipation thereof), provided that in any such case no such Lien shall
extend to
<PAGE>
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or cover any other property of the Company or such Restricted Subsidiary,
as the case may be;
(d) Liens securing Indebtedness owed by a Restricted Subsidiary to
the Company or to a Wholly-Owned Restricted Subsidiary;
(e) any extension, renewal or replacement of any Lien (including
successive extensions, renewals and replacements) permitted by clauses (a)
through (d) above, provided that the principal amount of Indebtedness (or
the maximum commitment therefor) secured by any such Lien is not increased
and such Lien does not extend to or cover any property other than the
property covered by such Lien on the date of such extension, renewal or
replacement;
(f) Permitted Liens; and
(g) Liens which would otherwise not be permitted by clauses (a)
through (e) above, securing additional Indebtedness of the Company or a
Restricted Subsidiary, provided that after giving effect thereto and the
application of the proceeds of such Indebtedness, (i) the aggregate unpaid
principal amount of Indebtedness of the Company and its Restricted
Subsidiaries secured by Liens permitted by this Section 10.1 (without
equally and ratably securing the Notes) plus (ii) the aggregate Value in
respect of all Sale and Leaseback Transactions of the Company and its
Restricted Subsidiaries entered into after the date of the First Closing as
permitted by Section 10.2(b) does not exceed the greater of (x) $50,000,000
and (y) 15% of Consolidated Capitalization.
For purposes of this Section 10.1 any Lien existing in respect of property at
the time such property is acquired or in respect of property of a Person at the
time such Person is acquired, consolidated or merged with or into the Company or
a Restricted Subsidiary, or becomes a Restricted Subsidiary (including by
designation pursuant to Section 10.7), shall be deemed to have been created at
that time.
10.2. Limitation on Sale and Leaseback Transactions.
The Company will not and will not permit any Restricted Subsidiary to
enter into any Sale and Leaseback Transaction with any Person (other than the
Company or a Wholly-Owned Restricted Subsidiary) involving any Principal
Property unless either
(a) in lieu of such Sale and Leaseback Transaction the Company would
be permitted to create a Lien on such Principal Property pursuant to
Section 10.1(b) or (c), or Section 10.1(e) in respect of the extension,
renewal or replacement of a Lien permitted by Section 10.1(a), (b) or (c),
in any case securing Indebtedness in a principal amount
<PAGE>
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equal to the Value attributable to such Sale and Leaseback Transaction,
(b) after giving effect to such Sale and Leaseback Transaction and
the Value attributable thereto the conditions specified in clauses (i) and
(ii) of Section 10.1(g) would be satisfied, or
(c) the net proceeds realized by the Company or such Restricted
Subsidiary from such Sale and Leaseback Transaction are applied within 180
days after the effective date thereof to reinvest in property or assets for
use in the business of the Company and its Wholly-Owned Restricted
Subsidiaries or to the optional or voluntary prepayment, redemption or
retirement of unsubordinated funded Indebtedness of the Company that by its
terms matures more than one year after the original creation thereof.
10.3. Maintenance of Financial Conditions.
The Company will not at any time permit
(a) the Consolidated Indebtedness to EBITDA Ratio to exceed 5.5 to 1,
provided that from and after the date of the first "credit event" described
below there may be a period or nonconsecutive periods aggregating not more
than 1095 days during which such Ratio may exceed 5.5 to 1 but will not at
any time exceed 6.0 to 1 (and for such purpose a "credit event" means that
prior to July 1, 1999 either (i) the Company issues equity securities for
gross proceeds aggregating at least $100,000,000 or (ii) Standard & Poor's
Ratings Group removes the "negative outlook" qualification to its "BBB-"
rating of the Company's senior unsecured Indebtedness without otherwise
reducing such rating), or
(b) Consolidated Net Worth to be less than the sum of (i)
$249,259,000 plus (ii) from and after the date of consummation of an
Acquisition, 75% of the aggregate amount by which Consolidated Net Worth is
increased upon consummation of such Acquisition plus (iii) 25% of
Consolidated Net Income for each fiscal year (beginning with the fiscal
year ending December 31, 1999 and without duplication on account of the
consummation of an Acquisition during such fiscal year) for which
Consolidated Net Income is positive.
10.4. Merger, Consolidation, etc.
The Company will not consolidate with or merge with any other
corporation or convey, transfer or lease all or substantially all of its assets
in a single transaction or series of transactions to any Person unless:
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(a) the continuing, surviving or acquiring corporation (if not the
Company) shall be a corporation organized and existing under the laws of
the United States or any state thereof or the District of Columbia and
shall have (i) executed and delivered to each holder of a Note its
assumption of the due and punctual performance and observance of all
obligations of the Company under this Agreement, the Other Agreements and
the Notes and (ii) caused to be delivered to each holder of a Note an
opinion of counsel reasonably satisfactory to the Required Holders to the
effect that all agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the terms
hereof, and
(b) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall (x) have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 10.4 from its liability under this Agreement or the Notes or (y)
deprive the holder of any Note of its rights under Section 8.3 with respect to
any Change of Control resulting therefrom.
10.5. Lines of Business.
The Company will not permit less than 75% of EBITDA for any period of
four consecutive fiscal quarters to be derived from the businesses in which the
Company and its Restricted Subsidiaries are engaged on the date of the First
Closing (as described in the Memorandum) and businesses complementary or
reasonably related thereto or in furtherance thereof.
10.6. Transactions with Affiliates.
The Company will not and will not permit any Restricted Subsidiary to
enter into directly or indirectly any Material Transaction or series or group of
related transactions after the date of the First Closing that collectively would
constitute a Material Transaction (including without limitation the purchase,
lease, sale or exchange of properties of any kind or the rendering of any
service) with any Affiliate (other than the Company or another Restricted
Subsidiary), except pursuant to the reasonable requirements of the Company's or
such Restricted Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary than would be obtainable
in a comparable arm's-length transaction with a Person not an Affiliate.
As used in this Section, "Material Transaction" means any transaction
or series or group of related transactions that
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is Material, taken as a whole, excluding any transaction specifically referred
to in Schedule 10.6.
10.7. Designation of Restricted and Unrestricted Subsidiaries.
(a) Subject to paragraph (c) below, the Company will not designate
any Subsidiary as an Unrestricted Subsidiary after the date of the First
Closing unless such Subsidiary was not previously (directly or indirectly)
an Unrestricted Subsidiary, except that any Unrestricted Subsidiary that is
designated as a Restricted Subsidiary after the date of the First Closing
pursuant to paragraph (b) below may subsequently be redesignated as an
Unrestricted Subsidiary so long as such Subsidiary is not thereafter
(directly or indirectly) redesignated as a Restricted Subsidiary for at
least five years after such redesignation as an Unrestricted Subsidiary.
After the expiration of such five-year period before the redesignation of
an Unrestricted Subsidiary as a Restricted Subsidiary, the foregoing
limitations as to designations and redesignations shall apply with respect
to such Subsidiary during successive five-year periods.
(b) Subject to paragraph (c) below, the Company will not designate
any Subsidiary as a Restricted Subsidiary after the date of the First
Closing unless such Subsidiary was not previously (directly or indirectly)
a Restricted Subsidiary, except that any Restricted Subsidiary that is
designated as an Unrestricted Subsidiary after the date of the First
Closing pursuant to paragraph (a) above may subsequently be redesignated as
a Restricted Subsidiary so long as such Subsidiary is not thereafter
(directly or indirectly) redesignated as an Unrestricted Subsidiary for at
least five years after such redesignation as a Restricted Subsidiary. After
the expiration of such five-year period before the redesignation of a
Restricted Subsidiary as an Unrestricted Subsidiary, the foregoing
limitations as to designations and redesignations shall apply with respect
to such Subsidiary during successive five-year periods.
(c) The Company will not designate any Restricted Subsidiary as an
Unrestricted Subsidiary or any Person as a Restricted Subsidiary unless
immediately after giving pro forma effect to such designation, no Default
or Event of Default shall have occurred and be continuing.
(d) Forthwith and in any event within ten Business Days after a
designation pursuant to paragraph (a) or (b) above, the Company will
furnish each holder of the Notes with a certificate of a Senior Financial
Officer specifying the effective date of such designation and setting forth
calculations in reasonable detail demonstrating compliance with the
conditions to such designation set forth in paragraph (c) above.
<PAGE>
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11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal of, or Make-
Whole Amount, if any, on any Note when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration or
otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any
term contained in Section 7.1(d) or 8.3 or Sections 10.1 to 10.4,
inclusive, and, in the case of any such default under Section 10.3(b), such
default shall have continued for a period of 90 days after a Responsible
Officer obtains knowledge thereof (if and so long as the Company is
proceeding diligently and in good faith, by issuing equity securities or
otherwise, to remedy such default during such 90-day period); or
(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b)
and (c) of this Section 11) and such default is not remedied within 30 days
after a Responsible Officer obtains knowledge of such default; or
(e) any representation or warranty made in writing by or on behalf of
the Company or any Subsidiary or by any officer of the Company or any
Subsidiary in this Agreement or in any writing furnished in connection with
the transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or
(f) (i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest on any Indebtedness (other
than the Notes) that is outstanding in an aggregate principal amount of at
least $20,000,000 beyond any period of grace provided with respect thereto,
or (ii) the Company or any Restricted Subsidiary is in default in the
performance of or compliance with any term of any evidence of any
Indebtedness outstanding in an aggregate principal amount of at least
$20,000,000 or of any mortgage, indenture or other agreement relating
thereto or any other condition exists, and as a consequence of such default
or condition such Indebtedness has become, or has been declared (or one or
more Persons are
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entitled to declare such Indebtedness to be), due and payable before its
stated maturity or before its regularly scheduled dates of payment, or
(iii) as a consequence of the occurrence or continuation of any event or
condition (other than the passage of time or the right of the holder of
Indebtedness to convert such Indebtedness into equity interests or a sale
of assets or other transaction that is permitted if made in connection with
a repayment of Indebtedness), (A) the Company or any Restricted Subsidiary
has become obligated to purchase or repay any Indebtedness outstanding in
an aggregate principal amount of at least $20,000,000 before its regular
maturity or before its regularly scheduled dates of payment or (B) one or
more Persons have the right to require the Company or any Restricted
Subsidiary so to purchase or repay such Indebtedness; provided that the
provisions of clause (iii) of this paragraph (f) shall not apply to any
offer to repurchase Indebtedness required or resulting from a Change of
Control of a Person acquired by the Company or a Restricted Subsidiary or
to any secured Indebtedness that becomes due as a result of the voluntary
sale or transfer of the property or assets securing such Indebtedness; or
(g) the Company or any Restricted Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any
Restricted Subsidiary, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial part
of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Company or any such Subsidiary, or any such petition shall be filed
against the Company or any such Subsidiary and such petition shall not be
dismissed within 60 days; or
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(i) a final judgment or judgments for the payment of money
aggregating in excess of $25,000,000 are rendered against one or more of
the Company and its Restricted Subsidiaries which judgments are not, within
60 days after entry thereof, bonded, discharged or stayed pending appeal,
or are not discharged within 60 days after the expiration of such stay; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof (except
where the reporting requirement of such failure is waived under Section
4043 of ERISA) or a waiver of such standards or extension of any
amortization period is filed under Section 412 of the Code, (ii) a notice
of intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted proceedings
under ERISA Section 4042 to terminate or appoint a trustee to administer
any Plan or the PBGC shall have notified the Company or any ERISA Affiliate
that a Plan may become a subject of any such proceedings, (iii) the
existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 303(d) of ERISA, whether
or not waived, (iv) the Company or any ERISA Affiliate withdraws from any
Multiemployer Plan; and any such event or events described in clauses (i)
through (iv) above, either individually or together with any other such
event or events, could reasonably be expected to have a Material Adverse
Effect.
12. REMEDIES ON DEFAULT, ETC.
12.1. Acceleration.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 has occurred, all the Notes then
outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Required Holders may at any time at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes
at the time outstanding affected by such Event of Default may at any time,
at its or their option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and payable.
Upon any Note becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Note will forthwith mature and the
entire unpaid principal amount of
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such Note, plus (x) all accrued and unpaid interest thereon and (y) the Make-
Whole Amount determined in respect of such principal amount (to the full extent
permitted by applicable law), shall all be immediately due and payable, in each
and every case without presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and the parties hereto agree,
that each holder of a Note has the right to maintain its investment in the Notes
free from repayment by the Company (except as herein specifically provided) and
that the provision for payment of a Make-Whole Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
12.2. Other Remedies.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3. Rescission.
At any time after any Notes have been declared due and payable
pursuant to paragraph (b) or (c) of Section 12.1, the Required Holders, by
written notice to the Company, may rescind and annul any such declaration and
its consequences if (a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
the non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
12.4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's
<PAGE>
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rights, powers or remedies. No right, power or remedy conferred by this
Agreement or by any Note upon any holder thereof shall be exclusive of any other
right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or collection
under this Section 12, including without limitation reasonable attorneys' fees,
expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. Registration of Notes.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), within five Business
Days thereafter the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request. Each such new Note shall be
dated and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no interest
shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Notes shall not be transferred in denominations of
less than $1,000,000, provided that if necessary to enable the registration of
transfer by a holder of its entire holding of
<PAGE>
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Notes, one Note may be in a denomination of less than $1,000,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed at such time to have made the representation set
forth in Section 6.1.
You agree that the Company shall not be required to register the
transfer of any Note to any Person (other than your nominee) or to any separate
account maintained by you unless the Company receives from the transferee a
representation to the Company (and appropriate information as to any separate
accounts or other matters) to the same or similar effect with respect to the
transferee as is contained in paragraph (a), (b), (c) or (e) of Section 6.2, or
other assurances reasonably satisfactory to the Company that such transfer does
not involve a prohibited transaction (as such term is used in Section 5.12(e)).
You shall not be liable for any damages in connection with any such
representation or assurances provided to the Company by any transferee.
13.3. Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note is,
or is a nominee for, an original Purchaser or any other Institutional
Investor, such Person's own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof, within five Business Days thereafter the Company at its own
expense shall execute and deliver, in lieu thereof, a new Note, dated and
bearing interest from the date to which interest shall have been paid on
such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been
paid thereon.
14. PAYMENTS ON NOTES.
14.1. Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made at the
principal office of Citibank, N.A. in New York City. The Company may at any
time, by notice to each holder of a Note, change the place of payment of the
Notes so long as such place of payment shall be either the principal
<PAGE>
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office of the Company in New York City or the principal office of a bank or
trust company in New York City.
14.2. Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 14.2.
15. EXPENSES, ETC.
15.1. Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all out-of-pocket costs and expenses (including reasonable
attorneys' fees of one firm that acts as special counsel for you and the Other
Purchasers and, if reasonably required, local or other counsel) incurred by you
and each Other Purchaser or holder of a Note in connection with such
transactions and in connection with any amendments, waivers or consents under or
in respect of this Agreement or the Notes (whether or not such amendment, waiver
or consent becomes effective), including without limitation: (a) the costs and
expenses incurred in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement or the Notes or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the Notes, or by reason of being a holder
of any Note, and (b) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
<PAGE>
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transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
In furtherance of the foregoing, on the date of each Closing the
Company will pay or cause to be paid the reasonable fees and disbursements and
other charges (including estimated unposted disbursements and other charges as
of the dates of such statements) of your special counsel referred to in Section
4 which are reflected in the statement of such special counsel submitted to the
Company on or prior to the date of such Closing. The Company will also pay,
promptly upon receipt of supplemental statements therefor, reasonable additional
fees, if any, and disbursements and charges of such special counsel in
connection with the transactions hereby contemplated (including disbursements
and other charges unposted as of the date of a statement to the extent such
disbursements and other charges exceed estimated amounts paid as aforesaid).
15.2. Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1. Requirements.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except
<PAGE>
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that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4,
5, 6 or 21, or any defined term (as it is used therein), will be effective as to
you unless consented to by you in writing, and (b) no such amendment or waiver
may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest or of the Make-Whole Amount on, the
Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
------------
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered decision
with respect to any proposed amendment, waiver or consent in respect of any
of the provisions hereof or of the Notes. The Company will deliver
executed or true and correct copies of each amendment, waiver or consent
effected pursuant to the provisions of this Section 17 to each holder of
outstanding Notes promptly following the date on which it is executed and
delivered by, or receives the consent or approval of, the requisite holders
of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause to be
-------
paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes
as consideration for or as an inducement to such holder's consideration of
or entering into by any holder of Notes of any waiver or amendment of any
of the terms and provisions hereof unless such remuneration is concurrently
paid, or security is concurrently granted, on the same terms, ratably to
each holder of Notes then outstanding even if such holder did not consent
to such waiver or amendment.
17.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall operate
as a waiver of any rights of any holder of such Note. As
<PAGE>
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used herein, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
17.4. Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified for such
communications in Schedule A, or at such other address as you or it shall
have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such address as such
other holder shall have specified to the Company in writing, or
(iii) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of the Chief Financial Officer, or at such
other address as the Company shall have specified to the holder of each Note in
writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at either Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard,
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miniature photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified in writing when received by you as being
confidential information of the Company or such Subsidiary, provided that such
term does not include information that (a) was publicly known or otherwise known
to you prior to the time of such disclosure, (b) subsequently becomes publicly
known through no act or omission by you or any person acting on your behalf, (c)
otherwise becomes known to you other than through disclosure by the Company or
any Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, trustees, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors whose duties require them to
hold confidential the Confidential Information substantially in accordance with
the terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 20), (v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners (including the
Securities Valuation Office) or any similar organization, or any
<PAGE>
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nationally recognized rating agency that requires access to information about
your investment portfolio or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement, such word shall no longer be
deemed to refer to such Affiliate, but shall refer to you, and you shall have
all the rights of an original holder of the Notes under this Agreement.
22. MISCELLANEOUS.
22.1. Successors and Assigns.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including without limitation any subsequent
holder of a Note) whether so expressed or not.
<PAGE>
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22.2. Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.3. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding (but without limiting the requirement in Section 8.2 or 8.3 that
notice of prepayment thereunder specify a Business Day as the date fixed for
such prepayment), any payment of principal of or Make-Whole Amount (if any) or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next succeeding
Business Day.
22.4. Severability.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the fullest extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.
22.5. Accounting Terms; Changes in GAAP.
All accounting terms used herein which are not expressly defined in
this Agreement have the meanings respectively given to them in accordance with
GAAP. Except as otherwise specifically provided herein, all computations made
pursuant to this Agreement shall be made in accordance with GAAP and all balance
sheets and other financial statements with respect thereto shall be prepared in
accordance with GAAP. Except as otherwise specifically provided herein, any
consolidated financial statement or financial computation shall be done in
accordance with GAAP; and, if at the time that any such statement or computation
is required to be made the Company shall not have any Restricted Subsidiary,
such terms shall mean a financial statement or a financial computation, as the
case may be, with respect to the Company only. References in this Agreement to
the determination of items "in accordance with GAAP", or words of similar
import, means that such items shall be derived by reference to, and with the
relevant components of such
<PAGE>
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items being determined in accordance with, GAAP even though (as is the case with
terms such as "pro forma") such terms may not have a meaning under GAAP.
In case GAAP changes from time to time after the date of this
Agreement, the covenant levels or other components of financial computations
required to be made under this Agreement and the Other Agreements shall be
appropriately adjusted by the Company in good faith in consultation with its
independent public accountants, so that the effects of such changes in GAAP will
be negated.
Forthwith and in any event within ten Business Days after any such
adjustment, the Company will furnish each holder of the Notes with certificates
or written statements of a Senior Financial Officer and such accountants
specifying the effective date of such change in GAAP, describing in reasonable
detail such adjustments to covenant levels or other components of financial
computations and certifying that such adjustments were made in accordance with
the requirements of the preceding paragraph of this Section.
22.6. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.7. Governing Law.
This Agreement and the Notes shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
<PAGE>
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If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
HEARST-ARGYLE TELEVISION, INC.
By______________________
Title:
Harry T. Hawks
Senior Vice President and
Chief Financial Officer
The foregoing is hereby agreed
to as of the date thereof.
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By________________________
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF ROGERS & WELLS LLP]
February 11, 1999
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, NY 10106
Re: Hearst-Argyle Television, Inc. Registration Statement on Form S-4
Ladies and Gentlemen:
We are acting as counsel to Hearst-Argyle Television, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company's
Registration Statement on Form S-4 (as the same be amended and supplemented
from time to time, the "Registration Statement") relating to the 37,096,774
shares of the Company's Series A Common Stock, par value $0.01 per share (the
"Shares"), that may be issued by the Company to the stockholders of Pulitzer
Publishing Company, a Delaware corporation ("Pulitzer"), in connection with
the merger (the "Merger") of Pulitzer with and into the Company pursuant to
the Amended and Restated Agreement and Plan of Merger, dated as of May 25,
1998 (the "Merger Agreement"), by and among Pulitzer, Pulitzer, Inc., a
Delaware corporation and a wholly-owned subsidiary of Pulitzer, and the
Company. Except as otherwise defined herein, capitalized terms used but not
defined herein have the meanings provided in the Registration Statement.
We have examined such documents, records and matters of law as we have deemed
necessary for purposes of this opinion. In examining all such documents, we
have assumed the genuineness of all signatures, the authenticity of all
documents purporting to be originals and the conformity to the respective
originals of all documents purporting to be copies. As to factual matters
relevant to the opinions set forth below, we have relied upon certificates of
officers of the Company and public officials, and have not independently
verified the accuracy of the statements contained therein. Based upon the
foregoing and such other examination of law and fact as we have deemed
necessary, we are of the opinion that when the Shares are (i) issued and
delivered after consummation of the Merger in accordance with the Merger
Agreement as contemplated by the Registration Statement and (ii) duly executed
by the Company and countersigned by its Transfer Agent, the Shares will be
validly issued, fully paid and nonassessable.
In rendering the foregoing opinions, our examination of matters of law have
been limited to the laws of the State of New York, the General Corporation Law
of the State of Delaware and the federal laws of the United States of America
as in effect on the date hereof.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to us in the Joint Proxy
Statement/Prospectus under the caption "Legal Matters." In giving this
consent, we do not admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act, or the rules and
regulations of the Commission thereunder.
Very truly yours,
Rogers & Wells LLP
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF ROGERS & WELLS LLP]
February 11, 1999
Hearst-Argyle Television, Inc.
888 Seventh Avenue
New York, New York 10106
Ladies and Gentlemen:
We have acted as counsel to you in connection with the proposed merger (the
"Merger") of Pulitzer Publishing Company ("Pulitzer") with and into Hearst-
Argyle Television, Inc. ("Hearst-Argyle"). This opinion letter is being
furnished to you pursuant to Section 7.04(e) of the Amended and Restated
Agreement and Plan of Merger, dated as of May 25, 1998 (the "Merger
Agreement"), by and among Pulitzer, Pulitzer, Inc. (a wholly owned subsidiary
of Pulitzer) and Hearst-Argyle. Unless otherwise specified herein, all
capitalized terms shall have the meanings ascribed to them in the Merger
Agreement.
We have examined and relied upon the accuracy and completeness of the facts,
information, covenants, statements and representations contained in originals
or copies, certified or otherwise identified to our satisfaction, of the
Merger Agreement, the Joint Proxy Statement/Prospectus (the "Joint
Proxy/Prospectus") filed by Pulitzer and Hearst-Argyle with the Securities and
Exchange Commission on February 11, 1999 (the "Registration Statement") and
such other documents and information as we have deemed necessary or
appropriate as a basis for the opinions set forth below. Our opinions are
expressly conditioned on, among other things, the accuracy as of the date
hereof, and the continuing accuracy of all of such facts, information,
covenants, statements and representations up to and including the Effective
Time.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as certified or photostatic copies and the authenticity of the originals
of such documents. We have also assumed that the contemplated transactions
will be consummated at the Effective Time in accordance with the terms of the
Merger Agreement. In addition, we have, with your consent, relied upon
statements, representations and covenants contained in certificates executed
by officers of Pulitzer and Hearst-Argyle, dated February 11, 1999 (the "Tax
Certificates"), and we have assumed that the Tax Certificates are true,
complete and accurate.
In rendering our opinions, we have considered applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder (the "Regulations"), judicial decisions, rulings of the
Internal Revenue Service and such other authorities as we have considered
relevant. It should be noted that such Code, Regulations, judicial decisions
and administrative interpretations are subject to change at any time and, in
some circumstances, with retroactive effect. A material change in the
authorities or the facts, information, covenants, statements, representations
or assumptions upon which our opinion is based could affect our conclusions
herein.
Based upon and subject to the foregoing, we are of the opinion, and hereby
confirm our opinion set forth in the Joint Proxy/Prospectus under the caption
"Federal Income Tax Consequences of the Spin-Off, the Merger and Related
Transactions--The Merger," that the Merger will qualify as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code. Accordingly, no gain
or loss will be recognized by Hearst-Argyle or Hearst-Argyle stockholders. We
are also of the opinion that the discussion in the Joint Proxy/Prospectus
under the
<PAGE>
captions "Summary--Certain Federal Income Tax Considerations," "Federal Income
Tax Consequences Of The Spin-Off, The Merger and Related Transactions--The
Merger" and "Risk Factors--Risk Factors Associated with the Spin-Off and the
Merger--Federal Income Tax Risks Relating to the Merger", to the extent it
relates to Hearst-Argyle or Hearst-Argyle stockholders, is a fair and accurate
summary of the material Federal income tax consequences of the Merger, subject
to the qualifications set forth therein.
Except as set forth above, we express no opinion to any party as to any
consequences of the Merger, any transactions related thereto or any issue
relating to Hearst-Argyle or any investment therein. This opinion is expressed
as of the date hereof, and we disclaim any undertaking to advise you of any
subsequent changes of the matters stated, represented, or assumed herein or
any subsequent changes in applicable law. This opinion is solely for your and
your stockholders' benefit and is not to be used, circulated, quoted or
otherwise referred to for any purpose, except that we consent in accordance
with the requirements of Item 601(a)(23) of Regulation S-K under the
Securities Act to the filing of this opinion as Exhibit 8.1 of the
Registration Statement. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
The Securities Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
Rogers & Wells LLP
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF FULBRIGHT & JAWORSKI, L.L.P.]
February 11, 1999
Pulitzer Publishing Company
900 North Tucker Boulevard
St. Louis, Missouri 63101
Ladies and Gentleman:
This opinion is being delivered in connection with the Amended and Restated
Agreement and Plan of Merger by and among Pulitzer Publishing Company
("Pulitzer"), Pulitzer, Inc.("New Pulitzer") and Hearst-Argyle Television,
Inc. ("Hearst-Argyle") dated as of May 25, 1998 (the "Merger Agreement").
Pursuant to the Merger Agreement, Pulitzer, after contributing to New Pulitzer
certain of Pulitzer's assets and distributing to Pulitzer's stockholders all
the issued and outstanding shares of capital stock of New Pulitzer, will merge
with and into Hearst-Argyle (the "Merger"), Hearst-Argyle will be the
surviving corporation and the stockholders of Pulitzer will become
stockholders of Hearst-Argyle. This opinion is issued with respect to certain
federal income tax consequences of the Merger. Reference to this opinion is
made in the Joint Proxy Statement/Prospectus of Pulitzer and Hearst-Argyle
dated February 11, 1999 which forms a part of the Registration Statement to
which this opinion is filed as an exhibit (the "Proxy Statement").
All capitalized terms not otherwise defined herein have the respective
meanings assigned to them in the Merger Agreement or the Proxy Statement. All
section references, unless otherwise indicated, are to the Internal Revenue
Code of 1986, as amended (the "Code").
We have acted as legal counsel to Pulitzer and New Pulitzer in connection
with the Merger. As such, and for the purpose of rendering this opinion, we
have examined and are relying upon (without any independent investigation or
review thereof) the truth and accuracy, at all relevant times, of the
statements, representations, covenants and warranties contained in the
following documents:
1. the Merger Agreement;
2. the Proxy Statement;
3. the letter to us from Pulitzer dated February 11, 1999 in which
Pulitzer has made certain representations which we deem necessary in order
to enable us to render this opinion;
4. the letter to us from Hearst-Argyle dated February 11, 1999 in which
Hearst-Argyle has made certain representations which we deem necessary in
order to enable us to render this opinion; and
5. such other documents, records and matters of law as in our judgement
were necessary or appropriate.
In rendering this opinion, we have assumed (without any independent
investigation or review thereof) that original documents (including
signatures) are authentic, that documents submitted to us as copies conform to
the original documents, and that there has been (or will be by the Effective
Time of the Merger) due execution and delivery of all documents where due
execution and delivery are prerequisites to the effectiveness thereof.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we
are of the opinion, and hereby confirm our opinion as set forth in the Proxy
Statement under the caption "Federal Income Tax Consequences of the Spin-Off,
the Merger and Related Transactions--The Merger," that for federal income tax
purposes:
1. the Merger will qualify as a reorganization under Section 368(a)(1)(A)
of the Code;
2. no gain or loss will be recognized by Pulitzer as a result of
consummation of the Merger;
3. no gain or loss will be recognized by a Pulitzer stockholder upon the
exchange of shares of Pulitzer Stock for shares of Hearst-Argyle Merger
Stock pursuant to the Merger, except upon the receipt of cash in lieu of a
fractional share of Hearst-Argyle Merger Stock;
<PAGE>
4. the aggregate adjusted tax basis of shares of Hearst-Argyle Merger
Stock received (including a fractional share deemed received) by a Pulitzer
stockholder pursuant to the Merger will be the same as the aggregate
adjusted tax basis of the shares of Pulitzer Stock surrendered in exchange
therefor;
5. the holding period of the shares of Hearst-Argyle Merger Stock
received (including any fractional share deemed received) by a Pulitzer
stockholder pursuant to the Merger will include the holding period of the
shares of Pulitzer Stock surrendered in exchange therefor, provided that
such Pulitzer Stock is held as a capital asset by the Pulitzer stockholder
at the consummation of the Merger; and
6. a Pulitzer stockholder who receives cash in lieu of a fractional
share of Hearst-Argyle Merger Stock will be treated as if the fractional
share had been distributed as part of the exchange and then such Pulitzer
stockholder had received a cash distribution in redemption of such
fractional share, which will be taxed as provided in Section 302 of the
Code.
We are further of the opinion that the discussion in the Proxy Statement
under the captions "Summary -- Certain Federal Income Tax Considerations,"
"Risk Factors Associated with the Spin-Off and the Merger -- Federal Income
Tax Risks Relating to the Merger" and "Federal Income Tax Consequences of the
Spin-Off, the Merger and Related Transactions -- The Merger," to the extent it
relates to Pulitzer or Pulitzer stockholders, is a fair and accurate summary
of the material federal income tax consequences of the Merger, subject to the
qualifications set forth therein.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment regarding
the application of federal income tax laws arising under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or
the courts, and we cannot provide assurance that the Internal Revenue
Service will not assert a contrary position. Furthermore, we cannot provide
assurance that future legislative, judicial or administrative changes would
not, on either a prospective or retroactive basis, adversely affect the
accuracy of the conclusions stated herein. Moreover, we undertake no
responsibility to advise you of any new developments in the application or
interpretation of the federal income tax laws as they might relate to this
opinion.
2. This opinion addresses only whether the Merger will qualify as a
reorganization under Section 368(a)(1)(A) of the Code and the tax
consequences listed above. The opinion does not address any other federal,
state, local or foreign tax consequences that may result from the Merger or
any other transaction.
3. No opinion is expressed as to any transaction other than the Merger,
as described in the Merger Agreement. Moreover, we have assumed that all
the transactions described in the Merger Agreement have been or will be
consummated in accordance with the terms the Merger Agreement and without
waiver or breach of any material provision thereof and that all of the
representations, warranties, statements and assumptions upon which we have
relied remain true and accurate at all relevant times. Any change after the
date hereof in the facts and circumstances surrounding the Merger, or any
inaccuracy in the representations, warranties, statements and assumptions
upon which we have relied may affect the continuing validity of the opinion
set forth herein. We assume no responsibility to inform you of any such
change or inaccuracy that may occur or come to our attention.
4. This opinion has been delivered to you for the purpose of satisfying
the conditions set forth in Section 7.03(g) of the Merger Agreement and is
intended solely for your and the Pulitzer stockholders' benefit. We hereby
consent to your filing this opinion as an exhibit to the Registration
Statement of which the Proxy Statement forms a part and to the reference
therein to our firm under the captions "Summary -- Certain Federal Income
Tax Considerations," "Federal Income Tax Consequences of the Spin-Off, the
Merger and Related Transactions" and "Legal Matters." This opinion may not
be relied upon for any other purpose or by any other person or entity, and
may not be made available to any other person or entity, without our prior
written consent.
Very truly yours,
Fulbright & Jaworski, L.L.P.
2
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Hearst-Argyle Television, Inc. on Form S-4 of our report dated February 26,
1998 (March 9, 1998 as to Note 18), appearing in the Annual Report on Form 10-
K, as amended by Form 10K/A, of Hearst-Argyle Television, Inc. for the year
ended December 31, 1997, and to the reference to us under the heading
"Experts" in this Registration Statement.
Deloitte & Touche LLP
New York, New York
February 11, 1999
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Joint Proxy
Statement/Prospectus of Hearst-Argyle Television, Inc. and Pulitzer Publishing
Company on Form S-4 of our reports dated February 6, 1998 (July 17, 1998 as to
paragraphs 1, 2, 3 and 5 of Note 2 and paragraphs 3 through 7 of Note 13;
November 25, 1998 as to paragraph 4 of Note 2; and December 11, 1998 as to
Note 17), appearing in the Current Report on Form 8-K, filed on January 22,
1999, of Pulitzer Publishing Company and to the reference to us under the
heading "Experts" in the Joint Proxy Statement/Prospectus, which is part of
this Registration Statement.
We also consent to the incorporation by reference in this Joint Proxy
Statement/Prospectus of Hearst-Argyle Television, Inc. and Pulitzer Publishing
Company on Form S-4 of our report dated July 17, 1998 (November 25, 1998 as to
paragraph 3 of Note 1) related to Pulitzer Broadcasting Company and
Subsidiaries appearing in the Current Report on Form 8-K, filed on January 22,
1999, of Pulitzer Publishing Company and the Current Report on Form 8-K dated
December 16, 1998, as amended of Hearst-Argyle Television, Inc. and to the
reference to us under the heading "Experts" in the Joint Proxy
Statement/Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Saint Louis, Missouri
February 11, 1999
<PAGE>
EXHIBIT 23.5
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in this Registration Statement (Form S-4) of
Hearst-Argyle Television, Inc. of our report dated February 12, 1997 with
respect to the consolidated financial statements and schedule of Argyle
Television, Inc. as of and for the two years ended December 31, 1996 and 1995
included in the Annual Report (Form 10-K) of Argyle Television, Inc., for the
year ended December 31, 1996.
Ernst & Young LLP
San Antonio, Texas
February 11, 1999
<PAGE>
EXHIBIT 23.6
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus/Proxy
Statement constituting part of this Registration Statement on Form S-4 of
Hearst-Argyle Television, Inc. of our report dated November 13, 1998, relating
to the financial statements of Kelly Broadcasting Co., which appears in
Hearst-Argyle's Current Reports on Form 8-K dated September 17, 1998, as
amended by Form 8-K/A dated December 7, 1998. We also consent to the
references to us under the caption "Experts" in such Prospectus/Proxy
Statement.
PricewaterhouseCoopers LLP
Sacramento, California
February 11, 1999
<PAGE>
EXHIBIT 23.9
CONSENT OF MICHAEL E. PULITZER
The undersigned hereby consents to be named in this Registration Statement on
Form S-4 as a person designated to become a director of Hearst-Argyle
Television, Inc. upon the consummation of the Merger (as defined in the Joint
Proxy Statement/Prospectus contained in this Registration Statement).
/s/ Michael E. Pulitzer
Signature: __________________________
Date: February 11, 1999
<PAGE>
EXHIBIT 23.10
CONSENT OF KEN J. ELKINS
The undersigned hereby consents to be named in this Registration Statement on
Form S-4 as a person designated to become a director of Hearst-Argyle
Television, Inc. upon the consummation of the Merger (as defined in the Joint
Proxy Statement/Prospectus contained in this Registration Statement).
Signature: /s/ Ken J. Elkins
------------------------------
Date: February 11, 1999
<PAGE>
EXHIBIT 99.1
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
Board of Directors
Hearst-Argyle Television, Inc.
959 Eighth Avenue
New York, New York 10019
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of Hearst-Argyle Television, Inc. ("Hearst-Argyle") as Annex V to
the Joint Proxy Statement/Prospectus of Hearst-Argyle and Pulitzer Publishing
Company ("Pulitzer") relating to the proposed merger transaction involving
Hearst-Agyle and Pulitzer and references thereto in such Joint Proxy
Statement/Prospectus under the captions "SUMMARY-- Opinion of Financial
Advisor to Hearst-Argyle" and "THE HEARST-ARGYLE MERGER PROPOSAL AND THE
PULITZER MERGER PROPOSAL--Opinion of Financial Advisor to Hearst-Argyle." In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under, and we do not admit that we are
"experts" for purposes of, the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
/s/ Credit Suisse First Boston
Corporation
By: _____________________________________
CREDIT SUISSE FIRST BOSTON CORPORATION
New York, New York
February 11, 1999
<PAGE>
EXHIBIT 99.2
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
PERSONAL AND CONFIDENTIAL
February 11, 1999
Board of Directors
Pulitzer Publishing Company
900 North Tucker Boulevard
St. Louis, Missouri 63101
Re: Registration Statement of Hearst-Argyle Television Inc. relating to Series A
Common Stock, par value $.01 per share, being registered in connection with
the Amended and Restated Agreement and Plan of Merger by and among Hearst-
Argyle Television Inc., Pulitzer Inc., and Pulitzer Publishing Company,
dated as of May 25, 1998.
Ladies and Gentlemen:
Reference is made to our opinion letter dated February 11, 1999 as to the
fairness from a financial point of view to the holders of outstanding shares
of Common Stock, par value $.01 per share, and the Class B Common Stock, par
value $.01 per share (together, the "Shares"), of Pulitzer Publishing Company
(the "Company") of the consideration to be received by the holders of the
Shares in the Merger and the Distribution (each as defined below) taken as a
whole. We understand that pursuant to the Amended and Restated Agreement and
Plan of Merger (the "Merger Agreement," and together with the ancillary
agreements thereto, the "Agreement") dated as of May 25, 1998 by and among
Hearst-Argyle Television, Inc. ("Hearst-Argyle"), Pulitzer Inc., a Delaware
corporation and wholly owned subsidiary of the Company, ("Newco") and the
Company, at the Effective Time (as defined in the Merger Agreement) the
Company will be merged with and into Hearst-Argyle (the "Merger"). Prior to
the effectiveness of the Merger, pursuant to a Contribution Agreement (the
"Contribution Agreement"), to be entered into among the Company and Newco, the
Company will contribute to Newco certain assets of the Company (other than
those assets described in the Contribution Agreement as being retained by the
Company) and Newco will assume certain liabilities of the Company (other than
those liabilities described in the Contribution Agreement as being retained by
the Company); Newco's Common Stock will then be distributed (the
"Distribution") pro rata to holders of Shares. In the Merger, each issued and
outstanding Share will be cancelled and converted into that number of shares
of Series A Common Stock, par value $.01 per share, of Hearst-Argyle
determined by dividing (1) the quotient obtained by dividing $1,150,000,000 by
$31.00, by (2) the number of Shares outstanding immediately prior to the
Effective Time.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of Pulitzer Publishing Company in connection with its
consideration of the transaction contemplated therein and is not to be used,
circulated, quoted or otherwise referred to for any other purpose, nor is it
to be filed with, included in or referred to in whole or in part in any
registration statement, proxy statement or any other document, except in
accordance with our prior written consent. We understand that the Company has
determined to include our opinion in the above-referenced Registration
Statement.
<PAGE>
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary--Opinion of Financial Advisor to Pulitzer", "The
Hearst-Argyle Merger Proposal and the Pulitzer Merger Proposal Background of
and Pulitzer's Reasons for the Spin-Off and the Merger" and "The Hearst-Argyle
Merger Proposal and the Pulitzer Merger Proposal--Opinion of Financial Advisor
to Pulitzer" and to the inclusion of the foregoing opinion in the Joint Proxy
Statement/Prospectus included in the above-mentioned Registration Statement.
In giving such consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
GOLDMAN, SACHS & CO.
- ------------------
(Goldman, Sachs & Co.)
