Exhibit 2.1
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▇▇▇▇▇ TELEVISION CO.
AGREEMENT AND PLAN OF MERGER
dated as of August 21, 1998
among
▇▇▇▇▇ TELEVISION CO.,
▇.▇. ▇▇▇▇▇ L.L.C.,
▇.▇. ▇▇▇▇▇ L.L.C.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ CORPORATION
and
KCPQ ACQUISITION CORP.
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms.............................................. 6
1.02. Other Defined Terms................................................ 8
ARTICLE II
THE MERGER
2.01. The Merger......................................................... 9
2.02. Closing............................................................ 10
2.03. Effective Time..................................................... 10
2.04. Effect of the Merger............................................... 11
2.05. Articles of Incorporation; Bylaws.................................. 11
2.06. Directors and Officers of Surviving Corporation.................... 11
2.07. Merger Consideration............................................... 11
2.08. Escrow Deposit..................................................... 12
2.09. Payment of Merger Consideration.................................... 12
2.10. Working Capital Adjustments........................................ 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KTC
3.01. Organization of KTC................................................ 15
3.02. Authorization, Execution and Delivery by KTC....................... 15
3.03. Partners; Partnership Interests.................................... 15
3.04. No Conflict........................................................ 15
3.05. Consents and Approvals............................................. 16
3.06. Financial Information.............................................. 16
3.07. Absence of Undisclosed Liabilities................................. 16
3.08. Absence of Certain Changes or Events............................... 16
3.09. Absence of Litigation.............................................. 18
3.10. Compliance with Laws............................................... 18
3.11. FCC Licenses and Reports and Records; Government Permits........... 18
3.12. Material Contracts................................................. 19
3.13. Real Property...................................................... 20
3.14. Employment Matters................................................. 21
3.15. Taxes.............................................................. 22
3.16. Personal Property.................................................. 22
3.17. Personal Property Leases........................................... 22
3.18. Intellectual Property.............................................. 23
3.19. Title to Assets.................................................... 23
3.20. Accounts Receivable................................................ 23
3.21. Insurance.......................................................... 23
3.22. Environmental Protection........................................... 24
3.23. Availability of Assets............................................. 24
3.24. Business of KTC.................................................... 24
3.25. Brokers............................................................ 24
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTNERS
4.01. Incorporation of such Partner; Authorization, Execution and
Delivery by Such Partner......................................... 25
4.02. No Conflict........................................................ 25
4.03. Consents and Approvals............................................. 25
4.04. Title to Partnership Interests..................................... 26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND MERGER SUB
5.01. Incorporation of the Purchaser and Merger Sub...................... 26
5.02. Authorization, Execution and Delivery by the Purchaser and
Merger Sub....................................................... 26
5.03. No Conflict........................................................ 26
5.04. Consents and Approvals............................................. 27
5.05. Absence of Litigation.............................................. 27
5.06. Financing.......................................................... 27
5.07. Ownership of Merger Sub; No Prior Activities....................... 27
5.08. Qualification of Purchaser......................................... 27
5.09. Brokers............................................................ 28
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Conduct of Business Prior to the Effective Time.................... 28
6.02. Access to Information.............................................. 30
6.03. Confidentiality.................................................... 30
6.04. Regulatory Consents and Approvals; Third Party Consents............ 30
6.05. Investigation...................................................... 31
6.06. Change of Name of Business......................................... 31
6.07. Interim Financial Statements....................................... 31
6.08. Funds Necessary to Pay the KTC Purchase Price...................... 31
6.09. Further Action..................................................... 32
ARTICLE VII
EMPLOYEE MATTERS
7.01. Continuation of Benefits........................................... 32
7.02. Service Credit..................................................... 32
7.03. Subsequent Purchaser............................................... 32
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ARTICLE VIII
TAX MATTERS
8.01. General............................................................ 32
8.02. Allocation of Tax Liabilities; Tax Indemnities..................... 32
8.03. Tax Returns........................................................ 33
8.04. Refunds and Tax Benefits........................................... 34
8.05. Contests........................................................... 35
8.06. Conveyance Taxes................................................... 36
8.07. Cooperation on Tax Matters......................................... 36
8.08. Allocation of KTC Purchase Price................................... 36
8.09. Miscellaneous...................................................... 37
ARTICLE IX
CONDITIONS TO THE MERGER
9.01. Conditions to Obligations of KTC and the Partners.................. 37
9.02. Conditions to Obligations of the Purchaser and Merger Sub.......... 38
ARTICLE X
INDEMNIFICATION
10.01. Survival of Representations and Warranties; Covenants and
Agreements...................................................... 40
10.02. Indemnification by the Indemnifying Partners...................... 40
10.03. Indemnification by the Purchaser.................................. 41
10.04. Indemnification Procedures........................................ 42
10.05. Tax Matters....................................................... 43
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.01. Termination....................................................... 43
11.02. Effect of Termination............................................. 44
11.03. Waiver............................................................ 44
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ARTICLE XII
GENERAL PROVISIONS
12.01. Expenses.......................................................... 44
12.02. Notices........................................................... 44
12.03. Public Announcements.............................................. 45
12.04. Headings.......................................................... 45
12.05. Severability...................................................... 45
12.06. Entire Agreement.................................................. 46
12.07. Assignment........................................................ 46
12.08. No Third-Party Beneficiaries...................................... 46
12.09. Amendment......................................................... 46
12.10. Governing Law..................................................... 46
12.11. Counterparts...................................................... 46
12.12. Board Approval.................................................... 46
Exhibits and Schedules
KTC Disclosure Schedule
Purchase Disclosure Schedule
Exhibit 2.08 Escrow Agreement
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▇▇▇▇▇ TELEVISION CO. AGREEMENT AND PLAN OF MERGER, dated as of August 21,
1998, among ▇▇▇▇▇ TELEVISION CO., a Washington limited partnership ("KTC"),
▇.▇. ▇▇▇▇▇ L.L.C., a Delaware limited liability company ("JSK" or the "General
Partner"), ▇.▇. ▇▇▇▇▇ L.L.C., a Delaware limited liability company ("GGK"),
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (each of JSK, GGK and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ being a "Partner" and,
together, the "Partners"), ▇▇▇▇▇▇▇▇ CORPORATION, an Iowa corporation (the
"Purchaser"), and KCPQ ACQUISITION CORP., a Washington corporation and wholly
owned subsidiary of the Purchaser ("Merger Sub").
W I T N E S S E T H :
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WHEREAS, KTC owns and operates the television broadcast station KCPQ-TV,
channel 13, Seattle-Tacoma, Washington (the "KCPQ Station" or the "Station");
WHEREAS, JSK is the sole general partner of KTC pursuant to the Amended
and Restated Limited Partnership Agreement of ▇▇▇▇▇ Television Co. effective as
of October 29, 1997 (the "KTC Partnership Agreement");
WHEREAS, JSK, GGK and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ are all of the limited partners of
KTC pursuant to the KTC Partnership Agreement;
WHEREAS, KTC and each of the Partners have determined that it is in their
respective best interests, and the Boards of Directors of the Purchaser and
Merger Sub have each determined that it is in the best interests of their
respective shareholders, for the Purchaser to acquire KTC upon the terms and
subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, KTC and the Partners and the
respective Boards of Directors of the Purchaser and Merger Sub have each
approved the merger (the "Merger") of KTC with and into Merger Sub with Merger
Sub being the surviving corporation in the Merger in accordance with the
Washington Business Corporation Act (the "WBCA") and the Washington Revised
Limited Partnership Act (the "WRLPA") and upon the terms and subject to the
conditions set forth herein;
WHEREAS, KTC, the Partners, the Purchaser and Merger Sub desire to make
certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe certain conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
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"Agreement" means this ▇▇▇▇▇ Television Co. Agreement and Plan of Merger,
dated as of August [___], 1998, among KTC, the Partners, the Purchaser and
Merger Sub (including the KTC Disclosure Schedule) and all amendments hereto
made in accordance with Section 12.10.
"Business" means the business of KTC as conducted as of the date hereof.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in the State of
Washington.
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications Act" means the Communications Act of 1934, as amended, and
the rules and regulations thereunder.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste, in each
case to the extent regulated by environmental, health or safety Requirements of
Law.
"Credit Agreements" means (i) the Credit Agreement dated as of October 28,
1997 among JSK and GGK as borrowers, KBC and KTC as guarantors, the financial
institutions party thereof as banks and Bank of America National Trust and
Savings Association as agent, and related interest rate swap agreements,
(ii) the Security Agreement dated as of October 28, 1997 among JSK and GGK as
borrowers, KBC and KTC as grantors, and Bank of America National Trust and
Savings Association as agent, (iii) the Copyright Security Agreement dated as
of October 28, 1997 among JSK, GGK, KBC and KTC as grantors, and Bank of
America National Trust and Savings Association as agent, and (iv) the Trademark
Security Agreement dated as of October 28, 1997 among JSK, GGK, KBC and KTC as
grantors, and Bank of America National Trust and Savings Association as agent.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FCC" means the Federal Communications Commission or any successor entity.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"KTC Disclosure Schedule" means the Disclosure Schedule dated as of the
date hereof delivered to the Purchaser by KTC and the Partners.
"knowledge of the Partners" or "Partners' knowledge" means the actual
knowledge of ▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
"KBC" means ▇▇▇▇▇ Broadcasting Co., a California limited partnership,
whose partners are JSK, GGK and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and which (i) owns and operates
the television broadcast station KCRA-TV, channel 3, Sacramento, California
(the "KCRA Station"), and (ii) programs and sells air time for the television
broadcast station KQCA-TV, channel 58, Sacramento, California (the "KQCA
Station") pursuant to the Time Brokerage Agreement, dated December 8, 1994,
between KBC and Channel 58, Inc. (as amended on January 1, 1997 and August 6,
1998, the "LMA").
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"Material Adverse Effect" means any change in, or effect on KTC or the
Business that is or is reasonably likely to be materially adverse to the
results of operations or the financial condition of KTC or the Business, taken
as a whole, except for any such changes or effects affecting the U.S. economy
or the broadcasting industry in general.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement
of Contaminants through or in the air, soil, surface water, groundwater or
property.
"Remedial Action" means actions required to (a) clean up, remove, treat or
in any other way address Contaminants in the indoor or outdoor environment;
(b) prevent the Release or threat of Release or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (c) perform pre-
remedial studies and investigations and post-remedial monitoring and care.
"Requirements of Law" means any foreign, federal, state or local law, rule
or regulation, Governmental Permit or other binding determination of any
governmental body.
"Return" means any return, report or form related to Taxes.
"Subsidiary" or "Subsidiaries" means any and all corporations,
partnerships, joint ventures, associations, and other entities in which the
majority of voting common stock or other equity interest is held by a party
directly or indirectly through one or more intermediaries.
"Tax" or Taxes" means all income, gross receipts, sales, use, employment,
franchise, profits, property, transfer or other taxes, fees, stamp taxes and
duties, assessments or charges of any kind whatsoever (whether payable directly
or by withholding), together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority with respect thereto.
SECTION 1.02. Other Defined Terms. The following terms shall have the
meanings defined for such terms in the Sections of this Agreement set forth
below:
Term Section
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Articles of Merger 2.03
Allocation 8.08
Claim 6.06
Closing 2.02
Closing Working Capital Estimate 2.10(a)
Confidentiality Agreement 6.03
Contest 8.05(c)
Effective Time 2.03
Escrow Agent 2.08
Escrow Agreement 2.08
Escrow Deposit 2.08
FCC Licenses 3.11(a)
FCC Order 9.02(d)
Fox 6.04(d)
Fox Affiliation Agreement 6.04(d)
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General Partner preamble
GGK preamble
GGK KTC Partnership Interest 2.07(a)
GGK KTC Purchase Price 2.07(a)
Governmental Permits 3.11
Independent Accounting Firm 2.10(e)
IRS 3.14(a)
JSK preamble
JSK KTC Partnership Interest 2.07(b)
JSK KTC Purchase Price 2.07(b)
KTC preamble
KTC Accounting Policies 2.10(c)
KTC Benefit Plans 3.14(a)
KTC Partnership Agreement recitals
KTC Purchase Price 2.07
KTC's Accountants 2.10(c)
Loss 10.02(a)
Management Indemnified Parties 6.06
Material Contracts 3.12(a)
Merger recitals
Merger Sub preamble
▇▇▇▇▇▇▇ ▇▇▇▇▇ 3.25
Operating Contracts 3.12(a)
Partner preamble
Post-Effective Time Tax Benefit 8.04(b)
Program Contracts 3.12(a)
Purchaser preamble
Purchaser's Accountants 2.10(a)
Reference Balance Sheet 3.07
REK KTC Partnership Interest 2.07(c)
REK KTC Purchase Price 2.07(c)
Statement of Working Capital 2.10(c)
Station recitals
Straddle Period 8.02(a)
Surviving Corporation 2.01
Target Closing Working Capital 2.10(b)
Third Party Claims 10.04
WBCA recitals
WRLPA recitals
Working Capital 2.10(i)
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and conditions of this
Agreement, and in accordance with the WBCA and the WRLPA, at the Effective Time
(as defined in Section 2.03) KTC shall be merged with and into Merger Sub. As
a result of the Merger, the separate existence of KTC shall cease and Merger
Sub shall continue as the surviving corporation of the Merger. Merger Sub as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation".
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SECTION 2.02. Closing. (a) Subject to paragraph (b) of this Section 2.02,
the closing (the "Closing") of the Merger shall take place at 10:00 a.m., San
Francisco time, on a date that is on or after the later to occur of (i) January
1, 1999, and (ii) the third Business Day following the satisfaction or waiver
of all of the conditions to the obligations of the parties set forth in Article
IX, at the offices of Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other time or on such other date or at
such other place as the parties may mutually agree upon in writing.
(b) Notwithstanding anything to the contrary in paragraph (a), the
Purchaser may, by delivering to the Partners a written notice (the
"Postponement Notice"), elect to postpone the Closing to a date (the "Extended
Closing Date") no later than 60 days from the date of Closing otherwise
required to occur pursuant to paragraph (a) if, and only if, the FCC has not
issued an order or decision that grants, without material adverse condition,
all consents or approvals required under the Communications Act for the
assignment of the license of WGNX(TV) from Tribune Broadcasting Company
("Tribune") to Purchaser as contemplated in the Asset Exchange Agreement (the
"Exchange Agreement") of even date between Tribune and its affiliate and the
Purchaser and Merger Sub (the "WGNX Assignment"). For purposes of this
provision, the FCC shall not be deemed to have granted its approval to the WGNX
Assignment if a petition to deny or other material objection has been filed
with the FCC with respect to the application for approval of the WGNX
Assignment and there exists a significant risk that the FCC's approval of the
WGNX Assignment will not become final (i.e., no longer subject to
administrative or judicial review). If the Purchaser shall deliver to the
Partners the Postponement Notice, the Purchaser agrees that (i) the conditions
to Closing set forth in Section 9.02(a) (solely as such condition relates to
representations and warranties), (d), (e) and (h) shall be deemed to have been
satisfied as of the Extended Closing Date and in no event shall the Purchaser
be permitted not to close the Merger as contemplated by this Agreement by
claiming such conditions have not been satisfied and (ii) for purposes of
determining whether the Purchaser has any right to indemnification pursuant to
Section 10.02(a) for breaches of representations and warranties or whether a
matter gives rise to an Environmental Indemnity the Closing and the Effective
Time shall be deemed to have occurred on the date of the Postponement Notice
(i.e., any breaches of representations and warranties or matters giving rise to
an Environmental Indemnity occurring after the date of the Postponement Notice
shall not form the basis for the Purchaser to seek indemnification from the
Partners).
(c) At the Closing (i) the parties shall deliver the certificates and
other documents, and take such other actions, required by this Article II and
Article IX, and (ii) the General Partner and the appropriate officers of the
Purchaser and Merger Sub shall execute and acknowledge the Articles of Merger
(as defined in Section 2.03).
SECTION 2.03. Effective Time. As promptly as practicable following the
Closing, the parties hereto shall cause the Merger to be consummated by filing
articles of merger (the "Articles of Merger") with the Secretary of State of
the State of Washington, in such form as required by, and executed in
accordance with the relevant provisions of, the WBCA and the WRLPA. The Merger
shall become effective at such time as the Agreement of Merger is duly filed
with the Secretary of State of the State of Washington or at such later time as
may be agreed in writing by each of the parties hereto and specified in the
Agreement of Merger (the date and time that the Merger becomes effective being
the "Effective Time").
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SECTION 2.04. Effect of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in the WBCA and the WRLPA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of KTC and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of KTC and Merger Sub shall become the debts, liabilities and duties
of the Surviving Corporation.
SECTION 2.05. Articles of Incorporation; Bylaws. (a) Articles of
Incorporation. At the Effective Time, the Articles of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, until thereafter
amended as provided by law and such Articles of Incorporation.
(b) Bylaws. At the Effective Time, the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation, until thereafter amended as provided by the WBCA, the
Articles of Incorporation of the Surviving Corporation and such Bylaws.
SECTION 2.06. Directors and Officers of Surviving Corporation. (a) The
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and qualified, as the case
may be.
(b) The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and qualified, as the case
may be.
SECTION 2.07. Merger Consideration. At the Effective Time, by virtue of
the Merger and without any action on the part of Purchaser, Merger Sub, KTC or
the Partners, the partnership interests in KTC shall be canceled and converted
into the right to receive an aggregate of $380,000,000.00 in cash, subject to
adjustment as set forth in Section 2.10(b) below (as adjusted, the "KTC
Purchase Price"), which shall be allocated as follows:
(a) GGK KTC Partnership Interest. At the Effective Time, the 28.93525%
limited partnership interest in KTC held by GGK (the "GGK KTC Partnership
Interest") shall be canceled and converted into the right to receive, and the
Purchaser shall pay to GGK at the Effective Time in accordance with Section
2.09, $109,953,950.00 in cash, subject to adjustment as set forth in Section
2.10(b) below (as adjusted, the "GGK KTC Purchase Price");
(b) JSK KTC Partnership Interest. At the Effective Time, the 0.20%
general partnership interest and 65.86475% limited partnership interest in KTC
held by JSK (collectively, the "JSK KTC Partnership Interest") shall be
canceled and converted into the right to receive, and the Purchaser shall pay
to JSK at the Effective Time in accordance with Section2.09, $251,046,050.00 in
cash, subject to adjustment as set forth in Section 2.10(b) below (as adjusted,
the "JSK KTC Purchase Price"); and
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(c) REK KTC Partnership Interest. At the Effective Time, the 5.0%
limited partnership interest in KTC held by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "REK KTC
Partnership Interest") shall be canceled and converted into the right to
receive, and the Purchaser shall pay to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ at the Effective Time
in accordance with Section 2.09, $19,000,000.00 in cash, subject to adjustment
as set forth in Section 2.10(b) below (as adjusted, the "REK KTC Purchase
Price").
SECTION 2.08. Escrow Deposit. Simultaneously with the execution of the
Escrow Agreement, the Purchaser shall deliver to an escrow agent (the "Escrow
Agent") reasonably satisfactory to the parties, a good faith deposit in the
amount equal to $1,000,000 of the KTC Purchase Price (the "Escrow Deposit"),
which shall be held in escrow by the Escrow Agent pursuant to the terms of the
Escrow Agreement attached hereto as Exhibit 2.08 (the "Escrow Agreement"),
which shall be entered into by the parties promptly after the execution of this
Agreement.
SECTION 2.09. Payment of Merger Consideration. (a) Subject to the terms
and conditions of the Escrow Agreement, at the Effective Time, the Escrow Agent
shall deliver to JSK, in partial satisfaction of the JSK KTC Purchase Price,
the Escrow Deposit and accrued interest thereon, by wire transfer of
immediately available funds to an account designated by JSK in writing at or
prior to the Effective Time.
(b) At the Effective Time, the Purchaser shall deliver to JSK an amount
equal to the JSK KTC Purchase Price less the Escrow Deposit by wire transfer of
immediately available funds to an account designated by JSK in writing at or
prior to the Effective Time.
(c) At the Effective Time, the Purchaser shall deliver to GGK and ▇▇▇▇▇▇
▇. ▇▇▇▇▇ the GGK KTC Purchase Price and the REK KTC Purchase Price,
respectively, by wire transfer of immediately available funds to an account
designated by such Partner in writing at or prior to the Effective Time.
SECTION 2.10. Working Capital Adjustments. (a) Estimated Closing Working
Capital. Not later than three Business Days prior to the date for the Closing,
the Partners shall deliver to the Purchaser their best estimate of the Working
Capital (as hereinafter defined) of KTC as of the Effective Time based on the
most recently available financial statements of KTC (the "Closing Working
Capital Estimate"). In connection with the preparation and review of the
Closing Working Capital Estimate, employees of the Purchaser and KPMG Peat
Marwick, its independent public accountants (the "Purchaser's Accountants"),
shall be entitled to review the work papers of the Partners prepared in
connection with calculating the Closing Working Capital Estimate and shall be
entitled to discuss the Closing Working Capital Estimate with the Partners
prior to the Effective Time.
(b) Closing Purchase Price Adjustments in respect of Closing Working
Capital. (i) In the event that the Closing Working Capital Estimate exceeds
$4,000,000 (the "Target Closing Working Capital"), the KTC Purchase Price shall
be increased by an amount equal to such excess, which amount shall be divided
among the Partners in proportion to the respective amounts to be received by
each such Partner pursuant to Section 2.07 hereof, and (ii) in the event that
the Closing Working Capital Estimate is less than the Target Closing Working
Capital, the KTC Purchase Price shall be decreased by an amount equal to such
deficit, which amount payable shall be divided among the Partners in proportion
to the respective amounts to be received by each such Partner pursuant to
Section 2.07 hereof.
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(c) Statement of Working Capital. As soon as practicable, but in any
event within 60 calendar days following the Effective Time, the Partners shall
prepare and deliver to the Purchaser a statement of the Working Capital of KTC
as of the Effective Time (including the balance sheet of KTC as of the
Effective Time) (the "Statement of Working Capital"), together with an agreed
upon procedures report thereon of Pricewaterhouse Coopers LLP, independent
accountants for KTC ("KTC's Accountants"), stating that the Statement of
Working Capital of KTC as of the Effective Time has been prepared in accordance
with generally accepted accounting principles as applied by KTC ("KTC
Accounting Policies") on a basis consistent with the preparation of the audited
balance sheet of KTC as at December 31, 1997.
(d) Cooperation. During the preparation of the Statement of Working
Capital by the Partners and the period of any dispute referred to in Section
2.10(e), (i) employees of the Purchaser and the Purchaser's Accountants shall
be entitled to review the work papers prepared by KTC's Accountants in
connection with the Statement of Working Capital and shall be entitled to
discuss the Statement of Working Capital with KTC's Accountants, in each case
at mutually agreeable times as work progresses during the preparation of the
Statement of Working Capital, and (ii) the Purchaser shall provide KTC's
Accountants full access to the books, records, facilities and employees of KTC
and shall cooperate fully with KTC's Accountants in the preparation of the
Statement of Working Capital and in investigating the basis for any such
dispute.
(e) Disputes.
(i) Subject to Section 2.10(e)(ii), the Statement of Working Capital
delivered by the Partners to the Purchaser and Purchaser's Accountants
shall be final, binding and conclusive on the Partners and the Purchaser.
(ii) The Purchaser may dispute any amounts reflected on the
Statement of Working Capital, but only on the basis that the Statement of
Working Capital does not present fairly the Working Capital of KTC as of
the Effective Time in accordance with KTC Accounting Policies; provided,
however, that the Purchaser shall notify the Partners in writing of each
disputed item, specifying the amount thereof in dispute and setting
forth, in reasonable detail, the basis for such dispute, within 10
Business Days after receipt from the Partners of the Statement of Working
Capital. In the event of such a dispute, the Purchaser and the Partners
shall attempt to reconcile their differences and any resolution by them
as to any disputed amounts shall be final, binding and conclusive on the
Purchaser and the Partners. If the Purchaser and the Partners are unable
to reach a resolution with such effect within 10 calendar days of
Purchaser's written notice of dispute to the Partners, the Purchaser and
the Partners shall submit the items remaining in dispute for resolution to
an independent accounting firm of national reputation mutually appointed
by the Purchaser and the Partners (the "Independent Accounting Firm"),
which shall, within 30 calendar days of such submission, determine and
report to the Purchaser and the Partners upon such remaining disputed
items and such report shall be final, binding and conclusive on the
Purchaser and the Partners. The Purchaser shall bear such proportion of
the fees and disbursements of the Independent Accounting Firm that the
aggregate amount of such remaining disputed items so submitted to the
Independent Accounting Firm that is unsuccessfully disputed by the
Purchaser (as finally determined by the Independent Accounting Firm) bears
to the total amount of such remaining disputed items so submitted (with
the Partners bearing the remainder of such fees and disbursements).
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(f) Certain Adjustments. The Statement of Working Capital shall be
deemed final for the purposes of this Section 2.10 upon the earliest of (i) the
failure of the Purchaser to notify the Partners of a dispute within 10 Business
Days of the Partners' delivery of the Statement of Working Capital to the
Purchaser, and (ii) the resolution of all disputes pursuant to Section 2.10(e).
Within three Business Days of the Statement of Working Capital being deemed
final:
(i) in the event that the Working Capital of KTC set forth on the
Statement of Working Capital is less than the Closing Working Capital
Estimate, the Partners shall pay to the Purchaser, in immediately
available funds, an aggregate amount equal to such deficiency,
which amount payable shall be divided among the Partners in proportion to
the respective amounts to be received by each such Partner pursuant to
Section 2.07 hereof; or
(ii) in the event that the Working Capital of KTC set forth on the
Statement of Working Capital exceeds the Closing Working Capital
Estimate, the Purchaser shall pay, or shall cause the Surviving
Corporation to pay, to the Partners, in immediately available funds, an
aggregate amount equal to such excess, which amount shall be divided
among the Partners in proportion to the respective amounts to be received
by each such Partner pursuant to Section 2.07 hereof.
(g) Interest. Any payment required to be made by the Purchaser or the
Partners pursuant to this Section 2.10 shall bear interest from the Effective
Time through the date of payment at the rate announced from time to time by
Bank of America as its prime rate, calculated from the Effective Time to the
date of such payment.
(h) Effect of Adjustments. All amounts paid by the Partners or the
Purchaser pursuant to this Section 2.10 shall constitute adjustments to the
consideration paid in the Merger.
(i) Working Capital. For purposes of this Section 2.10, "Working Capital"
means:
(a) all accounts receivable (excluding trade/barter receivables)
generated by KTC, less the allowance for doubtful accounts, reflected on
the balance sheet of KTC as of the Effective Time; plus
(b) the amount of inventory (exclusive of any amounts relating to
programming or broadcast rights) reflected on the balance sheet of KTC as
of the Effective Time; plus
(c) the amount of other current assets (exclusive of any amounts relating
to programming or broadcast rights) reflected on the balance sheet of KTC
as of the Effective Time; minus
(d) the amount of accounts payable (excluding trade/barter payables and
amounts relating to programming or broadcast rights) and accrued equipment
rentals of KTC reflected on the balance sheet of KTC as of the Effective
Time; minus
(e) the amount of accrued salary, payroll and wages and accrued vacation
and sick pay reflected on the balance sheet of KTC as of the Effective
Time; minus
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(f) the amount of any accrued accounting fees or expenses reflected on
the balance sheet of KTC as of the Effective Time; minus
(g) the amount of any other accrued current liabilities (exclusive of
amounts relating to programming or broadcast rights) reflected on the
balance sheet of KTC as of the Effective Time; minus
(h) the amount of any accrued Taxes reflected on the balance sheet of KTC
as of the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KTC
KTC hereby represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization of KTC. KTC is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Washington and has all necessary partnership power and authority to own,
operate or lease the properties and assets now owned, operated or leased by KTC
and has all necessary partnership power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. KTC does not have any Subsidiaries.
SECTION 3.02. Authorization, Execution and Delivery by KTC. The
execution and delivery of this Agreement by KTC, the performance by KTC of its
obligations hereunder and the consummation by KTC of the transactions
contemplated hereby have been duly authorized by all requisite partnership
action on the part of KTC. This Agreement has been duly executed and delivered
by KTC, and (assuming due authorization, execution and delivery by the other
parties hereto) this Agreement constitutes a legal, valid and binding
obligation of KTC enforceable against KTC in accordance with its terms, subject
to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject,
as to enforceability, to the effect of general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
SECTION 3.03. Partners; Partnership Interests. As of the date of this
Agreement and as of the Closing, the sole partners of KTC are and shall be JSK
as general partner and limited partner, GGK as limited partner and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ as limited partner. The ownership interest in KTC of each Partner is as
set forth in Section 3.03 of the KTC Disclosure Schedule.
SECTION 3.04. No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Section 3.05 have been obtained
and all filings and notifications listed in Section 3.05 of the KTC Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating solely to the Purchaser or as described in Section 3.04
of the KTC Disclosure Schedule, the execution, delivery and performance of this
Agreement by KTC do not and will not (a) violate or conflict with the KTC
Partnership Agreement, (b) violate or conflict with any law, rule, regulation,
order or judgment applicable to KTC or the Business or (c) result in any breach
of, or constitute a default under, or give to others any rights of termination
or amendment of, or result in the creation of any lien or other encumbrance on
- 15 -
any of the assets or properties of KTC pursuant to, any contract, agreement or
license relating to such assets or properties to which KTC is a party or by
which any of such assets or properties is bound or affected, except as to
contracts that are not Material Contracts.
SECTION 3.05. Consents and Approvals. The execution and delivery of this
Agreement by KTC do not, and the performance of this Agreement by KTC will not,
require any consent, approval, authorization or other action by, or filing with
or notification to, any governmental or regulatory authority or third party
(which is a counter-party to a Material Contract), except (a) as described in
Section 3.05 of the KTC Disclosure Schedule, (b) as may be required under the
Communications Act (including in connection with the FCC Licenses relating to
the Station), (c) the notification requirements of the HSR Act and (d) as may
be necessary as a result of any facts or circumstances relating solely to the
Purchaser.
SECTION 3.06. Financial Information. Section 3.06 of the KTC Disclosure
Schedule contains (i) the audited balance sheets of KTC as of December 31, 1996
and 1997 and the related audited statements of income, cash flows and partners'
equity of KTC for the years then ended and (ii) the unaudited balance sheet of
KTC as of June 30, 1998 and the related unaudited statements of income, cash
flows and partners' equity of KTC for the six months then ended. Such balance
sheets and statements of income, cash flows and partners' equity fairly present
the financial condition and results of operations of KTC as of such dates or
for the periods covered thereby and were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the past
practices of KTC.
SECTION 3.07. Absence of Undisclosed Liabilities. To the Partners'
knowledge, there are no liabilities of KTC except liabilities (i) disclosed in
the KTC Disclosure Schedule, (ii) as, and to the extent, reflected or reserved
against in the audited balance sheet of KTC as of December 31, 1997 (the
"Reference Balance Sheet"), (iii) with respect to the matters addressed in
Section 3.15 and Article VIII (which shall be governed solely by the terms of
such Section 3.15 and Article VIII) and (iv) incurred in the ordinary course of
business after the date of the Reference Balance Sheet.
SECTION 3.08. Absence of Certain Changes or Events. (a) Since the date
of the Reference Balance Sheet to the date of this Agreement, except as
disclosed in Section 3.08 of the KTC Disclosure Schedule, the business of KTC
has been conducted in the ordinary course and consistent with past practice and
there has been no Material Adverse Effect.
(b) Since the date of the Reference Balance Sheet and except as set forth
in Section 3.08 of the KTC Disclosure Schedule or as contemplated by this
Agreement, there has not been:
(i) except for fair value in the ordinary course of business consistent
with past practice, any sale, assignment, transfer, lease or other
disposition of any of the fixed assets of KTC having an aggregate net book
value exceeding $50,000;
(ii) (A) any acquisition by KTC (by merger, consolidation, or acquisition
of stock or assets) of any corporation, partnership or other business
organization or division thereof or (B) any incurrence of any indebtedness
for borrowed money, execution of capital leases or issuance of any debt
- 16 -
securities or assumption, grant, guarantee or endorsements, or other
accommodation or arrangement making KTC responsible for, the obligations
of any person, or any loans or advances except in the ordinary course of
business;
(iii) any change in any method of accounting or accounting practice used
by KTC, other than such changes required by generally accepted accounting
principles;
(iv) any acquisition or entering into of any new Program Contracts (as
defined below) or any renewal, extension or amendment of any existing
Program Contract, except for Program Contracts obligating KTC or the
Station to make payments of less than $100,000 per contract per year;
(v) any acquisition or entering into of any network affiliation
agreements, local marketing agreements or joint operating agreements;
(vi) any pledge, lien, security interest, mortgage, charge, adverse claim
of ownership or use, or other encumbrance of any kind created on any
properties or assets (whether tangible or intangible) of KTC having a
value in excess of $50,000;
(vii) any establishment of or increase in any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing,
stock option, stock purchase or other employee benefit plans, or other
increase in the compensation payable or to become payable to any officer
or key employee of KTC in excess of 10% of the level for the prior year;
(viii) any employment or severance agreement entered into with any of the
employees of KTC;
(ix) any issuance or sale of additional partnership or other equity
interests in KTC to persons other than the Partners, or securities or
other interests convertible into or exchangeable for such partnership or
other equity interests, or issuance or granting of any options, warrants,
calls, subscription rights or other rights of any kind to persons other
than the Partners to acquire additional partnership interests or other
equity interests or such securities or other interests;
(x) any cancellation without fair consideration therefor of any debts
owed to or claims held by KTC (including the settlement of any claims or
litigation) or waived any right of significant value to KTC, other than in
the ordinary course of business consistent with past practice;
(xi) any acceleration of collection of notes or accounts receivable of
significant value generated by KTC to a date prior to the date such
collection would have occurred in the ordinary course of business
consistent with past practice or any factoring of any receivable;
(xii) any material delay in payment of any account payable or other
liability of KTC beyond its due date or the date when such liability would
have been paid in the ordinary course of business consistent with past
practice;
- 17 -
(xiii) any preparation or filing of any Return inconsistent with past
practice or, on any such Return, the taking of any position, the making of
any election, or the adoption of any method that is inconsistent with
positions taken, elections made or methods used in preparing or filing
similar Returns in prior periods (including, without limitation,
positions, elections or methods which would have the effect of deferring
income to periods ending after the Effective Time or accelerating
deductions to periods ending on or prior to the Effective Time);
(xiv) any contract, agreement or transaction entered into between KTC and
any of its affiliates, including the Partners; or
(xv) any agreement to take any actions specified in this Section 3.08,
except for this Agreement.
SECTION 3.09. Absence of Litigation. Except as set forth in Section 3.09
of the KTC Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending against KTC or any of the assets or properties of KTC,
before any court, arbitrator or administrative, governmental or regulatory
authority or body. Except as set forth in Section 3.09 of the KTC Disclosure
Schedule, KTC and its assets and properties are not subject to any order, writ,
judgment, injunction, decree, determination or award. To the knowledge of the
Partners, there are no claims or investigations threatened against KTC or any
of the assets or properties of KTC. There is no action, suit or proceeding
pending or, to the knowledge of the Partners, threatened which questions the
legality of the transactions contemplated by this Agreement.
SECTION 3.10. Compliance with Laws. KTC is not in material violation of
any law, rule, regulation, order, judgment or decree applicable to KTC or by
which any of its properties is bound or affected, except (i) as set forth in
Section 3.10 of the KTC Disclosure Schedule and (ii) for violations the
existence of which could not reasonably be expected to have a Material Adverse
Effect.
SECTION 3.11. FCC Licenses and Reports and Records; Government Permits.
(a) KTC holds the licenses, permits and authorizations from the FCC required
for the operation of the Business set forth in Section 3.11 of the KTC
Disclosure Schedule (the "FCC Licenses"). The FCC Licenses together with the
other governmental licenses, franchises, permits, privileges, immunities,
approvals and other authorizations which are set forth in Section 3.11 of the
KTC Disclosure Schedule (together with the FCC Licenses, the "Governmental
Permits") constitute all of the licenses, permits, franchises, privileges,
immunities, approvals and authorizations that are required for the business and
operations of the KCPQ Station as presently conducted. The FCC Licenses are
valid and in full force and effect through the dates set forth in Section 3.11
of the KTC Disclosure Schedule, unimpaired by any condition which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Except as set forth in Section 3.11 of the KTC Disclosure
Schedule, KTC has fulfilled and performed in all material respects its
obligations under each of the Governmental Permits, and, to the knowledge of
the Partners, no event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a
material breach or material default under any such Governmental Permit. No
written notice of cancellation, of default or of any dispute concerning any
Governmental Permit, or of any event, condition or state of facts described in
the preceding sentence has been received by KTC or the Partners. Except as set
- 18 -
forth in Section 3.11 of the KTC Disclosure Schedule, to the knowledge of the
Partners, each of the Governmental Permits is valid, subsisting and in full
force and effect and, subject to receipt of the necessary consents under the
Communications Act, all such licenses material to the conduct of the Business
will be in full force and effect at the Effective Time, in each case, without
(i) the occurrence of any breach, default or forfeiture of any material rights
thereunder or (ii) the consent, approval or act of, or the making of any filing
with, any governmental body or other party (other than the FCC as required by
the Communications Act). Except as set forth in Section 3.11 of the KTC
Disclosure Schedule or as a result of the execution and delivery of this
Agreement or in connection with the transactions contemplated hereby, no
application, action or proceeding is pending for the renewal or modification of
any of the FCC Licenses, and, except for actions or proceedings affecting
television broadcast stations generally, no application, complaint, action or
proceeding is pending or, to the knowledge of the Partners, threatened that may
result in (i) the denial of an application for renewal, (ii) the revocation,
modification, non-renewal or suspension of any of the FCC Licenses, (iii) the
issuance of a cease-and-desist order, or (iv) the imposition of any
administrative or judicial sanction with respect to the KCPQ Station. To the
knowledge of the Partners, there are no facts, conditions or events relating to
KTC or the KCPQ Station that could reasonably be expected to cause the FCC to
deny the FCC consents and approvals required in connection with the
transactions contemplated by this Agreement.
(b) The Station is being operated in all material respects in accordance
with the Communications Act, the rules and regulations thereunder. (i) All
returns, reports and statements relating to the Station currently required to
be filed by KTC with the FCC have been filed and when filed were correct and
complete in all material respects, (ii) all material documents required by the
applicable rules and regulations of the FCC to be placed in the public files of
the Station by KTC have been placed and are being held in such files, (iii) all
logs and business records of every type and nature relating to the business and
operations of the Station that are required by the FCC to have been maintained
by KTC, including without limitation, political and public files, operating
logs, equipment performance measurements, licenses and other records pertaining
to the operations of the Station, have been maintained in all material respects
in accordance with the applicable rules and regulations of the FCC and are in
the possession of KTC at the Station.
(c) The operation of the Station does not cause or result in exposure of
workers or the general public to levels of radio frequency radiation in excess
of the levels specified in Section 1.1301, et seq., of the FCC's rules or the
FCC's OST/OET Bulletin No. 65, "Evaluating Compliance with FCC-Specified
Guidelines for Human Exposure to Radio Frequency Radiation," and renewal of the
FCC Licenses would not constitute a "major action" within the meaning of
Section 1.1301, et seq., of the FCC's rules.
SECTION 3.12. Material Contracts. (a) Section 3.12 of the KTC
Disclosure Schedule sets forth each of the following contracts and agreements
of KTC (such contracts and agreements being "Material Contracts"):
(i) network affiliation agreements, local marketing agreements, joint
operating agreements and national and local advertising representation
agreements for the Stations ("Operating Contracts") under the terms of
which KTC may pay or receive consideration of more than $50,000 in the
aggregate over the remaining term of the agreement;
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(ii) program licenses and contracts under which KTC is authorized to
broadcast programs on the Stations ("Program Contracts") under the terms
of which KTC may pay or receive consideration of more than $50,000 in the
aggregate over the remaining term of the agreement;
(iii) talent contracts;
(iv) contracts and agreements relating to indebtedness for borrowed money
of KTC to any Person in excess of $50,000 in the aggregate;
(v) other than time buying arrangements and barter agreements relating to
the provision of air time in exchange for programming agreements, all
contracts and agreements that require the expenditure of, or involve the
receipt of, more than $250,000 in any 12-month period after the date
hereof, other than those terminable without penalty on not more than 60
days' notice;
(vi) all real property leases;
(vii) all agreements containing any provision or covenant prohibiting or
limiting the ability of KBC to engage in any business activity or compete
with any person;
(viii) all contracts and agreements between KBC or either Station and any
Affiliate of KBC;
(ix) any contract for the purchase or sale of real property;
(x) any guarantee of the obligations of the Station's customers,
suppliers or employees or of any partner or other affiliate of KTC;
(xi) any barter agreement or other agreement with advertisers for
broadcasting or commercial time on the Station in exchange for goods and
services; and
(xii) any other contract, agreement or instrument which is material to
KTC or the Business.
(b) KTC has provided or made available to the Purchaser or its advisors
true and correct copies of all Material Contracts. Except as set forth in
Section 3.12 of the KTC Disclosure Schedule, each Material Contract is in full
force and effect and is valid and enforceable against KTC and, to the knowledge
of the Partners, each of the other parties thereto and KBC is not and, to the
knowledge of the Partners, no other party thereto is in material breach of or
default under any Material Contract.
SECTION 3.13. Real Property. (a) Each parcel of real property,
including, without limitation, those properties set forth on Sections 3.13(a)
(which lists all owned properties, showing the record title holder, legal
description and any indebtedness secured by a mortgage or other material lien
thereon) and 3.13(b) (which lists all leased properties, showing rental amount,
expiration date, renewal term and the location of the real property covered by
the lease or agreement) of the KTC Disclosure Schedule, owned or leased by KTC
is owned or leased, free and clear of all liens, security interests, claims and
other charges and encumbrances, except: (a) as disclosed in Section 3.13 of
the KTC Disclosure Schedule; (b) liens for Taxes and assessments not yet
- 20 -
payable; (c) liens for Taxes, assessments and charges and other claims, the
validity of which are being contested in good faith; (d) imperfections of
title, liens, security interests, claims and other charges and encumbrances the
existence of which, individually and in the aggregate, do not materially impair
the use of any such property; (e) inchoate mechanic's and materialmen's liens
for construction in progress; and (f) workmen's, repairmen's, warehousemen's
and carrier's liens arising in the ordinary course of the Business.
(b) Neither the whole nor any material part of any real property owned by
KTC nor, to the Partners' knowledge, any property leased by KTC, is subject to
any pending suit for condemnation or other taking by any public authority and
to the knowledge of the Partners, no such condemnation or other taking is
threatened.
SECTION 3.14. Employment Matters. (a) With respect to each employee
benefit plan, program, arrangement and contract (including, without limitation,
any "employee benefit plan", as defined in Section 3(3) of ERISA), maintained
or contributed to by KTC, or with respect to which KTC could incur liability
under Section 4069, 4212(c) or 4204 of ERISA (the "KTC Benefit Plans"), KTC has
made available to the Purchaser or its advisors a true and correct copy of (i)
the most recent annual report (Form 5500) filed with the Internal Revenue
Service (the "IRS"), (ii) the plan document and the most recent summary plan
description, (iii) each trust agreement and (iv) the most recent determination
letter, if any, issued by the IRS with respect to any KTC Benefit Plan intended
to be qualified under Section 401(a) of the Internal Revenue Code.
(b) With respect to the KTC Benefit Plans, no event has occurred and, to
the knowledge of the Partners, there exists no condition or set of
circumstances, in connection with which KTC could be subject to any liability
under the terms of such KTC Benefit Plans, ERISA, the Code or any other
applicable law which could reasonably be expected to have a Material Adverse
Effect.
(c) Except as set forth in Section 3.14(c) of the KTC Disclosure
Schedule, KTC is not a party to any collective bargaining or other labor union
contract. As of the date hereof, there is, to the knowledge of the Partners,
no material labor strike, slowdown or work stoppage against KTC pending or, to
the knowledge of the Partners, threatened in writing, which may interfere in
any material respect with the business activities of KTC. As of the date
hereof, there is no charge or complaint against KTC or by the National Labor
Relations Board or any comparable state agency pending or, to the Partners'
knowledge, threatened in writing, except where such charge or complaint could
not reasonably be expected to have a Material Adverse Effect.
(d) The Partners have made available to the Purchaser or its advisors
(i) copies of all employment agreements with senior executive officers of KTC,
(ii) copies of all severance agreements, programs and policies of KTC with or
relating to its employees and (iii) copies of all plans, programs, agreements
and other arrangements of KTC with or relating to its employees which contain
change in control provisions.
(e) Except as set forth in Section 3.14(e) of the KTC Disclosure Schedule
or as otherwise required by Law, no KTC Benefit Plan provides retiree medical
or retiree life insurance benefits to any person payable after the Effective
Time.
- 21 -
(f) Except as set forth in Section 3.14(f) of the KTC Disclosure
Schedule, KTC has complied in all material respects with all applicable laws,
rules and regulations which relate to wages, hours, discrimination in
employment and collective bargaining and to the operation of the Business and
is not liable for any arrears of wages or any Taxes or penalties for failure to
comply with any of the foregoing.
(g) Section 3.14(g) of the KTC Disclosure Schedule contains (i) a list of
all individuals employed by KTC as of August 12, 1998 and (ii) the then current
rate of compensation provided by KTC to each such employee.
SECTION 3.15. Taxes. Except as set forth in the audited financial
statements of KTC (including the notes thereto) or on Schedule 3.15 of the KTC
Disclosure Schedule:
(a) (i) all Returns, required to be filed by or on behalf of KTC prior to
the Effective Time have been or will be timely filed and such Returns as so
filed are or will be complete and accurate and disclose all Taxes required to
be paid for the period covered thereby and all Taxes shown to be due on such
Returns have been timely paid; (ii) no extension of time in which to file any
such Returns is in effect or has been requested; (iii) all Taxes which KTC is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or will be paid to the proper governmental
body; (iv) there are no Tax liens (except for liens relating to current Taxes
not yet due) on any property of KTC and no reasonable basis exists for any such
liens; and (v) there are no outstanding agreements or waivers extending the
statute of limitations with respect to the assessment of any Tax and no such
agreements or waivers have been requested.
(b) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code.
(c) KTC (and any predecessor of KTC) is and at all times has been
properly classified for United States federal, state and local income tax
purposes as a partnership and not as an association taxable as a corporation.
(d) With respect to any periods prior to the Effective Time, KTC will
make a valid election described in Section 754 of the Code.
SECTION 3.16. Personal Property. Section 3.16 of the KTC Disclosure
Schedule contains a list as of June 30, 1998 of all machinery, equipment,
vehicles, furniture and other personal property owned by KTC having an original
cost of $10,000 or more.
SECTION 3.17. Personal Property Leases. Section 3.17 of the KTC
Disclosure Schedule contains a brief description of each lease or other
agreement or right, whether written or oral (including in each case the rental,
the expiration date thereof and a brief description of the property covered),
under which KTC is lessee of, or holds or operates, any machinery, equipment,
vehicle or other tangible personal property owned by a third party which is not
terminable by KTC without penalty on 30 days' notice or less and which provides
for annual rentals in excess of $10,000.
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SECTION 3.18. Intellectual Property. Section 3.18 of the KTC Disclosure
Schedule contains a list of: (i) all trademarks, service marks, trade names
and copyrights for which registrations have been issued to KTC or applications
for registrations have been made by KTC and (ii) all licenses, agreements or
other arrangements under which KTC has the right to use any trademark, service
▇▇▇▇, trade name or copyright (other than such as are included in the Station
Agreements), in each case used in the operations of the Business as currently
conducted. KTC does not own, and has not applied for, any patents. To the
knowledge of the Partners, no proceedings have been instituted, are pending or
are threatened which challenge the validity of the ownership or use by KTC of
any trademarks, trade names, copyrights or patents. Except as set forth in
Section 3.18 of the KTC Disclosure Schedule, KTC has not licensed anyone to use
any trademarks, trade names or copyrights of KTC. Except as set forth in
Section 3.18 of the KTC Disclosure Schedule, and other than as are included in
the Station Agreements, KTC owns, or has the royalty-free right to use, all
trademarks, service marks, trade names, copyrights or patents used in and
material to the operation of the Business as currently conducted. Except as
set forth in Section 3.18 of the KTC Disclosure Schedule and to the knowledge
of the Partners, no trademark, service ▇▇▇▇, trade name or copyright listed in
Section 3.18 of the KTC Disclosure Schedule is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use thereof
by KTC or restricting the licensing thereof by KTC to any person.
SECTION 3.19. Title to Assets. Except as set forth in Section 3.19 of
the KTC Disclosure Schedule, KTC has good and marketable title to all of the
assets (other than real property) reflected on the Reference Balance Sheet as
being owned by it and all of the assets thereafter acquired by it (except to
the extent that such assets have been disposed of after the date of the
Reference Balance Sheet in the ordinary course of business consistent with past
practice), free and clear of all liens, claims, charges, security interests,
mortgages, pledges, easements, conditional sale or other title retention
agreements, defects in title, covenants or other restrictions of any kind
("Encumbrances"), except for (i) liens for Taxes, assessments or other
governmental charges which are not yet due and payable and (ii) easements,
servitudes, rights-of-way, covenants, consents, conditions, reservations,
encroachments, minor defects or irregularities in title, variations and other
restrictions affecting the use of any real property or leased real property,
which in the aggregate do not materially impair the use of such real property
for the purposes for which it is or may reasonably be expected to be held
("Permitted Encumbrances").
SECTION 3.20. Accounts Receivable. All accounts receivable of KTC have
arisen from bona fide transactions by KTC in the ordinary course of business
and, to the knowledge of the Partners, constitute only valid claims which are
not subject to counterclaims or setoffs.
SECTION 3.21. Insurance. KTC maintains in respect of the Station and the
Business policies of fire and extended coverage and casualty, liability and
other forms of insurance in such amounts and against such risks and losses as
are in the judgment of KTC prudent for the Business. All such policies are
currently in full force and effect and KTC shall keep such insurance policies
or comparable insurance policies in full force and effect through the Effective
Time.
- 23 -
SECTION 3.22. Environmental Protection. (a) Except as set forth in
Section 3.22 of the KTC Disclosure Schedule, to the knowledge of the Partners,
neither KTC, the Station or the Business nor any of the present properties,
assets or operations relating thereto are subject to any written order from or
written agreement with any governmental body or private party respecting (i)
any environmental, health or safety Requirements of Law, (ii) any Remedial
Action or (iii) any liabilities and costs arising from the Release or
threatened Release of a Contaminant into the environment.
(b) Except as set forth in Section 3.22 of the KTC Disclosure Schedule,
there is not now, nor has there ever been on or in any property of KTC or, to
the knowledge of the Partners, the past properties of KTC:
(i) any Release of any Contaminant on, in, under or from such properties;
(ii) any underground storage tanks or surface impoundments;
(iii) any asbestos containing material; or
(iv) any polychlorinated biphenyls (PCB) used in hydraulic oils,
electrical transformers or other equipment.
(c) Except as set forth in Section 3.22 of the KTC Disclosure Schedule,
KTC has not received in respect of the Station or the Business any written
notice or written claim to the effect that it is or may be liable to any person
as a result of the Release or threatened Release of a Contaminant into the
environment.
(d) Except as set forth in Section 3.22 of the KTC Disclosure Schedule,
to the knowledge of Partners, none of the properties of KTC or present or past
operations of the Station is the subject of any investigation by any
governmental body evaluating whether any Remedial Action is needed to respond
to a Release or threatened Release of a Contaminant into the environment.
SECTION 3.23. Availability of Assets. The assets owned or leased by KTC
constitute all the assets used in the Business as currently conducted and are
in good condition (subject to normal wear and tear and immaterial impairments
of value and damage) and serviceable condition and are generally suitable for
the uses for which intended.
SECTION 3.24. Business of KTC. Except as set forth in Section 3.24 of
the KTC Disclosure Schedule, KTC has not, and between the date hereof and the
Effective Time will not have, incurred, directly or indirectly, any obligations
or liabilities or engaged in any business activities other than relating to the
operation of the Station.
SECTION 3.25. Brokers. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. ("▇▇▇▇▇▇▇ ▇▇▇▇▇"),
no broker, finder or investment banker is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of KTC or any
Partner. The Partners are solely responsible for the fees and expenses of
▇▇▇▇▇▇▇ ▇▇▇▇▇.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTNERS
Each Partner, severally and not jointly, represents and warrants to the
Purchaser as follows:
SECTION 4.01. Incorporation of such Partner; Authorization, Execution and
Delivery by Such Partner. In the case of JSK and GGK, such Partner is a
limited liability company duly formed, validly existing and in good standing
under the laws of the State of Delaware and has all necessary limited liability
company power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
In the case of JSK and GGK, the execution and delivery of this Agreement by
such Partner, the performance by such Partner of its obligations hereunder and
the consummation by such Partner of the transactions contemplated hereby have
been duly authorized by all requisite limited liability company action on the
part of such Partner. This Agreement has been duly executed and delivered by
such Partner, and (assuming due authorization, execution and delivery by the
other parties hereto) this Agreement constitutes a legal, valid and binding
obligation of such Partner enforceable against such Partner in accordance with
its terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally
and subject, as to enforceability, to the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
SECTION 4.02. No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Section 3.05 have been obtained
and all filings and notifications listed in Section 3.05 of the KTC Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating solely to the Purchaser or as described in Section 3.04
of the KTC Disclosure Schedule, the execution, delivery and performance of this
Agreement by such Partner do not and will not (a) violate or conflict with the
organizational documents of such Partner (in the case of JSK and GGK),
(b) violate or conflict with any law, rule, regulation, order or judgment
applicable to such Partner, except as could not reasonably be expected to have
a Material Adverse Effect on the ability of such Partner to consummate the
transactions contemplated by this Agreement or (c) result in any breach of, or
constitute a default under, or give to others any rights of termination or
amendment of, or result in the creation of any lien or other encumbrance on
such Partner's general or limited partnership interests in KTC pursuant to, any
contract, agreement or license relating to such assets or properties to which
such Partner is a party or by which any of such KTC Partnership Interests are
bound or affected.
SECTION 4.03. Consents and Approvals. The execution and delivery of this
Agreement by such Partner do not, and the performance of this Agreement by such
Partner will not, require any consent, approval, authorization or other action
by, or filing with or notification to, any governmental or regulatory authority
or third party, except (a) as described in Section 3.05 of the KTC Disclosure
Schedule, (b) as may be required under the Communications Act (including in
connection with the FCC Licenses relating to the Stations), (c) the
notification requirements of the HSR Act and (d) as may be necessary as a
result of any facts or circumstances relating solely to the Purchaser.
- 25 -
SECTION 4.04. Title to Partnership Interests. Such Partner is the lawful
owner of the partnership interests in KTC described as being owned by such
Partner in Section 3.03 of the KTC Disclosure Schedule, free and clear of all
Encumbrances, except as set forth in Section 4.04 of the KTC Disclosure
Schedule.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND MERGER SUB
The Purchaser and Merger Sub hereby jointly and severally represent and
warrant to KTC and the Partners as follows:
SECTION 5.01. Incorporation of the Purchaser and Merger Sub. Each of the
Purchaser and Merger Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and has all necessary corporate power and authority to own, operate or lease
the properties and assets now owned, operated or leased by it and has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby.
SECTION 5.02. Authorization, Execution and Delivery by the Purchaser and
Merger Sub. The execution and delivery of this Agreement by each of the
Purchaser and Merger Sub, the performance by each of the Purchaser and Merger
Sub of its obligations hereunder and the consummation by each of the Purchaser
and Merger Sub of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of the Purchaser and
Merger Sub. No vote of the holders of any class or series of capital stock of
the Purchaser is necessary to approve any of the transactions contemplated
hereby. The affirmative vote of the Purchaser is the only vote of the holders
of any class or series of Merger Sub capital stock necessary to approve any of
the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of the Purchaser and Merger Sub, and (assuming due
authorization, execution and delivery by the other parties hereto) constitutes
a legal, valid and binding obligation of each of the Purchaser and Merger Sub
enforceable against each of the Purchaser and Merger Sub in accordance with its
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally
and subject, as to enforceability, to the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
SECTION 5.03. No Conflict. Except as may result from any facts or
circumstances relating solely to the Partners or KTC, the execution, delivery
and performance of this Agreement by each of the Purchaser and Merger Sub do
not and will not (a) violate or conflict with the Certificate of Incorporation
or By-laws (or other similar organizational documents) of either the Purchaser
or Merger Sub, (b) violate or conflict with any law, rule, regulation, order or
judgment applicable to either the Purchaser or Merger Sub (including, without
limitation, any FCC rule or regulation with respect to multiple or cross-
ownership of media properties) or (c) result in any breach of, or constitute a
default under, or give to others any rights of termination or amendment of, or
result in the creation of any lien or other encumbrance on any of the assets or
- 26 -
properties of the Purchaser or Merger Sub pursuant to, any material contract,
agreement or license relating to such assets or properties to which the
Purchaser or Merger Sub or any of their subsidiaries is a party or by which any
of such assets or properties is bound or affected.
SECTION 5.04. Consents and Approvals. The execution and delivery of this
Agreement by the Purchaser and Merger Sub do not, and the performance of this
Agreement by the Purchaser and Merger Sub will not, require any consent,
approval, authorization or other action by, or filing with or notification to,
any governmental or regulatory authority, except (a) as described in a writing
delivered to KTC and the Partners by the Purchaser on the date hereof, (b) as
may be required under the Communications Act (including in connection with the
FCC Licenses relating to the Stations), (c) the notification requirements of
the HSR Act, (d) where failure to obtain such consent, approval, authorization
or action, or to make such filing or notification, would not prevent the
Purchaser or Merger Sub from performing any of its material obligations under
this Agreement and (e) as may be necessary as a result of any facts or
circumstances relating solely to the Partners or KTC.
SECTION 5.05. Absence of Litigation. There are no claims, actions,
proceedings or investigations pending against the Purchaser or Merger Sub or
any of their Subsidiaries before any court, arbitrator or administrative,
governmental or regulatory authority or body that seek to delay or prevent the
consummation of the transactions contemplated hereby or that could reasonably
be expected to materially and adversely affect or restrict the ability of
Purchaser or Merger Sub to consummate the transactions contemplated hereby.
SECTION 5.06. Financing. The Purchaser, at the Effective Time, will have
all funds necessary to consummate the transactions contemplated by this
Agreement.
SECTION 5.07. Ownership of Merger Sub; No Prior Activities. The
Purchaser owns all of the outstanding capital stock of Merger Sub. Merger Sub
was formed by the Purchaser solely for the purpose of engaging in the
transactions contemplated by this Agreement. As of the date of this Agreement
and the Effective Time, except for obligations or liabilities incurred in
connection with its incorporation or organization and this Agreement and the
transactions contemplated hereby, Merger Sub has not and will not have
incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
SECTION 5.08. Qualification of Purchaser. The Purchaser is, and as of
the Effective Time will be, legally, technically, financially and otherwise
qualified under the Communications Act and all rules, regulations and policies
of the FCC to acquire and operate the Station. There are no facts or
proceedings that could reasonably be expected to disqualify the Purchaser under
the Communications Act or otherwise from acquiring or operating the Station or
that could reasonably be expected to cause the FCC not to grant the approvals
required in connection with the transactions contemplated by this Agreement.
Except as set forth in Section 5.08 of the Purchaser Disclosure Schedule, no
waiver of any FCC rule or policy is necessary to be obtained for the grant of
the applications to be filed with the FCC in connection with the transactions
contemplated by this Agreement, nor will processing pursuant to any exception
to any rule of general applicability be requested or required in connection
with the transactions contemplated by this Agreement.
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SECTION 5.09. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Conduct of Business Prior to the Effective Time. (a)
Unless the Purchaser otherwise agrees in writing and except as otherwise set
forth herein or in Section 6.01 of the KTC Disclosure Schedule, between the
date of this Agreement and the Effective Time, KTC shall:
(i) conduct the Business only in the ordinary course consistent with past
practice and keep and maintain the assets of KTC in good operating
condition (wear and tear in ordinary usage excepted);
(ii) use its reasonable best efforts to preserve substantially intact the
business organization of the Business;
(iii) use its reasonable best efforts to keep available to the Purchaser
the services of the present officers and key employees of KTC;
(iv) maintain the validity of the FCC Licenses and to comply in all
material respects with the requirements of the FCC Licenses and the rules
and regulations of the FCC. KTC shall timely file with the FCC all
license renewal applications with respect to the Station as they become
due and all applications shall be true, complete and correct;
(v) use its reasonable best efforts to maintain in full force and effect
KTC's current network affiliation agreements for the Station; and
(vi) use its reasonable best efforts to preserve the current
relationships of KTC with its respective customers, suppliers,
distributors and other persons with which KTC has significant business
relationships.
(b) Except as expressly provided in this Agreement or Section 6.01 of the
KTC Disclosure Schedule, between the date of this Agreement and the Effective
Time, KTC will not do any of the following without the prior written consent of
the Purchaser:
(i) except for fair value in the ordinary course of business, sell,
assign, transfer, lease or otherwise dispose of any fixed assets of KTC
having a net book value exceeding $50,000 in the aggregate;
(ii) (A) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or (B) incur any indebtedness for borrowed money, execute
any capital lease or issue any debt securities or assume, grant, guarantee
or endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make loans or advances;
(iii) change any method of accounting or accounting practice used by KTC,
other than such changes as are required by generally accepted accounting
principles;
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(iv) acquire or enter into any new Program Contracts or renew, extend or
amend any existing Program Contract, except for Program Contracts
obligating KTC or the Station to make payments of less than $100,000 per
contract per year;
(v) acquire or enter into any network affiliation agreements, local
marketing agreements or joint operating agreements;
(vi) except in the ordinary course of business, grant any pledge, lien,
security interest, mortgage, charge, adverse claim of ownership or use, or
other encumbrance of any kind on any properties or assets (whether
tangible or intangible) of KTC (other than Permitted Encumbrances);
(vii) establish or increase any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option, stock
purchase or other employee benefit plan, or otherwise increase the
compensation payable or to become payable to any officers or key employees
of KTC, except, in any case described above, in the ordinary course of
business consistent with past practice or as may be required by law;
(viii) enter into any collective bargaining agreements or any employment
or severance agreement with any of the employees of KTC;
(ix) issue or sell any additional partnership or other equity interests
in KTC, or securities or other interests convertible into or exchangeable
for such partnership or other equity interests, or issue or grant any
options, warrants, calls, subscription rights or other rights of any kind
to acquire additional partnership or other equity interests or such
securities or other interests; or
(x) cancel or agree to cancel without fair consideration therefor any
debts owed to or claims held by KTC (including the settlement of any
claims or litigation), other than in the ordinary course of business
consistent with past practice;
(xi) accelerate collection of any material notes or accounts receivable
generated by KTC to a date prior to the date such collection would have
occurred in the ordinary course of business consistent with past practice;
(xii) delay payment of any material account payable or other liability of
KTC beyond its due date or the date when such liability would have been
paid in the ordinary course of business consistent with past practice;
(xiii) prepare or file any Return inconsistent with past practice or, on
any such Return, take any position, make any election, or adopt any method
that is inconsistent with positions taken, elections made or methods used
in preparing or filing similar Returns in prior periods (including,
without limitation, positions, elections or methods which would have the
effect of deferring income to periods ending after the Effective Time or
accelerating deductions to periods ending on or prior to the Effective
Time);
(xiv) enter into any contract, agreement or transaction with any
affiliate of KTC, including the Partners; or
(xv) enter into an agreement to do any of the foregoing.
- 29 -
SECTION 6.02. Access to Information. (a) From the date hereof until
theEffective Time, upon reasonable notice, KTC and the Partners shall, and
shall cause the officers, directors, employees, auditors and agents of KTC and
the Partners to, (i) afford the officers, employees and authorized agents and
representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, books and records of KTC and (ii) furnish to
the officers, employees and authorized agents and representatives of the
Purchaser such additional financial and operating data and other information
regarding the assets, properties, goodwill and business of KTC as the Purchaser
may from time to time reasonably request; provided, however, that such
investigation shall not unreasonably interfere with any of the businesses or
operations of KTC or the Partners or any of their respective affiliates.
(b) In order to facilitate the resolution of any claims made against or
incurred by any of the Partners prior to the Effective Time, for a period of
seven years after the Effective Time, the Purchaser shall or shall cause any
transferee of KTC or the Station to agree to (i) retain the books and records
of KTC relating to periods prior to the Effective Time and (ii) upon reasonable
notice, afford the officers, employees and authorized agents and
representatives of the Partners reasonable access (including the right to make,
at the expense of the Partners, photocopies), during normal business hours, to
such books and records.
SECTION 6.03. Confidentiality. The terms of the letter agreement dated
as of June 12, 1998 (the "Confidentiality Agreement") between KTC and the
Purchaser are hereby incorporated herein by reference and shall continue in
full force and effect until the Effective Time, at which time such
Confidentiality Agreement and the obligations of the Purchaser under this
Section 6.03 shall terminate; provided, however, that the Confidentiality
Agreement shall terminate only in respect of that portion of the information
provided to Purchaser by KTC or the Partners exclusively relating to the
transactions contemplated by this Agreement. If this Agreement is, for any
reason, terminated prior to the Effective Time, the Confidentiality Agreement
shall continue in full force and effect.
SECTION 6.04. Regulatory Consents and Approvals; Third Party Consents.
(a) As promptly as practicable and no later than five Business Days after the
date hereof, JSK, KTC and the Purchaser shall jointly file applications for the
Station with the FCC requesting its consent to the transfer of control of the
FCC licensee for such Station from JSK to the Purchaser. JSK, KTC and the
Purchaser will diligently take, or fully cooperate in the taking of, all
necessary and proper steps, and provide any additional information reasonably
requested in order to obtain promptly the requested consents and approvals of
such applications by the FCC; provided, however, that none of the parties
hereto shall have any obligation to take any unreasonable steps to satisfy
complainants, if any, or to participate in any evidentiary hearing or to divest
any asset unless the ownership of such asset in combination with ownership of
the Station would violate the rules, regulations or policies of the FCC. All
filing fees payable to the FCC relating to the transfer applications shall be
shared equally by the Partners and the Purchaser.
(b) As promptly as practicable and no later than 20 days after the date
hereof, each of KTC and the Purchaser shall make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby and shall supply promptly any additional
information and documentary material that may be requested pursuant to the HSR
Act.
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(c) Each of KTC, the Indemnifying Partners and the Purchaser shall use
its reasonable efforts to obtain all other consents and approvals of all other
federal, state and local regulatory bodies and officials that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and will cooperate fully with the other
party in promptly seeking to obtain all such other consents and approvals. The
parties hereto will not take any action that will have the effect of delaying,
impairing or impeding the receipt of any such required approvals.
(d) Each of KTC and the Purchaser shall use its reasonable efforts to
obtain all other consents required of third persons to consummate the
transactions contemplated by this Agreement, including, without limitation, the
consent of (i) the agent and, if necessary, requisite financial institutions,
with respect to the release of KTC under the Credit Agreements and (ii) Fox
Broadcasting Company ("Fox") in connection with the Station Affiliation
Agreement (the "Fox Affiliation Agreement") dated July 30, 1997 (executed on
May 20, 1998) between KTC and Fox.
(e) KTC shall diligently prosecute all applications for renewal of any of
the FCC Licenses, furnish all information required by the FCC in connection
therewith, attend all hearings scheduled to consider such applications,
promptly provide the Purchaser with copies of all documents filed or received
by it in connection therewith, and otherwise keep the Purchaser fully informed
with respect thereto.
SECTION 6.05. Investigation. In connection with the Purchaser's
investigation of KTC and the Business, the Purchaser has received from KTC and
the Partners certain projections and other forecasts, plans and budgets for KTC
which were prepared in good faith based on assumptions believed by them at the
time to be reasonable in the context of preparing such estimates. KTC and the
Partners make no representation or warranty with respect to any estimates,
projections, forecasts, plans or budgets referred to in this Section 6.05, or
any other representation or warranty with respect to the business, operations,
assets, liabilities or financial condition of KTC other than as specifically
set forth in this Agreement.
SECTION 6.06. Change of Name of Business. From and after the Effective
Time, no part of the Business may be conducted using the name "▇▇▇▇▇ Television
Co." or any other name that includes, refers to, or suggests the ▇▇▇▇▇ family
name. None of the Purchaser, Merger Sub or the Surviving Corporation or any of
their respective affiliates shall use any signs, stationery, packaging,
advertising or promotional materials or like materials or supplies that state
or otherwise indicate thereon that the Business after the Effective Time is
affiliated with any of ▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or any
business owned or operated by any of them.
SECTION 6.07. Interim Financial Statements. KTC shall promptly deliver
to the Purchaser copies of any monthly, quarterly or annual financial
statements of KTC that may be prepared by it during the ordinary course of
business on a basis consistent with that used in the preparation of the
unaudited financial statement of KTC as of June 30, 1998 during the period from
the date hereof through the Effective Time.
SECTION 6.08. Funds Necessary to Pay the KTC Purchase Price. The
Purchaser shall obtain all funds necessary to pay the KTC Purchase Price at the
Effective Time.
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SECTION 6.09. Further Action. Each of the parties hereto shall execute
and deliver such documents and other papers and take such further actions as
may be reasonably required to carry out the provisions hereof and give effect
to the transactions contemplated hereby.
ARTICLE VII
EMPLOYEE MATTERS
SECTION 7.01. Continuation of Benefits. Subject to Section 7.03, the
Purchaser shall permit those of its employees who were employed by KTC
immediately prior to the Effective Time to participate in the Purchaser's
employee benefit plans on the same basis as similarly situated employees of the
Purchaser, Tribune, WGNX Inc. or an affiliate thereof pursuant to the WGNX
Assignment. The Purchaser agrees to provide to any such employees whose
employment is governed by the terms of a collective bargaining agreement or
employment agreement, such health, welfare and other employee benefits as are
required by the terms of such agreement.
SECTION 7.02. Service Credit. To the extent that service is relevant for
eligibility and vesting (and, solely for purposes of holidays, sick days,
vacation benefits, benefit accruals) under any retirement plan, employee
benefit plan, program or arrangement established or maintained by the Purchaser
or any of its Subsidiaries for the benefit of the employees of KTC, such plan,
program or arrangement shall credit such employees for service on or prior to
the Effective Time with KTC or any affiliate or predecessor thereof. In
addition, the Purchaser shall waive limitations on benefits relating to any
pre-existing conditions and recognize, for purposes of annual deductible and
out-of-pocket limits under its medical and dental plans, deductible and out-of-
pocket expenses paid by employees and their dependents under the medical and
dental plans in which they participate in the calendar year in which the Merger
occurs.
SECTION 7.03. Subsequent Purchaser. In the event that the Purchaser or
any of its affiliates sells or otherwise transfers to a subsequent purchaser
any or all of the equity interest in, or assets of, KTC, the Purchaser shall
cause such subsequent purchaser to agree in writing to honor the covenants set
forth in this Article VII as if such subsequent purchaser were the Purchaser
hereunder.
ARTICLE VIII
TAX MATTERS
SECTION 8.01. General. For purposes of this Article VIII, the term
"Income Taxes" shall mean all Taxes in the nature of income taxes imposed by
the United States federal, state or local governmental authority, and the term
"Non-Income Taxes" shall mean all Taxes other than Income Taxes.
SECTION 8.02. Allocation of Tax Liabilities; Tax Indemnities. (a) The
Partners shall be responsible for all Taxes imposed on KTC with respect to any
taxable period that ends at or before the Effective Time, and in the case of
any taxable period that includes the Effective Time but does not end at the
Effective Time (a "Straddle Period"), the Partners shall be responsible for the
Taxes allocable to the portion of the taxable period that ends at the Effective
Time, as determined in (d) below.
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(b) JSK and GGK (collectively, the "Indemnifying Partners") jointly and
severally agree to indemnify the Purchaser against all Taxes imposed on KTC
with respect to any taxable period that ends at or before the Effective Time
or, in the case of any Straddle Period, the Taxes allocable to the portion of
the taxable period that ends at the Effective Time, as determined in (d) below,
in excess of the amount of Taxes taken into account in the Statement of Working
Capital.
(c) Payment by the Indemnifying Partners of any amount due under this
Section 8.02 shall be made within ten days following written notice by the
Purchaser that payment of such amounts to the appropriate tax authority is due,
provided that the Partners shall not be required to make any payment earlier
than two days before it is due to the appropriate tax authority. If the
Partners receive an assessment or other notice of Tax due with respect to KTC
for any period ending at or before the Effective Time for which the Partners
are not responsible, in whole or in part, pursuant to this Section 8.02 because
all or a part of such Tax does not exceed the amount taken into account in the
Statement of Working Capital, and the Partners pay such Tax, then the Purchaser
shall pay to the Partners, in accordance with the first sentence of this
Section 8.02(c), the amount of such Tax for which the Partners are not
responsible. In the case of a Tax that is contested in accordance with the
provisions of Section 8.04, payment of the Tax to the appropriate tax authority
will not be considered to be due earlier than the date a final determination to
such effect is made by the appropriate taxing authority or a court.
(d) For purposes of this Agreement, in the case of any Tax that is
payable for a Straddle Period, the portion of such Tax payable for the period
ending at the Effective Time shall be:
(i) in the case of Taxes that are either (x) based upon or related to
income or receipts, or (y) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, as
provided under Section 8.05), deemed equal to the amount which would be
payable if the taxable year ended at the Effective Time (except that,
solely for purposes of determining the marginal tax rate applicable to
income or receipts during such period in a jurisdiction in which such tax
rate depends upon the level of income or receipts, annualized income or
receipts may be taken into account if appropriate for an equitable sharing
of such Taxes); and
(ii) in the case of Taxes not described in subparagraph (i) that are
imposed on a periodic basis and measured by the level of any item, deemed
to be the amount of such Taxes for the entire period (or, in the case of
such Taxes determined on an arrears basis, the amount of such Taxes for
the immediately preceding period) multiplied by a fraction the numerator
of which is the number of calendar days in the period ending at the
Effective Time and the denominator of which is the number of calendar days
in the entire period.
SECTION 8.03. Tax Returns. (a) The Partners shall prepare, or cause to
be prepared, all Income Tax Returns required to be filed with respect to the
short taxable year of KTC ending at the Effective Time.
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(b) With respect to Non-Income Taxes, the Partners shall prepare and file
or otherwise furnish to the appropriate party (or cause to be prepared and
filed or so furnished) in a timely manner all such Returns relating to KTC that
are due on or before or relate to any taxable period ending at or before, the
Effective Time (and the Purchaser shall do the same for any other Returns).
Returns of KTC not yet filed for any taxable period that begins before the
Effective Time shall be prepared, and each item thereon treated, in a manner
consistent with past practices employed with respect to KTC (except to the
extent counsel for the Purchaser, the Partners or KTC determines there is no
reasonable basis in law therefor or determines that a Return cannot be so
prepared and filed or an item so reported without being subject to penalties).
With respect to any Return required to be filed by the Purchaser or Partners
with respect to KTC and as to which an amount of Tax is allocable to the other
party under Section 8.02(d), the filing party shall provide the other party and
its authorized representatives with a copy of such completed Return and a
statement certifying the amount of Tax shown on such Return that is allocable
to such other party pursuant to Section 8.02(d), together with appropriate
supporting information and schedules at least 20 Business Days prior to the due
date (including any extension thereof) for the filing of such Return, and such
other party and its authorized representatives shall have the right to review
and comment on such Return and statement prior the filing of such Return.
SECTION 8.04. Refunds and Tax Benefits. (a) The Purchaser shall
promptly pay to the Partners any refund or credit (including any interest paid
or credited with respect thereto) received by the Purchaser or KTC of Taxes (i)
relating to taxable periods or portions thereof ending at or before the
Effective Time or (ii) attributable to an amount paid by the Partners under
Section 8.02 hereof. The Purchaser shall, if the Partners so request and at
the Partners' expense, cause the relevant entity to file for and obtain any
refund to which the Partner is entitled under this Section 8.04. The Purchaser
shall permit the Partners to control (at the Partners' expense) the prosecution
of any such refund claimed, and shall cause the relevant entity to authorize by
appropriate power of attorney such persons as the Partners shall designate to
represent such entity with respect to such refund claimed. In the event that
any refund or credit of Taxes for which a payment has been made pursuant to
this Section 8.04(a) is subsequently reduced or disallowed, the Partners shall
indemnify and hold harmless the payor for any Tax liability, including interest
and penalties, assessed against such payor by reason of the reduction or
disallowance. In no event shall the Purchaser or the Partners be entitled to a
refund or credit for any item reflected in the working capital adjustment made
pursuant to Section 2.10(f).
(b) Any amount otherwise payable by the Partners under Section 8.02 shall
be reduced by any Tax benefit to the Purchaser or KTC for a period or portion
thereof beginning after the Effective Time (a "Post-Effective Time Tax
Benefit") that arose in connection with any underlying adjustment resulting in
the obligation of the Purchaser or KTC to pay Taxes for which the Partners are
responsible under Section 8.02 (such as a timing adjustment resulting in a Tax
deduction for KTC for a period after the Effective Time) or the payment of such
Taxes. If a payment is made by the Partners in accordance with Section 8.02,
and if in a subsequent taxable year a Post-Effective Time Tax Benefit is
realized by the Purchaser or KTC (that was not previously taken into account
pursuant to the preceding sentence to reduce an amount otherwise payable by the
Partners under Section 8.02), the Purchaser or KTC shall pay to the Partners at
the time of such realization the amount of such Post-Effective Time Tax Benefit
- 34 -
to the extent that the Post-Effective Time Tax Benefit would have resulted in a
reduction in the amount paid by the Partners under Section 8.02 if the Post-
Effective Time Tax Benefit had been obtained in the year of such payment. The
Partners shall pay to the Purchaser the amount of any Tax benefit to the
Partners or KTC for a period or portion thereof ending on or before the
Effective Time (a "Pre-Effective Time Tax Benefit") that arises in connection
with any underlying adjustment resulting in an increase in the Tax liability
for the Purchaser or KTC for any period or portion thereof beginning after the
Effective Time at the time such Pre-Effective Time Tax Benefit is realized. A
Post-Effective Time Tax Benefit or Pre-Effective Time Tax Benefit will be
considered to be realized for purposes of this Section 8.04 at the time that it
is reflected on a Tax Return of the Partners, the Purchaser or KTC.
SECTION 8.05. Contests. (a) After the Effective Time, the Purchaser
shall promptly notify the Partners and the Partners shall promptly notify the
Purchaser in writing of the commencement of any Tax audit or administrative or
judicial proceeding or of any demand or claim on the Partners, the Purchaser or
KTC which, if determined adversely to the taxpayer or after the lapse of time
would be grounds for indemnification under Section 8.02. Such notice shall
contain factual information (to the extent known to the Partners, the Purchaser
or KTC) describing the asserted Tax liability in reasonable detail and shall
include copies of any notice or other document received from any taxing
authority in respect of any such asserted Tax liability. If the Purchaser
fails to give the Partners prompt notice of an asserted Tax liability as
required by this Section 8.05, then (i) if the Partners are precluded by the
failure to give prompt notice from contesting the asserted Tax liability in
both the administrative and judicial forums, then the Partners shall not have
any obligation to indemnify for any loss arising out of such asserted Tax
liability, and (ii) if the Partners are not so precluded from contesting but
such failure to give prompt notice results in a detriment to the Partners, then
any amount which the Partners are otherwise required to pay the Purchaser
pursuant to Section 8.02 with respect to such liability shall be reduced by the
amount of such detriment.
(b) The Partners shall control in their sole and absolute discretion, and
the Purchaser and KTC shall cooperate with the Partners with respect to, any
audit, controversy or administrative or judicial proceeding relating to Income
Tax Returns of KTC or the Partners for any taxable period ending at or before
the Effective Time; provided, however, that the Partners shall have no rights
to represent KTC's interest in any audit or proceeding unless the Partners
shall have agreed in writing with the Purchaser that the Partners shall be
liable for any Taxes that result from such audit or proceeding.
(c) The Partners may elect to control, any audit, claim for refund and
administrative or judicial proceeding involving any asserted Non-Income Tax
liability with respect to which indemnity may be sought under Section 8.02 (any
such audit, claim for refund or proceeding relating to an asserted Tax
liability is referred to herein as a "Contest"). If the Partners elect to
direct a Contest, they shall within 30 calendar days of receipt of the notice
of asserted Tax liability notify the Purchaser of their intent to do so, and
the Purchaser shall cooperate and shall cause KTC or its successor to
cooperate, at the expense of the Partners, in each phase of such Contest;
provided, however, that the Partners shall have no rights to represent KTC's
interest in any such audit or proceeding unless the Partners shall have agreed
in writing with the Purchaser that the Partners shall be liable for any Taxes
that result from such audit or proceeding. If the Partners elect not to
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control the Contest, fail to notify the Purchaser of their election as herein
provided or contest their obligation to indemnify under Section 8.02, the
Purchaser or KTC may pay, compromise or contest, at its own expense, such
asserted liability. However, in such case, neither the Purchaser nor KTC may
settle or compromise any asserted liability over the objection of the Partners;
provided, however, that consent to settlement or compromise shall not be
unreasonably withheld. In any event, the Partners may participate, at their
own expense, in the Contest. If the Partners choose to direct the Contest, the
Purchaser shall promptly empower and shall cause KTC or its successor promptly
to empower (by power of attorney and such other documentation as may be
appropriate) such representatives of the Partners as it may designate to
represent the Purchaser or KTC or its successor in the Contest insofar as the
Contest involves an asserted Tax liability for which the Partners would be
liable under Section 8.02.
SECTION 8.06. Conveyance Taxes. One-half of all transfer, documentary,
sales, use, stamp, registration, value added and other such Taxes and fees
(including any penalties and interest) incurred or payable by the Partners or
KTC in connection with this Agreement (including any real property transfer tax
and any similar Tax, whether or not based on income) shall be borne and paid
by the Purchaser, and the Purchaser shall, at the Purchaser's expense, file all
necessary Tax returns and other documentation with respect to all such Taxes
and fees. If required by applicable law, the Purchaser will, and will cause
any entities Purchaser controls, join in the execution of such Tax Returns and
other documentation.
SECTION 8.07. Cooperation on Tax Matters. Each of the Partners and
Purchaser shall cooperate fully, as and to the extent reasonably requested by
any other party, in connection with the preparation and filing of any Tax
return, statement, report or form, any audit, litigation or other proceeding
with respect to Taxes. As provided in Section 6.02(b), such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees or representatives
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
SECTION 8.08. Allocation of KTC Purchase Price. (a) Within 60 days
prior to the Closing, the Purchaser shall provide the Partners with a proposed
allocation of the KTC Purchase Price among the assets of KTC. Within 30 days
prior to the Closing, the Partners shall provide the Purchaser with written
notification whether they agree with such allocation, and, if the Partners do
not agree with such allocation, shall provide the Purchaser with a proposed
allocation. If the parties are unable to agree on an allocation of the KTC
Purchase Price, the allocation shall be determined by an independent appraiser,
which can be a nationally recognized accounting firm, that shall determine the
allocation of the KTC Purchase Price, and such allocation shall be binding on
the parties. The cost of any such independent appraisal shall be borne equally
by the Purchaser, on the one hand, and the Partners, on the other hand. The
final allocation as determined under this Section 8.08 shall be referred to as
the "Allocation."
(b) The Purchaser and the Partners agree to (i) be bound by the
Allocation, (ii) act in accordance with the Allocation in the preparation of
financial statements and filing of all Tax Returns (including filing Form 8594)
and in the course of any Tax audit, Tax review or Tax litigation relating
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thereto and (iii) take no position and cause their Affiliates to take no
position inconsistent with the Allocation for all Tax and accounting purposes.
(c) Not later than 30 days prior to the filing of their respective Forms
8594 relating to this transaction, each party shall deliver to the other party
a copy of its Form 8594 which shall be identical in all respects to the
Allocation except as may be manifestly required to take into account changes in
the types or values of the assets of KTC occurring subsequent to the date of
the Agreement and on or prior to the Effective Time.
SECTION 8.09. Miscellaneous. (a) The parties agree to treat all
payments made under this Article VIII or Article X as adjustments to the KTC
Purchase Price for Tax purposes.
(b) Except as expressly provided otherwise and except for the
representations contained in Section 3.15 of this Agreement, this Article VIII
shall be the sole provision governing Tax matters and indemnities therefor
under this Agreement.
(c) For purposes of this Article VIII, all references to the Purchaser,
the Partners and KTC include successors thereto.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to Obligations of KTC and the Partners. The
obligations of KTC and the Partners to consummate the Merger shall be subject
to the fulfillment or waiver, at or prior to the Effective Time, of each of the
following conditions:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Purchaser and Merger Sub contained in this Agreement
shall be true and correct as of the Effective Time, with the same force
and effect as if made as of the Effective Time (except where the failure
to be so true and correct would not have a material adverse effect on the
ability of the Purchaser and Merger Sub to consummate the transactions
contemplated by this Agreement), other than such representations and
warranties as are made as of another date, and all covenants contained in
this Agreement to be complied with by the Purchaser and Merger Sub on or
before the Effective Time shall have been complied with in all material
respects, and the Partners shall have received a certificate of the
Purchaser and Merger Sub to such effect, in each case signed by a duly
authorized officer thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or shall have been
terminated;
(c) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order which is in
effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting consummation of
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such transactions; provided, however, that the parties hereto shall use
their best efforts to have any such order or injunction vacated;
(d) FCC Order. The FCC shall have issued the FCC Order and any condition
or action required to be satisfied or taken to legally effect the Merger
in compliance with the FCC Order (as hereinafter defined) shall have been
so satisfied or taken (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 Order be so satisfied or taken subsequent
to consummation of the Merger);
(e) Opinion of Counsel for the Purchaser and Merger Sub. KTC shall have
received from Wiley, Rein & Fielding or other counsel reasonably
satisfactory to the Partners an opinion dated as of the Effective Time, in
form and substance reasonably satisfactory to KTC, to the effect set forth
in Exhibit 9.01; and
(f) Consents under Credit Agreements. All necessary consents required
under the Credit Agreements for the consummation of the transactions
contemplated by this Agreement shall have been obtained.
SECTION 9.02. Conditions to Obligations of the Purchaser and Merger Sub.
The obligations of the Purchaser and Merger Sub to consummate the Merger shall
be subject to the fulfillment or waiver, at or prior to the Effective Time, of
each of the following conditions:
(a) Representations and Warranties; Covenants. The representations and
warranties of KTC and the Partners contained in this Agreement shall be
true and correct as of the Effective Time, with the same force and effect
as if made as of the Effective Time (except where the failure to be so
true and correct would not have a Material Adverse Effect or a material
adverse effect on the ability of KTC to consummate the transactions
contemplated by this Agreement), other than such representations and
warranties as are made as of another date, and all covenants contained in
this Agreement to be complied with by KTC and the Partners on or before
the Effective Time shall have been complied with in all material respects,
and the Purchaser shall have received a certificate of each of the
Partners to such effect, in each case signed by a duly authorized officer
thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or shall have been
terminated;
(c) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order which is in
effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting consummation of
such transactions; provided, however, that the parties hereto shall use
their best efforts to have any such order or injunction vacated;
(d) FCC Order. The FCC shall have issued the FCC Order and any condition
or action required to be satisfied or taken to legally effect the Merger
in compliance with the FCC Order shall have been so satisfied or taken
- 38 -
(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 Order be so satisfied or taken subsequent to consummation of the
Merger); provided, that in the event that a petition to deny or other
material objection has been filed with the FCC with respect to the
application for transfer of control of the FCC Licenses to Purchaser,
Tribune, WGNX Inc. or an affiliate thereof pursuant to the WGNX Assignment
and there exists a significant risk that the FCC Order will not become
Final, the FCC Order shall have become a Final Order. As used in this
Agreement, the term "FCC Order" means an order or decision of the FCC that
grants, without material adverse condition, all consents or approvals
required under the Communications Act for the transfer of control of all
FCC Licenses held by KTC to the Purchaser, Tribune, WGNX Inc. or an
affiliate thereof and the consummation of the Merger and the other
transactions contemplated by this Agreement. For purposes of this
Agreement, the term "Final Order" shall mean that action shall have been
taken by the FCC (including action duly taken by the FCC's staff, pursuant
to delegated authority) which shall not have been reversed, stayed,
enjoined, set aside, annulled or suspended; with respect to which no
timely request for stay, petition for rehearing, appeal or certiorari or
sua sponte action of the FCC with comparable effect shall be pending; and
as to which the time for filing any such request, petition, appeal,
certiorari or for the taking of any sua sponte action by the FCC shall
have expired or otherwise terminated. The following shall be deemed not
to be material adverse conditions for purposes of the definition of FCC
Order: (i) a condition by the FCC that the Closing not occur until the
grant of applications for renewal of the FCC License for the KCPQ Station
or (ii) a condition by the FCC that the Purchaser or any affiliate of the
Purchaser divest itself of any media property at the Closing or at any
future date if ownership of which, in combination with the ownership of
the Station, violates the rules, regulations or policies of the FCC. For
purposes of this paragraph, the "FCC" shall mean the FCC or its staff;
(e) No Material Adverse Effect. Since the date of this Agreement, there
shall have been no damage, destruction, loss or claim or condemnation or
other taking which results in a Material Adverse Effect;
(f) Opinion of Counsel for the KTC and the Partners. The Purchaser and
Merger Sub shall have received from Shearman & Sterling, counsel to KTC
and the Partners, and Washington counsel reasonably satisfactory to the
Purchaser an opinion dated as of the Effective Time, in form and substance
reasonably satisfactory to the Purchaser, to the effect set forth in
Exhibit 9.02;
(g) Release of Indebtedness. KTC shall have been released from all
obligations (including all guarantees relating thereto) under the Credit
Agreements and all liens and encumbrances on assets and properties of KTC
under the Credit Agreements shall have been released;
(h) Renewal Application. The application for renewal of the FCC license
for the Station to be filed on or before October 1, 1998 shall have been
granted without material adverse condition for a full license term; and
(i) Required Consents. KTC shall have received consents, in form and
substance reasonably satisfactory to the Purchaser, to the transactions
contemplated hereby from the other parties to the contracts, leases and
agreements set forth in Section 9.02(i) of the KTC Disclosure Schedule.
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ARTICLE X
INDEMNIFICATION
SECTION 10.01. Survival of Representations and Warranties; Covenants and
Agreements. The representations and warranties of the parties contained in
this Agreement shall survive the Effective Time until twelve months after the
date of this Agreement, except that (a)the representations and warranties
contained in Sections 3.02, 3.03, 4.01, 4.04, and 5.02 shall survive the
Effective Time indefinitely and (b) the representations and warranties
contained in Section 3.15 which shall survive the Effective Time until the
expiration of all applicable statute of limitation periods. All covenants and
agreements set forth in this Agreement shall survive the Effective Time
indefinitely or for such shorter period as is specified in this Agreement.
Notwithstanding the foregoing, the representations and warranties contained in
Section 3.22 shall not survive the Effective Time.
SECTION 10.02. Indemnification by the Indemnifying Partners. (a) The
Purchaser shall be indemnified and held harmless, jointly and not severally, by
the Indemnifying Partners for any and all liabilities, damages, claims, costs
and expenses actually suffered or incurred (hereinafter a "Loss") by the
Purchaser, arising out of or resulting from (i) the breach of any
representation, warranty, covenant or agreement made by KTC or any Partner
contained in this Agreement or in the certificate delivered pursuant to Section
9.02(a) (the "Closing Certificate") or (ii) arising out of or resulting from
the occupancy, operation, use or control of any real property listed in Section
3.13(a) or 3.13(b) of the KTC Disclosure Schedule prior to the Effective Time
or the operation of the Station prior to the Effective Time, in each case
incurred or imposed as a requirement or in connection with the compliance with
any environmental, health or safety law, rule or regulation, Governmental
Permit or other binding determination of a governmental body, including,
without limitation, any Release or storage of any Contaminant on, at or from
(A) any such real property (including, without, limitation, all facilities,
improvements, structures and equipment thereon, surface water thereon or
adjacent thereto and soil or groundwater thereunder) or any conditions
whatsoever on, under or in such real property or (B) any real property or
facility owned by a third party at which Contaminants generated by the Business
were sent by KTC prior to the Effective Time (collectively, the "Environmental
Indemnity"). After the Effective Time, Purchaser agrees to undertake the
management of all liabilities related to the Release of Contaminants on such
real property arising out of or resulting from the occupancy, operation, use or
control of such real property by KTC prior to the Effective Time; provided,
that (x) Purchaser shall investigate the nature of any Release and conduct any
remedial activities only to the extent that such investigation or remedial
action is required by applicable Environmental Law or is not inconsistent with
the exercise of reasonable business judgment and (y) Purchaser shall conduct
any investigations or remedial activities required by any applicable
Environmental Law in a cost effective manner. No later than 30 days before
commencing any work to investigate or respond to a Release of Contaminants on
the real property for which Purchaser seeks payment from KTC pursuant this
Section 10.02, Purchaser shall give KTC written notice describing in reasonable
detail the nature and estimated cost of the proposed work for the purpose of
giving the KTC a reasonable opportunity to review and comment on such proposed
work.. Anything in Section 10.01 to contrary notwithstanding, no claim may be
asserted nor any action commenced against the Indemnifying Partners for breach
of any representation, warranty, covenant or agreement contained in this
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Agreement or the Closing Certificate unless written notice of such claim or
action is received by the Indemnifying Partners describing in detail the facts
and circumstances with respect to the subject matter of such claim or action on
or prior to the date (x) with respect to the Environmental Indemnity, which is
four years from the date of this Agreement and (y) for all other
indemnification obligations, on which the representation, warranty, covenant or
agreement on which such claim or action is based ceases to survive as set forth
in Section 10.01, in each case, irrespective of whether the subject matter of
such claim or action shall have occurred before or after such date.
(b) Notwithstanding anything to the contrary contained in this Agreement,
(i) the maximum aggregate amount of indemnifiable Losses which may be recovered
from all Partners (x) arising out of or resulting from the breaches of
representations and warranties contained in this Agreement or in the Closing
Certificate or (y) under Section 10.02(a)(ii) shall be $25 million and (ii) no
Indemnifying Partner shall be liable to indemnify the Purchaser for any
indemnifiable Losses otherwise payable as a result of breaches of
representations and warranties or in the Closing Certificate contained in this
Agreement until such time as all such indemnifiable Losses shall aggregate to
more than $1,000,000, and then the Indemnifying Partners shall only be liable
for such indemnifiable Losses in excess of $1,000,000. For the purposes of
this Section 10.02(b), in computing such individual or aggregate amounts of
Losses, the amount of each Loss shall be deemed to be an amount (i) net of any
Tax benefit to the Purchaser or any affiliate thereof and (ii) net of any
insurance proceeds and any indemnity, contribution or other similar payment
recoverable by the Purchaser or any affiliate from any third party with respect
thereto. Payments by the Indemnifying Partners pursuant to Section 10.02(a)
shall be limited to the amount of any Loss that remains after deducting
therefrom (i) any Tax benefit to the Purchaser or any affiliate thereof, and
(ii) any insurance proceeds and any indemnity, contribution or other similar
payment recoverable by the Purchaser or any affiliate from any third party with
respect thereto. A Tax benefit will be considered to be recognized by the
Purchaser or any affiliate for purposes of this Section 10.02 in the tax period
in which the indemnity payment occurs, and the amount of the Tax benefit shall
be determined by assuming that each of the Purchaser and any affiliate is in
the maximum applicable statutory tax bracket after any deductions or other
allowances reportable with respect to a payment hereunder. In no event shall
the Purchaser be entitled to indemnification for any item reflected in the
Working Capital Adjustment made pursuant to Section 2.10(f). The amount to
which an indemnified person shall be entitled under this Article X shall be
determined: (i) by written agreement between the Purchaser and the
Indemnifying Partners, (ii) by a final judgment or decree of any court of
competent jurisdiction or (iii) by any other means to which the Purchaser and
the Indemnifying Partners shall agree. The judgment or decree of a court shall
be deemed final when the time for appeal, if any, shall have expired and no
appeal shall have been taken or when all appeals taken have been finally
determined. The indemnified party shall have the burden of proof in
establishing the amount of the Losses suffered by it.
SECTION 10.03. Indemnification by the Purchaser. The Partners shall be
indemnified and held harmless by the Purchaser for any and all Losses of the
Partners arising out of or resulting from the breach of any representation,
warranty, covenant or agreement made by the Purchaser or Merger Sub contained
in this Agreement. JSK shall be indemnified and held harmless by the Purchaser
for all liabilities or obligations of KTC to which JSK shall become subject
because it is liable for such liabilities or obligations under the WRLPA in its
- 41 -
capacity as general partner of KTC, but excluding any such liabilities or
obligations for which the Purchaser is entitled (without regard, for purposes
of this sentence only, to the limitations on the indemnification of the
Indemnifying Partners set forth in Section 10.02(b)) to be indemnified pursuant
to Section 10.02 or Article VIII of this Agreement. Anything in Section 10.01
to contrary notwithstanding, no claim may be asserted nor any action commenced
against the Purchaser for breach of any representation, warranty, covenant or
agreement contained in this Agreement unless written notice of such claim or
action is received by the Purchaser describing in detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation, warranty, covenant or agreement
on which such claim or action is based ceases to survive as set forth in
Section 10.01, irrespective of whether the subject matter of such claim or
action shall have occurred before or after such date.
SECTION 10.04. Indemnification Procedures. (a) An indemnified party
shall give the indemnifying party notice of any matter which an indemnified
party has determined has given or could give rise to a right of indemnification
under this Agreement, within 60 days of such determination, stating the amount
of the Loss, if known, and method of computation thereof, and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises; provided, however, that the failure to
provide such notice shall not release the indemnifying party from any of its
obligations under this Article X except to the extent the indemnifying party is
actually prejudiced by such failure and shall not relieve the indemnifying
party from any other obligation or liability that it may have to any
indemnified party otherwise than under this Article X. The obligations and
liabilities of the indemnifying party under this Article X with respect to
Losses arising from claims of any third party which are subject to the
indemnification provided for in this Article X ("Third Party Claims") shall be
governed by and contingent upon the following additional terms and conditions:
if an indemnified party shall receive notice of any Third Party Claim, the
indemnified party shall give the indemnifying party notice of such Third Party
Claim within 30 days of the receipt by the indemnified party of such notice;
provided, however, that the failure to provide such notice shall not release
the indemnifying party from any of its obligations under this Article X except
to the extent the indemnifying party is actually prejudiced by such failure and
shall not relieve the indemnifying party from any other obligation or liability
that it may have to any indemnified party otherwise than under this Article X.
The indemnifying party shall be entitled to assume and control the defense of
such Third Party Claim at its expense and through counsel of its choice if it
gives notice of its intention to do so to the indemnified party within five
days of the receipt of such notice from the indemnified party. In the event
the indemnifying party exercises the right to undertake any such defense
against any such Third Party Claim as provided above, the indemnified party
shall cooperate with the indemnifying party in such defense and make available
to the indemnifying party, at the indemnifying party's expense, all witnesses,
pertinent records, materials and information in the indemnified party's
possession or under the indemnified party's control relating thereto as is
reasonably required by the indemnifying party. Similarly, in the event the
indemnified party is, directly or indirectly, conducting the defense against
any such Third Party Claim, the indemnifying party shall cooperate with the
indemnified Party in such defense and make available to the indemnified party,
at the indemnifying party's expense, all such witnesses, records, materials and
information in the indemnifying party's possession or under the indemnifying
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party's control relating thereto as is reasonably required by the indemnified
party. No such Third Party Claim may be settled by the indemnifying party
without the written consent of the indemnified party. To the extent a third
party seeks a non-monetary remedy in addition to monetary damages and such non-
monetary remedy is reasonably likely to affect adversely the ongoing operation
of the Station, and the Indemnifying Partners have assumed the defense of such
claim, the Purchaser may participate in the defense, at its own expense, and no
settlements or agreements relating to such non-monetary remedy may be entered
into without the prior written consent of the Purchaser.
(b) From and after the Effective Time, the exclusive remedy of the
Purchaser for breaches of representations, warranties, covenants and agreements
of the Partners contained in this Agreement and for any and all liabilities,
losses, claims, costs or damages whatsoever relating to this Agreement or the
transactions contemplated hereby shall be pursuant to the indemnification
provisions set forth in this Article X; provided, however, that each party
hereto shall retain all non-monetary equitable remedies available to it in
respect of any breach or alleged breach by any other party of any covenant or
other agreement of such other party contained in or made pursuant to this
Agreement and required to be performed after the Effective Time.
SECTION 10.05. Tax Matters. Anything in this Article X to the contrary
notwithstanding, the rights and obligations of the parties with respect to
indemnification for any and all Tax matters shall be governed by Article VIII.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the mutual written consent of the Purchaser, on the one hand, and
the General Partner, on the other hand;
(b) by the General Partner if the Purchaser or Merger Sub shall have
breached in any material respect any of their respective representations,
warranties, covenants or other agreements contained in this Agreement,
which breach is incapable of being cured or has not been cured within 30
days after the giving of written notice by the General Partner to the
Purchaser, except, in any case, such breaches which could reasonably be
expected to materially adversely affect the ability of the Purchaser to
complete the Merger;
(c) by the Purchaser if KTC or the Partners shall have breached in any
material respect any of their respective representations, warranties,
covenants or other agreements contained in this Agreement, which breach is
incapable of being cured or has not been cured within 30 days after the
giving of written notice by the Purchaser to the General Partner, except,
in any case, such breaches which could not reasonably be expected to have
a Material Adverse Effect or to affect adversely the ability of KTC or the
Partners to complete the Merger; or
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(d) by the Purchaser, on the one hand, or the General Partner, on the
other hand, if the Effective Time shall not have occurred prior to nine
months after the date of this Agreement; provided, however, that the right
to terminate this Agreement under this Section 11.01(d) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the
failure of the Merger to occur prior to such date.
SECTION 11.02. Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 11.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto (i)
except as set forth in Section 6.03 and Section 12.02 and (ii) nothing herein
shall relieve any party from liability for any breach of any covenant or
agreement contained herein or any willful breach of any representation or
warranty contained herein.
(b) The Purchaser acknowledges and agrees that the Escrow Deposit shall
serve to secure any obligations of the Purchaser resulting from its failure to
comply with the terms and conditions of this Agreement prior to the Effective
Time. In no event shall KTC's remedies in the circumstances described in this
Section 11.02(b) be limited to this Section 11.02(b).
SECTION 11.03. Waiver. At any time prior to the Effective Time, the
Purchaser, on behalf of itself and Merger Sub on the one hand, and the General
Partner on behalf of KTC and the Partners on the other hand, may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.01. Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Merger shall have occurred.
SECTION 12.02. Notices. All notices, request, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this
Section 12.02):
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(a) if to KTC or the Partners:
▇▇▇▇▇ Broadcasting Co.
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Purchaser or Merger Sub:
▇▇▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and:
Wiley, Rein & Fielding
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 12.03. Public Announcements. No party to this Agreement shall
make any public announcements in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media without prior
notification to the other party, and the parties shall cooperate as to the
timing and contents of any such announcement.
SECTION 12.04. Headings. 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.
SECTION 12.05. 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
- 45 -
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 a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
SECTION 12.06. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, other
than the Confidentiality Agreement, among KTC, the Partners, the Purchaser and
Merger Sub with respect to the subject matter hereof and except as otherwise
expressly provided herein.
SECTION 12.07. Assignment. The rights of any party under this Agreement
or any KTC Ancillary Agreement or Purchaser Ancillary Agreement, as the case
may be, shall not be assignable by such party prior to or after the Effective
Time without the written consent of the other parties hereto. Notwithstanding
the foregoing, the Partners agree that following the Effective Time, the
Purchaser may assign any of its rights hereunder to Tribune, WGNX Inc. or an
affiliate thereof and following such assignment such assignee shall have all
the rights (including the ability to enforce such rights) and such of those
obligations of Purchaser hereunder assumed by such assignee, but no such
assignment shall relieve Purchaser of its obligations hereunder.
SECTION 12.08. No Third-Party Beneficiaries. Except as provided in
Articles VII and VIII, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 12.09. Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the General Partner, on behalf of
itself, KTC and the other Partners, and the Purchaser, on behalf of itself and
Merger Sub.
SECTION 12.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in a California state or federal court sitting in the City of
Sacramento or San Francisco, and the parties hereto hereby irrevocable submit
to the exclusive jurisdiction of such courts in any such action or proceeding
and irrevocably waive the defense of an inconvenient forum to the maintenance
of any such action or proceeding.
SECTION 12.11. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 12.12. Board Approval. Notwithstanding anything herein to the
contrary, the execution and delivery by Purchaser and the Merger Sub of this
Agreement is subject to the approval of this Agreement and the Exchange
Agreement by the Board of Directors of Purchaser and the approval of the
- 46 -
Exchange Agreement by the Board of Directors of Tribune. If such approval is
not obtained by 5:00 p.m. Eastern Time on Monday, August 24, 1998, then
Purchaser shall deliver written notice thereof to KTC. If Purchaser delivers
such notice, then this Agreement shall thereupon terminate without liability on
the part of any party. If Purchaser does not deliver such notice on or prior
to such date, then such approval shall be deemed to have been obtained for
purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
▇▇▇▇▇ TELEVISION CO.
By: ▇.▇. ▇▇▇▇▇ L.L.C., its General Partner
By: /s/ ▇. ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇. ▇. ▇▇▇▇▇
Title: General Partner
▇.▇. ▇▇▇▇▇ L.L.C.
By: /s/ ▇. ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇. ▇. ▇▇▇▇▇
Title:
▇.▇. ▇▇▇▇▇ L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President - Broadcasting Group
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KCPQ ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
- 48 -