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Exhibit 10.5
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement") is made as of August 29, 1997
by and between THE HEARST CORPORATION, a Delaware corporation ("Hearst"), and
ARGYLE TELEVISION, INC., a Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, this Agreement is being executed simultaneously with the closing
(the "Closing") of the transactions contemplated by the Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement") by and among Hearst, HAT
Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of
Hearst, HAT Contribution Sub, Inc., a Delaware corporation and a wholly-owned
subsidiary of Hearst, and the Company, pursuant to which the Company will be
renamed "Hearst-Argyle Television, Inc."; and
WHEREAS, Hearst and the Company each desires to make certain arrangements
for the provision of certain services after the Closing by Hearst to the Company
for the periods and on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
SERVICES TO BE PROVIDED
1.1 SERVICES. The parties agree that, subject to the terms and conditions
of this Agreement, Hearst shall provide to the Company the services described on
SCHEDULE 1.1 (the "Services").
1.2 COOPERATION. The Company shall cooperate fully and provide such
assistance as is reasonably required for Hearst to provide the Services. During
the Term, Hearst shall provide the Company with reasonable access during normal
business hours to the books and records of Hearst relating to the Services and
Hearst management and employees involved in providing the Services will be
available to confer with the Company. The parties agree to adjust the manner or
procedures for providing the Services hereunder in order to accommodate
necessary or appropriate controls required or suggested by the Company's
independent auditors or the Audit Committee of the Company's Board of Directors.
1.3 STAFFING. All Services may be performed by Hearst's employees and
Hearst shall not be required to hire any persons other than its own employees in
connection with the
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performance of the Services. Hearst, however, shall be entitled to obtain such
Services from a third party. Hearst agrees to consult with the Company
concerning obtaining Services from a third party and if Hearst obtains Services
from a third party exclusively for the benefit of the Company, Hearst agrees to
obtain the consent of the Company, such consent not to be unreasonably withheld.
In the event that both Hearst and a third party provide Services to the Company,
the Company shall bear all out-of-pocket costs and expenses associated with
obtaining Services from a third party ("Third Party Costs"). Additionally, the
Service Costs set forth on Schedule 2.1 shall be adjusted to reflect Hearst's
outsourcing to a third party, Services which had previously been directly
provided by Hearst.
ARTICLE 2
SERVICE COSTS AND PAYMENT TERMS
2.1 COST FOR SERVICES. The fees to be paid by the Company for each Service
(the "Service Costs") shall be a monthly amount equal to the sum of a monthly
allocation (calculated based on twelve months) of the total fixed annual fees
and the monthly variable transaction fees as set forth on SCHEDULE 2.1 hereto.
The Company acknowledges and agrees that the Service Costs set forth on Schedule
2.1 reflect Hearst's good faith efforts to estimate such Service Costs as of the
date hereof, and as such, the Company agrees that such Service Costs shall be
subject to adjustment annually, beginning the calendar year 1999, to reflect
changes in costs or other assumptions used to establish the Service Costs.
Hearst and the Company agree that if during the Term the Company either acquires
or divests a television or radio station, then the Service Costs shall be
adjusted to reflect such transaction. Hearst agrees that any adjustment in the
Service Costs shall be consistent with adjustments made in costs charged to
other Hearst divisions and any adjustments in Service Costs for Services
provided exclusively to the Company by Hearst shall only be by the mutual
agreement of Hearst and the Company.
2.2 PAYMENT. The Service Costs will be paid as follows:
(a) Monthly Invoices. Within 15 days after the end of each month
during the Term, Hearst will provide to the Company an invoice for the Services
of Service Costs therefor for the month just ended, plus any Third Party Costs.
At the Company's direction, Hearst shall deduct the amount shown on each such
invoice 15 days after the date thereof from the Company's cash management
account if maintained by Hearst. In the event that the Company's cash management
account balance is insufficient to cover the monthly invoice or the Company does
not direct Hearst to deduct the Service Costs from the Company's cash management
account, the Company shall pay the amount shown on each such invoice within 15
days after the date thereof by means of a Company check. The Service Costs for
any Service that is provided for only part of a month shall be appropriately
prorated.
(b) Other Documents. Hearst shall provide to the Company upon
reasonable request any reports or summaries relating to the Service Costs, which
the Company may need for preparing financial statements, tax returns or
otherwise.
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2.3 INTEREST ON LATE PAYMENTS. Any monthly payment of the Service Costs
that is not paid on or before the thirtieth day after the date of an invoice
pursuant to Section 2.2(a), shall bear interest from the thirtieth day after the
date of such invoice until the date paid at the lesser of (i) an annual simple
interest rate equal to the prime rate of interest announced by Chase Manhattan
Bank at its principal office in New York, New York as its "prime rate," plus
1.5%, or (ii) the maximum amount permitted by applicable laws. Hearst agrees
that interest will not be charged on any portion of the monthly Service Costs
contested in good faith by the Company.
2.4 TAXES. Any transaction, excise, sales or other tax imposed on or
measured by the rendering of a Service shall be the responsibility of the
Company.
ARTICLE 3
TERM AND TERMINATION
3.1 TERM. The term of this Agreement shall commence on the date first
written above and shall continue through December 31, 1998 (the "Initial Term")
and thereafter shall renew for successive one year periods unless and until
terminated as provided in Section 3.2 (together with the Initial Term, the
"Term").
3.2 TERMINATION. After the Initial Term, this Agreement may be terminated
(i) by Hearst, on written notice given to the Company at least six months prior
to the proposed termination date or (ii) by the Company, on written notice given
to Hearst at least six months prior to the proposed termination date; provided,
however, if this Agreement is terminated by the Company, the Company shall pay
to Hearst the reasonable and direct out-of-pocket costs incurred by Hearst
associated with such termination. During the Term, if either party shall breach
in any material respect any of its obligations or agreements under this
Agreement, including but not limited to, the failure of the Company to make
payments (other than those contested in good faith) when due, and said party
does not cure such default within 30 days after receiving written notice thereof
from the non-breaching party, the non-breaching party may terminate this
Agreement by providing written notice of termination given at least 60 days
prior to the proposed termination date. Upon such termination, Hearst and/or the
Company shall promptly return any and all property of the other party used in
connection with the provision of the Services.
ARTICLE 4
LIABILITIES
4.1 LIMITATION OF LIABILITY; CONSEQUENTIAL DAMAGES. In providing the
Services, Hearst shall not have any liability hereunder except to the extent
that Hearst shall be finally judicially determined to have engaged in gross
negligence or willful misconduct. In addition, Hearst shall not be liable,
whether in contract, in tort (including negligence and strict liability), or
otherwise, for any special, indirect, incidental or consequential damages
whatsoever (including, but not limited to, lost profits), which in any way arise
out of, relate to, or are a consequence of, its performance or nonperformance
under this Agreement, or the provision of or failure to provide any Service
under this Agreement.
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4.2 INDEMNITY. (a) The Company hereby agrees to indemnify and hold
harmless Hearst, and its affiliates, their respective officers, directors,
employees, successors and assigns and agents and each other person, if any,
controlling Hearst, or any of its affiliates (Hearst and each such other person
being a "Hearst Indemnified Person") from and against any and all losses,
claims, damages, liabilities and expenses (including, without limitation,
reasonable fees and expenses of counsel) related to, arising out of or in
connection with the Services provided pursuant to this Agreement, provided,
however, the Company shall not be responsible for any losses, claims, damages or
liabilities (or expenses relating thereto) that result directly and solely from
the gross negligence or willful misconduct of any Hearst Indemnified Person.
(b) Hearst hereby agrees to indemnify and hold harmless the Company, its
affiliates, and their respective officers, directors, employees, successors and
assigns and agents and each other person, if any, controlling the Company, or
any of its affiliates from and against any and all losses, claims, damages or
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that result directly and solely from the gross negligence
or willful misconduct of Hearst in connection with the Services provided
pursuant to this Agreement.
4.3 INDEMNIFICATION PROCEDURES. The party making a claim under this
Article IV is referred to as the "Indemnified Party" and the party against whom
such claims are asserted under this Article IV is referred to as the
"Indemnifying Party". All claims by any Indemnified Party under this Article IV
shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which an Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against or
sought to be collected from such Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand, specifying the basis for such claim
or demand, and the amount or the estimated amount thereof to the extent then
determinable (which estimate shall not be conclusive of the final amount of such
claim and demand) (the "Claim Notice"); provided, however, that any failure to
give such Claim Notice will not be deemed a waiver of any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced by such failure. The Indemnifying Party shall have the right
to control the defense of such claim or demand and shall retain counsel (who
shall be reasonably acceptable to the Indemnified Party) to represent the
Indemnified Party and shall pay the reasonable fees and disbursements of such
counsel with regard thereto; provided, however, that any Indemnified Party is
hereby authorized prior to the date on which it receives written notice from the
Indemnifying Party designating such counsel, to retain counsel, whose fees and
expenses shall be at the expense of the Indemnifying Party, to file any motion,
answer or other pleading and take such other action which it reasonably shall
deem necessary to protect its interests or those of the Indemnifying Party until
the date on which the Indemnified Party receives such notice from the
Indemnifying Party. After the Indemnifying Party shall retain such counsel, the
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party.
The Indemnifying Party shall not, in connection with any proceedings or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one counsel for the Indemnified Party (except to the extent the
Indemnified Party retained counsel to protect its (or the
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Indemnifying Party's) rights prior to the selection of counsel by the
Indemnifying Party). If requested by the Indemnifying Party, the Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in
contesting any claim or demand which the Indemnifying Party defends. A claim or
demand may not be settled by the Indemnifying Party without the prior written
consent of the Indemnified Party (which consent will not be unreasonably
withheld) unless, as part of such settlement, the Indemnified Party shall
receive a full and unconditional release reasonably satisfactory to the
Indemnified Party. If the Indemnifying Party elects to defend a claim or demand,
the Indemnified Party shall not pay or settle such claim or demand without the
consent of the Indemnifying Party. In each instance, the Indemnified Party shall
have the right to be kept fully informed by the Indemnifying Party and its legal
counsel with respect to any legal proceedings.
(b) In the event any Indemnified Party shall have a claim against
any Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to the
Indemnifying Party.
ARTICLE 5
MISCELLANEOUS
5.1 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by Hearst
or the Company without the prior written consent of the other party, except as
provided in Section 1.3 with respect to Hearst's ability to retain third parties
to provide services and except that either Hearst or the Company may assign its
right and obligations hereunder to one of its wholly-owned subsidiaries, and any
attempt to assign any rights or obligations arising under this Agreement without
such prior consent in violation hereof shall be null and void.
5.2 GOVERNING LAW. The construction, validity and enforceability of this
Agreement shall be governed by the laws of the State of New York, without regard
to its conflicts of laws principles.
5.3 NOTICES. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
(a) If to Hearst:
The Hearst Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) If to the Company:
Hearst-Argyle Television, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
5.4 NO WAIVER. The failure of either party at any time to require
performance by the other party of any provision of this Agreement shall in no
way affect the right of such party to require performance of that provision. Any
waiver by either party of any breach of any provision of this Agreement shall
not be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself or a waiver of any right under this
Agreement.
5.5 SEVERABILITY. All provisions of this Agreement are severable and any
provision which may be prohibited by law shall be ineffective to the extent of
such prohibition without invalidating the remaining provisions of this
Agreement.
5.6 ENTIRE AGREEMENT; MODIFICATIONS AND AMENDMENTS. This Agreement
(including the Schedules hereto) and any other agreements executed and delivered
by the parties contemporaneously herewith constitute the entire agreement
between the parties concerning the subject matter thereof and supersedes all
prior agreements and understandings, both oral or written, between the parties
with respect to the subject matter hereof.
5.7 INDEPENDENT CONTRACTOR STATUS. Hearst shall be deemed to be an
independent contractor to the Company. Nothing contained in this Agreement shall
create or be deemed to create the relationship of employer and employee, and no
party to this Agreement shall, by reason hereof, be deemed to be a partner or a
joint venturer of any other party hereto in the conduct of their respective
businesses and/or the conduct of the activities contemplated by this Agreement.
5.8 BINDING EFFECTS; BENEFITS. This Agreement will be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Nothing contained in this
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Agreement, express or implied, is intended to confer upon any person other than
the parties to it and their respective successors and permitted assigns any
rights or remedies under or by reason of this Agreement.
5.9 SURVIVAL. In the event this Agreement is terminated pursuant to
Section 3.2, this Agreement shall become null and void and of no further force
and effect, except for the provisions of Sections 4.1, 4.2 and 4.3.
5.10 SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not in any way control the meaning or
interpretation of this Agreement.
5.11 FORCE MAJEURE. Hearst shall be excused from performing the Services
under this Agreement and shall have no liability to the Company for any period
it is prevented from performing the Services, in whole or in part, as a result
of delays caused by an act of God, war, civil disturbance, court order, labor
dispute, machinery breakdown or other cause beyond its reasonable control,
including failures or fluctuations in electrical power or telecommunications
(the "Force Majeure Period") or, in the event that Hearst obtains any Services
from a third party, the failure of such third party to provide such Services, or
the misconduct or negligence of such party in providing such Services. In the
event the Force Majeure Period continues for six consecutive months, either
party may terminate this Agreement on written notice given by the terminating
party at least five days prior to the proposed termination date. Also, if during
the Force Majeure Period, Hearst outsources to a third party any Services
provided by Hearst hereunder, the Service Costs set forth on Schedule 2.1 shall
be adjusted to reflect amounts paid to such third party.
5.12 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall constitute an
original, but all such counterparts shall together constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE HEARST CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President
ARGYLE TELEVISION, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer, Secretary &
Treasurer
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SCHEDULE 1.1
SERVICES
1. Corporate Accounting. Provide or assist in providing accounting services
relating to corporate accounting, cash accounting, intra unit and inter company
accounting, consolidation and reporting.
2. Accounts Payable. Maintain on its computer system the Company's accounts
payable system and provide or assist in providing accounts payable services.
3. General Ledger. Maintain on its computer system the Company's general
ledger and provide or assist in providing general ledger services.
4. Payroll Services. Provide or assist in providing payroll services.
5. Legal. Provide or assist in providing legal services.
6. Treasury Support. Provide or assist in providing treasury support services,
including, but not limited to, cash management, tax return preparation and
payment and corporate insurance administration.
7. Employee Benefits. Provide or assist in providing services related to the
Company's employee benefits, including, but not limited to, pension, 401(k),
medical, life and long-term disability insurance and supplemental pension plan.
8. Travel and Entertainment. Provide or assist in providing travel and
entertainment services.
9. Fleet Car. Provide or assist in providing fleet car services.
10. Networking Capabilities. Provide or assist in providing network services.
11. Internal Auditing. Provide or assist in providing internal auditing
services.
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SCHEDULE 2.1
ANNUAL SERVICE COSTS
See Attached.
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SCHEDULE 2.1
HEARST ARGYLE TELEVISION, INC.
SERVICE CENTER CHARGES
HEARST STATIONS PAYROLL~CHECKS ACCOUNTS PAYABLE GENERAL LEDGER TRAVEL & ENTERTAINMENT
PROCESSED VOUCHERS PROCESSED TRANSACTIONS PROCESSED CHECKS PROCESSED
Volume(1) Cost Total Volume (1) Cost Total Volume (1) Cost Total Volume (1)
KMBC-TV 4,494 4.73 $21,257 4,056 3.72 $15,088 11,390 0.82 $9,340 500
---------------------------- ----------------------- --------------------- ----
WBAL-TV 6,508 $30,783 5,034 $18,726 8,998 $7,378 500
----------------------------- ----------------------- --------------------- ----
WCVB-TV 10,162 $48,066 10,590 $39,395 20,536 $16,840 750
----------------------------- ----------------------- --------------------- ----
WDTN-TV 3,944 $18,655 4,856 $18,064 9,900 $8,118 500
----------------------------- ----------------------- --------------------- ----
WISN-TV 5,494 $25,987 6,996 $26,025 9,492 $7,783 500
----------------------------- ----------------------- --------------------- ----
WTAE-TV 6,240 $29,515 6,290 $23,399 10,380 $8,512 500
----------------------------- ----------------------- --------------------- ----
Subtotal 36,842 $174,263 37,822 $140,697 70,696 $57,971 3,250
------ -------- ------ -------- ------ ------- -----
ARGYLE STATIONS (3)
KHBS?CHOG-TV
KTTV-TV
KOOO-TV
WAPT-TV
WLWT-TV
WNAC-TV
Subtotal
Total Service Charge to Hearst-Argyle
MANAGED UNITS
KCWB-TV 366 $1,731 1,766 $6,570 6,844 $5,612 100
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WPBF-TV (3)
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WWWB-TV 1,032 $4,881 2,454 $9,129 3,706 $3,039 100
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WBAL RADIO 1,300 $6,149 2,852 $10,609 9,322 $7,644
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Total 2,698 $12,761 7,072 $26,308 19,872 $16,295 200
===== ======= ===== ======= ====== ======= ===
RADIO
WISN RADIO 768 $3,623 1,648 $6,131 8,728 $7,157
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WTAE RADIO 1,176 $5,572 1,902 $7,075 9,902 $8,120
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Total 1,944 $9,195 3,550 $13,206 18,630 $15,277
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(1) Volume based on first 6 months of 1997 annualized
(2) Estimated Volume
(3) No volume currently available
(4) Financial Office Services include the administration of the following
areas: Insurance, Banking and Finance, Pension and Investments, Employee
Benefits, Tax, Consolidation and Reporting and Internal Audit
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FLEET TOTAL COLUMBINE WIDE AREA FINANCIAL LEGAL TOTAL
ADMINISTRATION SHARED SERVICES NETWORK OFFICE (4) PROCESSING CHARGE
Total
$3,750 $1,500 $50,935 $22,000 $68,007 $38,640 $180,582
------ ------ ------- ------- ------- ------- --------
$3,750 $1,500 $62,138 $22,000 $96,066 $58,935 $239,139
------ ------ ------- ------- ------- ------- --------
$5,625 $1,500 $111,425 $22,000 $189,842 $218,035 $539,103
------ ------ -------- ------- -------- -------- --------
$3,750 $1,500 $50,087 $22,000 $38,262 $25,267 $138,616
------ ------ ------- ------- ------- ------- --------
$3,750 $1,500 $65,045 $22,000 $68,124 $65,817 $219,985
------ ------ ------- ------- ------- ------- --------
$3,750 $1,500 $66,676 $22,000 $98,569 $44,306 $231,551
------ ------ ------- ------- ------- ------- --------
$24,375 $9,000 $406,306 $132,000 $558,870 $451,000 $1,548,976
------- ------ -------- -------- -------- -------- ----------
$25,000 $22,000 $26,144 $21,241 $94,385
------- ------- ------- ------- -------
$25,000 $22,000 $26,144 $21,241 $94,385
------- ------- ------- ------- -------
$25,000 $22,000 $26,144 $21,241 $94,385
------- ------- ------- ------- -------
$25,000 $22,000 $26,144 $21,241 $94,385
------- ------- ------- ------- -------
$55,000 $22,000 $57,520 $46,722 $181,242
------- ------- ------- ------- --------
$5,000 $22,000 $5,234 $4,214 $36,448
------ ------- ------ ------ -------
$160,000 $132,000 $167,330 $135,900 $595,230
-------- -------- -------- -------- ----------
$566,306 $264,000 $726,200 $586,900 $2,144,206
======== ======== ======== ======== ==========
$750 $14,663 $14,663
---- ------ -------- ------- -------- -------- -------- ---------
$25,000 $22,000 $26,144 $21,241 $94,385
------- ------ -------- ------- -------- -------- ------- -------
$750 $1,500 $19,299 $22,000 $26,144 $21,241 $88,684
------- ------ -------- ------- ------- ------- ------- -------
$24,402 $16,000 $22,333 $17,333 $80,068
------- ------- ------- ------- ------- ------- ------- -------
$1,500 $1,500 $83,364 $16,000 $44,000 $74,621 $59,815 $277,800
====== ====== ======= ======= ======= ======= ======= ========
$16,911 $16,000 $22,333 $17,333 $72,577
------- ------- ------- ------- -------
$20,767 $16,000 $22,333 $17,333 $76,433
------- ------- ------- ------- -------
$37,678 $32,000 $44,666 $34,666 $149,010
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