EXHIBIT 10.6
AGREEMENT AND PLAN OF MERGER
AMONG
▇▇▇▇▇▇▇▇ BROADCAST HOLDINGS, INC.,
▇▇▇▇▇▇▇▇ BROADCAST GROUP, INC.,
and
ABRY PARTNERS, INC.
(as Stockholder Representative)
EFFECTIVE AS OF
FEBRUARY 23, 1998
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into on March 16, 1998,
but is effective as of February 23, 1998, among ▇▇▇▇▇▇▇▇ Broadcast Holdings,
Inc., a Delaware corporation ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇▇ Broadcast Group, Inc., a
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Maryland corporation ("▇▇▇▇▇▇▇▇"), on behalf of itself and a subsidiary to be
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formed by it pursuant to Section 1.A below, and ABRY Partners, Inc., a Delaware
corporation ("ABRY Partners"), solely in its capacity as the Stockholder
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Representative referred to in this Agreement.
WHEREAS, the parties to this Agreement are among the parties to an
Agreement and Plan of Merger dated as of February 23, 1998 (the "Prior
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Agreement"), and the parties to the Prior Agreement have agreed to restate the
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Prior Agreement by entering into this Agreement and certain other agreements;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows,
effective as of the date of the Prior Agreement:
ARTICLE I
THE SPIN-OFF TRANSACTIONS
1.A. Formation of Merger Sub. On or prior to March 20, 1998, ▇▇▇▇▇▇▇▇
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will form a wholly-owned Subsidiary which will be a Delaware corporation. Such
Subsidiary will be the "Merger Sub" referred to in this Agreement. ▇▇▇▇▇▇▇▇
will cause such Subsidiary to become a party to this Agreement, the Indemnity
Agreement, the ▇▇▇▇▇▇▇ Money Escrow Agreement, the Estimate Escrow Agreement and
the Indemnity Escrow Agreement by executing and delivering to ▇▇▇▇▇▇▇▇ a
counterpart thereof.
1.▇. ▇▇▇▇▇▇▇▇ Two Spin-Off. At or prior to the time of the Closing,
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so long as all required Consents of the FCC for the ▇▇▇▇▇▇▇▇ Two Spin-Off are
then effective and any other required Consent for the ▇▇▇▇▇▇▇▇ Two Spin-Off has
been obtained and is then effective, ▇▇▇▇▇▇▇▇ will, and will cause its
Subsidiaries to, take such actions as may be required to (1) cause the capital
stock of ▇▇▇▇▇▇▇▇ Two to be distributed to the holders of the ▇▇▇▇▇▇▇▇ Common
Share Equivalents immediately prior to such distribution, with each such holder
receiving a number of shares of common stock which is equal to the number of
shares of common stock of ▇▇▇▇▇▇▇▇ then held by such holders (on a fully-
diluted, as-exercised basis) and with such shares of common stock of ▇▇▇▇▇▇▇▇
Two having the same relative voting rights as such shares of common stock of
▇▇▇▇▇▇▇▇ which are then held by each of them (on a similar fully-diluted, as-
exercised basis), and (2) cause the FCC Authorizations relating to the ▇▇▇▇▇▇▇▇
Two Stations and the other assets described in the attached Exhibit A to be
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transferred to ▇▇▇▇▇▇▇▇ Two in consideration for a promissory note of ▇▇▇▇▇▇▇▇
Two in a principal amount equal to the amount specified on the attached Exhibit
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A. The transactions described the preceding sentence are referred to as the
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"▇▇▇▇▇▇▇▇ Two Spin-Off."
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1.C ▇▇▇▇▇▇▇▇ Three Spin-Off. At or prior to the time of the Closing,
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so long as all required Consents of the FCC for the ▇▇▇▇▇▇▇▇ Three Spin-Off are
then effective and any other required Consent for the ▇▇▇▇▇▇▇▇ Three Spin-Off
has been obtained and is then effective, ▇▇▇▇▇▇▇▇ will, and will cause its
Subsidiaries to, take such actions as may be required to (1) cause the capital
stock of ▇▇▇▇▇▇▇▇ Three to be distributed to the holders of the ▇▇▇▇▇▇▇▇ Common
Share Equivalents immediately prior to such distribution, with each such holder
receiving a number of shares of common stock which is equal to the number of
shares of common stock of ▇▇▇▇▇▇▇▇ then held by such holders (on a fully-
diluted, as-exercised basis) and with such shares of common stock of ▇▇▇▇▇▇▇▇
Three having the same relative voting rights as such shares of common stock of
▇▇▇▇▇▇▇▇ which are then held by each of them (on a similar fully-diluted, as-
exercised basis), and (2) cause the FCC Authorizations relating to the ▇▇▇▇▇▇▇▇
Three Stations and the other assets described in the attached Exhibit B to be
transferred to ▇▇▇▇▇▇▇▇ Three in consideration for a promissory note of ▇▇▇▇▇▇▇▇
Three in a principal amount equal to the amount specified on the attached
Exhibit B. The transactions described in the preceding sentence are referred to
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as the "▇▇▇▇▇▇▇▇ Three Spin-Off," and each of the ▇▇▇▇▇▇▇▇ Two Spin-Off and the
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▇▇▇▇▇▇▇▇ Three Spin-Off is referred to as a "Spin-Off."
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1.D Spin-Off Taxes. ▇▇▇▇▇▇▇▇ and its Subsidiaries will be
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responsible for the payment of any Tax arising solely by reason of either Spin-
Off (a "Spin-Off Tax"). To the extent not paid at the Effective Time, the
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liability of ▇▇▇▇▇▇▇▇ and its Subsidiaries (if any) for any Spin-Off Tax arising
by reason of the ▇▇▇▇▇▇▇▇ Three Spin-Off (as determined in accordance with
Section 3.D(6)) will be reflected in the computation of the Current Liabilities.
ARTICLE II
THE MERGER
2.A General. Upon and subject to the terms and conditions stated in
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this Agreement, on the Closing Date, effective as of the Effective Time, the
Merger Sub will merge with and into ▇▇▇▇▇▇▇▇ in accordance with the terms and
conditions of this Agreement. ▇▇▇▇▇▇▇▇ will be the corporation which survives
such merger (the "Merger") and in such capacity is sometimes referred to in
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this Agreement as "Post-Merger ▇▇▇▇▇▇▇▇."
2.B Effect on ▇▇▇▇▇▇▇▇ Share Equivalents. Immediately after the
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Closing, effective at the Effective Time, subject to the terms and conditions of
this Agreement (1) the Merger will be effected by the filing with the Secretary
of the State of Delaware of a Certificate of Merger; (2) each ▇▇▇▇▇▇▇▇ Share
Equivalent outstanding at the Effective Time, by said occurrence and with no
further action on the part of the holder thereof, will be transformed and
converted into the right to receive the Merger Consideration for such ▇▇▇▇▇▇▇▇
Share Equivalent, without interest or any similar payment thereon or with
respect thereto, upon surrender of the certificate representing such ▇▇▇▇▇▇▇▇
Share Equivalent; (3) each share of common stock of the Merger Sub outstanding
immediately prior to the Effective Time will, by said occurrence and with no
further action on the part of the holder thereof, be transformed and converted
into one share of common stock of Post-Merger ▇▇▇▇▇▇▇▇, so that immediately
thereafter ▇▇▇▇▇▇▇▇ will be the sole and exclusive owner of all equity
securities of Post-Merger ▇▇▇▇▇▇▇▇; and (4) Post-Merger ▇▇▇▇▇▇▇▇ will be the
owner of the
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business, assets, rights, privileges, immunities, powers, franchises and other
attributes of ▇▇▇▇▇▇▇▇ and the Merger Sub.
2.C Certificate of Incorporation. Immediately after the Effective
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Time, the certificate of incorporation of Post-Merger ▇▇▇▇▇▇▇▇ will be the
certificate of incorporation of the Merger Sub as in effect immediately prior to
the Effective Time.
2.D Bylaws. Immediately after the Effective Time, the bylaws of
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Post-Merger ▇▇▇▇▇▇▇▇ will be the bylaws of the Merger Sub as in effect
immediately prior to the Effective Time.
2.E Board of Directors and Officers. The board of directors and
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officers of the Merger Sub immediately prior to the Effective Time will be the
board of directors and the officers, respectively, of Post-Merger ▇▇▇▇▇▇▇▇
immediately after the Effective Time, and such individuals will serve in such
positions for the respective terms provided by applicable Legal Requirements or
in the bylaws of Post-Merger ▇▇▇▇▇▇▇▇ until their respective successors are
elected and qualified.
2.F Name. The name of Post-Merger ▇▇▇▇▇▇▇▇ will be designated by
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▇▇▇▇▇▇▇▇.
2.G Exchange Procedures. At or after the Closing, each holder of
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record of ▇▇▇▇▇▇▇▇ Share Equivalents will deliver to Post-Merger ▇▇▇▇▇▇▇▇ for
cancellation the certificate(s) representing such ▇▇▇▇▇▇▇▇ Share Equivalents
(the "Old ▇▇▇▇▇▇▇▇ Certificates"). Upon surrender of any Old ▇▇▇▇▇▇▇▇
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Certificate for cancellation, subject to the provisions of this Agreement, (a)
the holder of such Old ▇▇▇▇▇▇▇▇ Certificate will receive in exchange therefor
the Merger Consideration for the ▇▇▇▇▇▇▇▇ Share Equivalents represented by such
Old ▇▇▇▇▇▇▇▇ Certificate, and (b) such Old ▇▇▇▇▇▇▇▇ Certificate will be
canceled. Until surrendered as contemplated by this Section 2.G, each Old
▇▇▇▇▇▇▇▇ Certificate will, at and after the Effective Time, be deemed to
represent only the right to receive, upon surrender of such Old ▇▇▇▇▇▇▇▇
Certificate, the Merger Consideration for the ▇▇▇▇▇▇▇▇ Share Equivalents
represented by such Old ▇▇▇▇▇▇▇▇ Certificate.
2.H No Further Rights; Transfer of ▇▇▇▇▇▇▇▇ Stock. The Merger
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Consideration paid for any ▇▇▇▇▇▇▇▇ Share Equivalent in accordance with the
terms of this Agreement will be deemed to have been paid in full satisfaction of
all rights pertaining to such ▇▇▇▇▇▇▇▇ Share Equivalent. At the Effective Time,
the stock transfer books of ▇▇▇▇▇▇▇▇ will be closed and no transfer of ▇▇▇▇▇▇▇▇
Share Equivalents will thereafter be made.
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ARTICLE III
MERGER CONSIDERATION AND CLOSING
3.A Merger Consideration.
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(1) Amount for all ▇▇▇▇▇▇▇▇ Share Equivalents in the Aggregate.
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The amount of the aggregate "Merger Consideration" for all ▇▇▇▇▇▇▇▇ Share
Equivalents will an amount equal to the result of:
(a) (i) the sum of (x) the product of the Cash Flow Multiplier
and the Annualized Trailing Cash Flow plus (y) if the Cash Flow
Multiplier is 12.00 and the Annualized Trailing Cash Flow is not less
than the amount of the Target Cash Flow, then $2,620,000, plus (ii)
the KOKH Amount, plus (iii) the Adjustment Amount (the amount
described in this clause (a) being the "Base Merger Consideration")
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plus
(b) an amount equal to the ▇▇▇▇▇▇▇▇ Receivable Proceeds (the
"Receivable Merger Consideration"), which amount will be payable as
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provided in Section 3.G;
provided that, if the Closing occurs on or prior to September 21, 1998,
then the amount described in clauses (a)(i) above will not exceed
$970,000,000. Subject to Section 3.A(4), the "Cash Flow Multiplier" means
(x) 12.00, if the Closing occurs on or prior to June 23, 1998; (y) 12.25,
if the Closing occurs after June 23, 1998 and on or prior to September 21,
1998; and (z) 12.5, if the Closing occurs after September 21, 1998. The
"Target Cash Flow" means $78,115,000 plus the amount of all discretionary
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contributions actually made by ▇▇▇▇▇▇▇▇ and its Subsidiaries to the 401(k)
Plan with respect to any period after December 31, 1997.
(2) Amount for any Particular ▇▇▇▇▇▇▇▇ Share Equivalent. With
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respect to any particular ▇▇▇▇▇▇▇▇ Share Equivalent, the "Merger
Consideration" means the portion of the aggregate Merger Consideration for
all ▇▇▇▇▇▇▇▇ Share Equivalents which is equal to the amount that the holder
of such ▇▇▇▇▇▇▇▇ Share Equivalent would receive in respect of such ▇▇▇▇▇▇▇▇
Share Equivalent if:
(a) all ▇▇▇▇▇▇▇▇ Rights outstanding immediately prior to the
Effective Time were converted into or exercised or exchanged for
▇▇▇▇▇▇▇▇ Shares to the fullest extent permitted by the terms of such
▇▇▇▇▇▇▇▇ Rights, immediately prior to the Effective Time,
(b) ▇▇▇▇▇▇▇▇ (instead of the Old ▇▇▇▇▇▇▇▇ Stockholders)
received an amount equal to the aggregate Merger Consideration for all
▇▇▇▇▇▇▇▇ Share Equivalents and applied a portion of such aggregate
Merger Consideration to the redemption in full, in accordance with the
provisions of its certificate of incorporation, of all preferred stock
of ▇▇▇▇▇▇▇▇, if any, which is outstanding
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immediately prior to the Effective Time, and
(c) ▇▇▇▇▇▇▇▇ thereafter distributed to the holders of the
▇▇▇▇▇▇▇▇ Shares outstanding immediately prior to the Effective Time
(after giving effect to the conversions, exercises and exchanges
referred to in clause (a) above and the redemption described in clause
(b) above), in accordance with the provisions of its certificate of
incorporation, an amount equal to the aggregate Merger Consideration
for the ▇▇▇▇▇▇▇▇ Share Equivalents reduced by the amount required to
effect the redemption described in clause (b) above,
reduced, in the case of any ▇▇▇▇▇▇▇▇ Right, by the exercise price (if any)
payable upon the exercise of such ▇▇▇▇▇▇▇▇ Right as described in clause (a)
above. ▇▇▇▇▇▇▇▇ will cause the holders of all ▇▇▇▇▇▇▇▇ Rights to accept
the Merger Consideration for such ▇▇▇▇▇▇▇▇ Right in consideration for the
cancellation of such ▇▇▇▇▇▇▇▇ Right.
(3) Form of Merger Consideration.
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(a) For ▇▇▇▇▇▇▇▇ Preferred Stock. Subject to the provisions
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of Article II regarding the surrender of Old ▇▇▇▇▇▇▇▇ Certificates,
the amount of the aggregate Merger Consideration for the ▇▇▇▇▇▇▇▇
Preferred Stock will be paid on behalf of the holders of ▇▇▇▇▇▇▇▇
Preferred Stock on the Closing Date in cash by wire transfer of
immediately available funds to such bank account(s) as the Stockholder
Representative may designate to the Merger Sub not less than two (2)
Business Days prior to the Closing Date.
(b) For Other ▇▇▇▇▇▇▇▇ Share Equivalents. Subject to the
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provisions of Article II regarding the surrender of Old ▇▇▇▇▇▇▇▇
Certificates, the Receivable Merger Consideration will be paid as
provided in Section 3.G, and:
(i) at the option of the Merger Sub, up to One Hundred
Million Dollars ($100,000,000) of the aggregate amount of the
estimated Base Merger Consideration for the ▇▇▇▇▇▇▇▇ Share
Equivalents which are not ▇▇▇▇▇▇▇▇ Preferred Stock (the "▇▇▇▇▇▇▇▇
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Common Share Equivalents") will be paid to the holders of
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▇▇▇▇▇▇▇▇ Common Share Equivalents on the Closing Date (the "Old
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▇▇▇▇▇▇▇▇ Common Stockholders") by the issuance of validly-issued,
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fully-paid and nonassessable shares of ▇▇▇▇▇▇▇▇ Common Stock
which have been registered under the Securities Act (and which
therefore will be tradeable on the Nasdaq National Market upon
receipt thereof), and
(ii) the remainder of the estimated amount of such aggregate
Base Merger Consideration will be paid for the account of the Old
▇▇▇▇▇▇▇▇ Common Stockholders on the Closing Date in cash by wire
transfer of immediately available funds to such bank account(s)
as the Stockholder Representative may designate to the Merger Sub
not less than two (2) Business Days prior to the Closing Date.
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The portion of the Base Merger Consideration which is payable in
respect of the ▇▇▇▇▇▇▇▇ Common Share Equivalents is referred to as the
"▇▇▇▇▇▇▇▇ Common Base Merger Consideration." For purposes of this
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Section 3.A(3)(b), shares of ▇▇▇▇▇▇▇▇ Common Stock will be valued at
the Average Trading Price. Notwithstanding the foregoing, the entire
amount of the ▇▇▇▇▇▇▇▇ Common Base Merger Consideration will be
payable in cash in the manner provided in clause (ii) above if on the
Closing Date shares of ▇▇▇▇▇▇▇▇ Common Stock are not registered under
the Securities Exchange Act, the registration described in clause (i)
above has not been effected, and/or shares of ▇▇▇▇▇▇▇▇ Common Stock
are not traded on the Nasdaq National Market or a domestic national
securities exchange. The respective portions of the ▇▇▇▇▇▇▇▇ Common
Base Merger Consideration which are payable in ▇▇▇▇▇▇▇▇ Common Stock
and cash will be allocated among the Old ▇▇▇▇▇▇▇▇ Common Stockholders
pro rata according to the respective amounts of the ▇▇▇▇▇▇▇▇ Common
Base Merger Consideration to be received by them, as determined in
accordance with Section 3.A(2); provided that, in lieu of issuing a
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fractional share of ▇▇▇▇▇▇▇▇ Common Stock to any Old ▇▇▇▇▇▇▇▇ Common
Stockholder, ▇▇▇▇▇▇▇▇ or the Merger Sub will pay the Stockholder
Representative as provided in clause (ii) above (for the account of
such Old ▇▇▇▇▇▇▇▇ Stockholder) an amount in cash equal to a
corresponding fraction of the Average Trading Price.
(c) Share Certificates for ABRY Fund Partners. ▇▇▇▇▇▇▇▇ and
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the Merger Sub acknowledge that at or after the time of the Closing
the ABRY Fund will distribute to its partners (who may in turn
distribute to their partners, and so on) any or all of the shares of
the ▇▇▇▇▇▇▇▇ Common Stock which may be issuable to the ABRY Fund as
part of the ▇▇▇▇▇▇▇▇ Common Base Merger Consideration. At the request
of the Stockholder Representative, the Merger Sub will cause to be
issued and delivered to the Stockholder Representative (for the
account of the ABRY Fund) certificates for any or all of such shares
of ▇▇▇▇▇▇▇▇ Common Stock, issued in such whole-number denominations
and registered in such names or nominees, as the Stockholder
Representative may request. Such certificates will be issued in whole
number of shares only, and in lieu of any fractional share ▇▇▇▇▇▇▇▇ or
the Merger Sub will pay the Stockholder Representative (for the
account of the ABRY Fund) an amount in cash equal to a corresponding
fraction of the Average Trading Price.
(d) Escrow Deposit Under Certain Circumstances.
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Notwithstanding the foregoing, if the Estimated Receivable Amount set
forth in ▇▇▇▇▇▇▇▇'▇ Estimate Report (as it may be revised by ▇▇▇▇▇▇▇▇
as provided in the penultimate sentence of Section 3.E(2)) is less
than $24,000,000, then an amount equal to the excess of $24,000,000
over such Estimated Receivable Amount will be withheld from the cash
portion of the ▇▇▇▇▇▇▇▇ Common Base Merger Consideration to be paid
to the Stockholder Representative pursuant to Section 3.A(3)(b) and
will instead be deposited with the Estimate Escrow Agent as the
Estimate Fund.
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(4) Effect of Delay.
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(a) If Caused by ▇▇▇▇▇▇▇▇. If the Closing is delayed (a
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"Delay") solely by reason of (i) a breach by ▇▇▇▇▇▇▇▇ of its
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obligations under this Agreement, (ii) the failure of a ▇▇▇▇▇▇▇▇
Consent to be obtained, (iii) any loss, damage, impairment,
condemnation, confiscation or interruption described in Section 7.L(1)
or 7.L(2), and/or (iv) a delay in the Grant of any Required FCC
Consent for a Spin-Off, or in the expiration of the applicable waiting
period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, solely as a result of actions
taken by ▇▇▇▇▇▇▇▇ or its Subsidiaries (items described in clauses (i),
(ii), (iii), and (iv) being "Causes"), then for purposes of
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determining the Cash Flow Multiplier and the amount described in
Section 3.D(1)(b), the Closing will be deemed to have occurred on the
day upon which it would have occurred but for such breach, failure,
loss, damage, impairment, condemnation, confiscation or interruption.
(b) If Caused by Gross Revenue Shortfall. As part of the
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Cash Flow Report delivered pursuant to Section 7.C(1) for each of
March, April and May of 1998, ▇▇▇▇▇▇▇▇ will deliver to ▇▇▇▇▇▇▇▇ its
good faith determination of the amount of the Gross Revenues,
determined as if the last day of the month in question were the
Measurement Date (such amount being the "Estimated Gross Revenues" for
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such month). If the Estimated Gross Revenues for each of March, April
and May of 1998 set forth in the corresponding Cash Flow Reports is
less than the corresponding amount set forth in Section 10.E and all
conditions to the Closing set forth in Articles IX and X (other than
Section 10.E) have been satisfied or waived in writing (or would be
satisfied by the delivery of documents or taking of other actions to
be delivered or taken at the Closing) on June 23, 1998, then for
purposes of determining the Cash Flow Multiplier, the Closing will be
deemed to have occurred prior to June 23, 1998, if the Closing
actually occurs on or prior to the fifth (5th) Business Day after the
delivery of the Monthly Cash Flow Report for June, 1998.
3.B Annualized Trailing Cash Flow.
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(1) Trailing Cash Flow -- Basic Definition. Subject to Sections
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3.B(2), 3.B(3), 3.B(4), 3.B(5), 3.B(6), and 13.Q, the "Trailing Cash Flow"
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means the amount of
(a) the consolidated net operating income of ▇▇▇▇▇▇▇▇ and its
Subsidiaries for the period (the "Measurement Period") beginning on
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January 1, 1998 and ending on the earlier of (i) the last day of the
last full calendar month ended prior to the Closing Date and (ii)
August 31, 1998 (such earlier date being the "Measurement Date"),
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(b) increased by the amount of all non-recurring items incurred
other than in the ordinary course of business, corporate overhead
(including management and consulting fees, reimbursements paid or
payable to ABRY Partners and all
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discretionary profit-sharing and 401(k) plan contributions), income
taxes, interest expense, depreciation and amortization (including
amortization in respect of Film Obligations) deducted in computing
such net operating income,
(c) reduced by the aggregate amount of all Film Obligations which
were actually paid in cash pursuant to Program Contracts with respect
to the Stations during such period and which became due after
September 30, 1997 (determined under the terms and conditions of the
related Program Contracts as in effect on December 31, 1997, or as
initially entered into, if entered into after December 31, 1997), and
(d) further reduced by the aggregate amount of all Film
Obligations which were not paid in cash on or prior to the Measurement
Date and which became due prior to the three-calendar-month-period
ending on the Measurement Date (determined under the terms and
conditions of the related Program Contracts as in effect on December
31, 1997, or as initially entered into, if entered into after December
31, 1997).
For purposes of clause (b) above, except as provided in Section 3.B(3),
"corporate overhead" is understood and agreed to include all expenses
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incurred in connection with the activities of the Corporate Personnel and
(without duplication) all expenses which are not incurred for the benefit
of a single Station (with an LMA Station and the Owned Station serving the
same market being considered a single "Station" for purposes of this
sentence) and which would not be incurred for the benefit of a single
Station under customary industry practice.
(2) Treatment of Barter-Related Items. Notwithstanding GAAP to
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the extent GAAP are to the contrary, the Trailing Cash Flow will be
determined exclusive of the value of any consideration received in barter
for time on any Station pursuant to any Trade and expenses pertaining to
air time provided in barter for products or services pursuant to any Trade.
(3) Lobbying Expenses. For purposes of determining the Trailing
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Cash Flow, and notwithstanding GAAP to the extent GAAP are to the contrary,
50% (and only 50%) of the amounts paid or payable to Policy Communications,
Inc. and which are attributable to the Measurement Period will be deemed to
constitute a part of corporate overhead, and therefore will be added
pursuant to clause (b) of Section 3.B(1).
(4) Treatment of Certain Cascom Items. For purposes of
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determining the Trailing Cash Flow, and notwithstanding GAAP to the extent
GAAP are to the contrary, any payment or accrual in respect of the "Cascom
Bonus" (as that term is defined in the Executive Employment Agreement dated
as of December 9, 1996 among ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Broadcasting and ▇▇▇▇▇▇
▇▇▇▇▇▇ ("▇▇▇▇▇▇")) (so long as, by its terms, such Cascom Bonus will not
------
continue to accrue after the Closing Date), and any expense relating to or
arising out of the issuance in February, 1998 of shares of ▇▇▇▇▇▇▇▇ Common
Stock to ▇▇▇▇▇▇, will be disregarded.
8
(5) Treatment of Certain LMA Payments. For purposes of
--------- -- ------- --- --------
determining the Trailing Cash Flow, and notwithstanding GAAP to the extent
GAAP are to the contrary, a portion of the amount payable by ▇▇▇▇▇▇▇▇ or a
Subsidiary of ▇▇▇▇▇▇▇▇ under an Existing LMA for any period which is equal
to the amount of the interest expense of the Person to whom such amount is
payable for such period, plus the amount of all repayments of the principal
amount of indebtedness of such Person from the proceeds of any such payment
by ▇▇▇▇▇▇▇▇ or a Subsidiary of ▇▇▇▇▇▇▇▇, ▇▇▇▇ be treated as if it were
interest expense of ▇▇▇▇▇▇▇▇ and its Subsidiaries.
(6) Application of GAAP. Except as otherwise provided in this
----------- -- ----
Agreement, the Trailing Cash Flow will be determined in accordance with
GAAP.
(7) Annualized Trailing Cash Flow Defined. The "Annualized
---------- -------- ---- ---- -------
Trailing Cash Flow" means the product of the Trailing Cash Flow multiplied
by the amount (the "Annualization Factor") set forth below for the date
------------- ------
which is the Measurement Date:
Measurement Date Annualization Factor
----------- ---- ------------- ------
March 31, 1998 5.81419
April 30, 1998 3.87381
May 31, 1998 2.90996
June 30, 1998 2.34386
July 31, 1998 2.02835
August 31, 1998 1.76026
3.C KOKH Amount. The "KOKH Amount" means the result of:
---- ------ ---- ------
(1) $30,066,000, plus a yield on such amount from January 30,
1998 to the date of the Closing computed at the Yield Rate, plus
----
(2) for each payment made by ▇▇▇▇▇▇▇▇ or any of its Subsidiaries
after January 30, 1998 in respect of the "Purchase Price" under the KOKH
Purchase Agreement or any out-of-pocket expense incurred in connection with
the transactions contemplated by the KOKH Purchase Agreement, the amount of
such payment plus a yield on such amount from the date it was paid to the
Closing Date (or, if earlier in the case of any such expense which is later
reimbursed by ▇▇▇▇▇▇▇▇, the date it is reimbursed by ▇▇▇▇▇▇▇▇), computed at
the Yield Rate, plus
----
(3) for each capital contribution, loan or advance to ▇▇▇▇▇▇▇▇
Broadcasting of Oklahoma City, Inc., a Delaware corporation ("SBOC"), or
----
▇▇▇▇▇▇▇▇ Broadcasting License Holder, Inc., a Nevada corporation ("SBLH"),
----
by ▇▇▇▇▇▇▇▇ or another Subsidiary of ▇▇▇▇▇▇▇▇ after January 30, 1998 and
prior to the Closing, to the extent the proceeds thereof were used in
connection with the operations of Station KOKH, the amount of such capital
contribution, loan or advance, plus a yield on such amount from the date of
such capital contribution, loan or advance to the Closing Date (or, if
earlier, the date upon which such capital contribution,
9
loan or advance is repaid) computed at the Yield Rate, less
----
(4) the amount of each payment made to ▇▇▇▇▇▇▇▇ or any of its
Subsidiaries after January 30, 1998 pursuant to the KOKH Purchase Agreement
representing a reduction in the "Purchase Price" thereunder or a
reimbursement of expenses incurred by SBOC or SBLH, and less
--- ----
(5) the amount of any capital contribution, loan or advance
described in clause (3) above which is repaid prior to the Adjustment Time.
The "Yield Rate" will be 7.125% per annum.
----- ----
3.D Adjustment Amount.
---------- ------
(1) Basic Definition. Subject to the provisions of Sections
----- ----------
3.D(2) through 3.D(6), the "Adjustment Amount" means:
---------- ------
(a) the result of the following, as of the Adjustment Time,
for ▇▇▇▇▇▇▇▇ and its Subsidiaries (including ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇
Three, as if it each were a Subsidiary of ▇▇▇▇▇▇▇▇ at the Adjustment
Time), determined on a consolidated basis:
(i) the aggregate amount of all cash, cash equivalents,
marketable securities, prepaid expenses, deposits (other than
film deposits, if any) held by others and any current assets
(including amounts receivable from employees and independent
contractors and co-op receivables, and amounts payable to
▇▇▇▇▇▇▇▇ or any of its Subsidiaries by reason of the termination
of any interest rate hedging arrangement, assuming such
arrangement were terminated immediately prior to the Adjustment
Time) not otherwise described in this clause (i), other than the
▇▇▇▇▇▇▇▇ Receivables (collectively, but excluding the ▇▇▇▇▇▇▇▇
Receivables, the "Current Assets"), reduced (below zero, if
------- ------ ------- ------ ----- --
necessary) by
---------- --
(ii) the aggregate principal amount of all outstanding
Funded Indebtedness and the aggregate principal amount of the
outstanding indebtedness guaranteed by ▇▇▇▇▇▇▇▇ Broadcasting
pursuant to the Mission Guarantees, in each case together with
the amount of all unpaid accrued interest thereon, unpaid
commitment fees and costs incurred in connection with the
termination of any interest rate hedging arrangements, assuming
such arrangement were terminated immediately prior to the
Adjustment Time, but excluding any change of control, prepayment
or other premium in respect of any such indebtedness, and
excluding in all events the indebtedness of ▇▇▇▇▇▇▇▇ Two and
▇▇▇▇▇▇▇▇ Three represented by the promissory notes issued by them
in connection with the Spin-Offs, and further reduced (below
--- ------- ------- ------
zero, if necessary) by
----- -- ---------- --
10
(iii) without duplication of any amount reflected in
clause (ii) above, all trade accounts payable, accrued expenses
(including accrued vacation pay) and other current liabilities
(collectively, the "Current Liabilities"), and further reduced
------- ----------- --- ------- -------
(below zero, if necessary) by
------ ----- -- ---------- --
(iv) the aggregate amount of the proceeds (net of taxes
and disposition costs) of all Designated Sales (as that term is
defined in Section 7.A(5)(a)(y) consummated after the date of
this Agreement and prior to the Adjustment Time; increased by
--------- --
(b) the applicable amount set forth below, if the Closing
occurs on or after October 21, 1998
Closing Date Amount
------------ ------
On or after October 21, 1998 but
prior to November 20, 1998 $10,000,000
On or after November 20, 1998 but
prior to December 20, 1998 $20,000,000
On or after December 20, 1998 but
prior to January 19, 1999 $30,000,000
On or after January 19, 1999 but
prior to February 18, 1999 $40,000,000
On or after February 18, 1999 but
prior to March 20, 1999 $50,000,000
On or after March 20, 1999 but
prior to April 19, 1998 $60,000,000
On or after April 19, 1998 $70,000,000
and reduced by
--- ------- --
(c) the excess, if any, of (i) the product of $1,985,422 and
a fraction, the numerator of which is the number of days during
calendar year 1998 prior to the Closing Date and the denominator of
which is 365, over (ii) the aggregate amount of the capital
expenditures made by ▇▇▇▇▇▇▇▇ and its Subsidiaries during calendar
year 1998 and prior to the Adjustment Time.
(2) Current Portion of Funded Indebtedness. For purposes of
------- ------- -- ------ ------------
11
determining the Adjustment Amount, and notwithstanding GAAP to the extent
GAAP are to the contrary, the "Current Liabilities" will not include the
current portion of any Funded Indebtedness or any accrued interest thereon.
(3) Transaction Expenses. For purposes of determining the
----------- --------
Adjustment Amount, and notwithstanding GAAP to the extent GAAP are to the
contrary, the "Current Liabilities" will include (i) all amounts incurred
by ▇▇▇▇▇▇▇▇ or any of its Subsidiaries (including on behalf of any Old
▇▇▇▇▇▇▇▇ Stockholder, and including the fees and disbursements of advisors
to ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Two, ▇▇▇▇▇▇▇▇ Three, the Old ▇▇▇▇▇▇▇▇ Stockholders
and the Stockholder Representative), in connection with the negotiation of,
the execution of, the performance of ▇▇▇▇▇▇▇▇'▇, ▇▇▇▇▇▇▇▇ Two's and
▇▇▇▇▇▇▇▇ Three's obligations under, and the consummation or preparation for
consummation of the transactions contemplated by, this Agreement and not
paid prior to the Adjustment Time (all of which amounts ▇▇▇▇▇▇▇▇ and Post-
Merger ▇▇▇▇▇▇▇▇ will pay and satisfy, or cause to be paid and satisfied, in
full), other than any item which this Agreement specifies is to be at any
Acquiring Party's expense, (ii) all amounts required to be paid by, or
other obligations of ▇▇▇▇▇▇▇▇, any of its Subsidiaries, ▇▇▇▇▇▇▇▇ Two or
▇▇▇▇▇▇▇▇ Three from and after the Adjustment Time pursuant to the various
employment agreements among ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Broadcasting and the
Corporate Personnel (each of whom it is understood will resign or be
terminated as of the Effective Time), and (iii) all amounts required to be
paid by ▇▇▇▇▇▇▇▇, any of its Subsidiaries, ▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three
from and after the Adjustment Time in connection with the termination of
employment by ▇▇▇▇▇▇▇▇ and its Subsidiaries of the Corporate Personnel or
any Non-Continuing Station Manager effective as of the Closing Date.
(4) Trade-Out Items. For purposes of determining the Adjustment
--------- -----
Amount, and notwithstanding GAAP to the extent GAAP are to the contrary,
with respect to Trade-Out Receivables and Trade-Out Payables:
(a) the amount of ▇▇▇▇▇▇▇▇'▇ or any of its Subsidiaries'
obligations under, and the amount of the goods, services and other
items to be received under, any Trade will be determined in accordance
with standard industry valuation methods as of the date of this
Agreement (provided that, in the case of goods, services and other
--------
items to be so received, no such item will be valued at an amount
which is greater than the fair value of such item at the Adjustment
Time);
(b) the "Current Assets" will not include Trade-Out
Receivables with respect to any Station;
(c) the "Current Liabilities" will not include Trade-Out
Payables with respect to any Station except to the extent (and only to
the extent) that the aggregate amount of the Trade-Out Payables with
respect to such Station as of the Adjustment Time exceeds the
aggregate amount of the Trade-Out Receivables with respect to such
Station as of the Adjustment Time by more than $50,000; and
12
(d) for purposes of this Agreement (including clause (c)
above), each Station which is a television translator station will be
considered together with the related Station which is a full-power
television station and all other related television translator
stations.
(5) Program Payments. For purposes of determining the Adjustment
------- --------
Amount, and notwithstanding GAAP to the extent GAAP are to the contrary,
"Current Assets" and "Current Liabilities" will not include any amounts in
respect of Film Obligations, except that:
(a) the Current Liabilities will include the aggregate
amount of all Film Obligations which become due prior to the first day
of the calendar month which includes the Closing Date (determined
under the terms and conditions of the related Program Contracts as
then in effect) and which are not paid prior to the Adjustment Time;
(b) the Current Liabilities will include an amount equal to
(i) the aggregate amount of all Film Obligations which are not paid
prior to the Adjustment Time and which become due during the calendar
month which includes the Closing Date (determined under the terms and
conditions of the related Program Contracts as then in effect),
multiplied by (ii) a fraction, the numerator of which is the number of
days during such calendar month prior to, but not including, the
Closing Date, and the denominator of which is the number of days
during such calendar month;/1/
(c) the Current Assets will include an amount equal to (i)
the aggregate amount of all Film Obligations which are paid prior to
the Adjustment Time and which become due during the calendar month
which includes the Closing Date (determined under the terms and
conditions of the related Program Contracts as then in effect),
multiplied by (ii) a fraction, the numerator of which is the number of
days during such calendar month on and after, but not prior to, the
Closing Date, and the denominator of which is the number of days
during such calendar month;/2/ and
(d) the Current Assets will include an amount equal to the
aggregate amount of all Film Obligations which become due after the
final day of the calendar month which includes the Closing Date
(determined under the terms and conditions of the related Program
Contracts as then in effect) and which are paid prior to the
Adjustment Time.
-----------------
/1/ e.g., if the Closing occurs on June 20, 1998, then the fraction described
in this clause (b) will be 19/30.
/2/ e.g., if the Closing occurs on June 20, 1998, then the fraction described
in this clause (c) will be 11/30.
13
(6) Tax Matters. For purposes of determining the Adjustment
--- -------
Amount and notwithstanding GAAP to the extent GAAP are to the contrary:
(a) Closing of Books. The Tax liabilities for each Straddle
------- -- -----
Period will be determined by closing the books and records of
▇▇▇▇▇▇▇▇, its Subsidiaries, ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three as of the
Adjustment Time, and by treating the portion of such Straddle Period
ending on (and including) the day prior to the Closing Date and the
portion of the Straddle Period beginning on the Closing Date as if
they were separate Tax periods, and by employing accounting methods
which are consistent with those employed in preparing the Tax Returns
for ▇▇▇▇▇▇▇▇, its Subsidiaries, ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three in
prior periods except as otherwise required by applicable law, and
which do not have the effect of distorting income or expenses (taking
into account the transactions contemplated by this Agreement), except
that Taxes based on items other than income or sales (for this
purpose, a Tax imposed under alternative methods, at least one of
which is based on income, will be considered an income Tax) will be
computed for such Straddle Period by prorating on a time basis between
the portion of the Straddle Period beginning on the first day of the
applicable Straddle Period and ending on (and including) the day prior
to the Closing Date and the period beginning on the Closing Date and
ending on the last day of such Straddle Period; provided that (x) with
respect to any Tax which is not in effect during the entire Straddle
Period, the proration of such Tax will be based on the period during
the Straddle Period that such Tax was in effect, and (y) for all such
purposes, the ▇▇▇▇▇▇▇▇ Two Spin-Off will be deemed to have occurred
after the Adjustment Time and the ▇▇▇▇▇▇▇▇ Three Spin-Off will be
deemed to have occurred prior to the Adjustment Time, with the effect
that any liability for Spin-Off Taxes relating to the ▇▇▇▇▇▇▇▇ Three
Spin-Off, but not Spin-Off Taxes relating to the ▇▇▇▇▇▇▇▇ Two Spin-
Off, will constitute Current Liabilities.
(b) Determination of Spin-Off Tax Liabilities. The
------------- -- -------- --- -----------
respective amounts of ▇▇▇▇▇▇▇▇'▇, its Subsidiaries', ▇▇▇▇▇▇▇▇ Two's
and ▇▇▇▇▇▇▇▇ Three's aggregate liabilities for the Spin-Off Taxes
arising from the ▇▇▇▇▇▇▇▇ Two Spin-Off (the "▇▇▇▇▇▇▇▇ Two Spin-Off Tax
-------- --- -------- ---
Liability") and the ▇▇▇▇▇▇▇▇ Three Spin-Off (the "▇▇▇▇▇▇▇▇ Three Spin-
--------- -------- ----- ----
Off Tax Liability") will be determined by applying all available net
--- --- ---------
operating losses and other items of deduction and credit
(collectively, "Tax Benefits"). Those Tax Benefits which are
--- --------
permitted under the applicable Legal Requirements to be applied to
reduce either the ▇▇▇▇▇▇▇▇ Two Spin-Off Tax Liability or ▇▇▇▇▇▇▇▇
Three Spin-Off Tax Liability (as distinct from those Tax Benefits
which are only permitted to be applied to reduce one such Tax
Liability but not the other) will be applied pro rata, based on the
respective amounts of the ▇▇▇▇▇▇▇▇ Two Spin-Off Tax Liability for the
Tax in question and the ▇▇▇▇▇▇▇▇ Three Spin-Off Tax Liability for the
Tax in question determined prior to the application of such Tax
Benefits.
(7) Application of GAAP. Except as otherwise provided in this
----------- -- ----
Agreement, the Adjustment Amount will be determined in accordance with
GAAP.
14
3.E Estimates of Annualized Trailing Cash Flow, KOKH Amount and
--------- -- ---------- -------- ---- ----- ---- ------ ---
Adjustment Amount for Closing Purposes.
---------- ------ --- ------- --------
(1) Estimates to be Given Effect. For purposes of determining
--------- -- -- ----- ------
the amount of Base Merger Consideration to be paid at the Closing, the
Annualized Trailing Cash Flow, the KOKH Amount and the Adjustment Amount
will be deemed to be equal to the Estimated Annualized Trailing Cash Flow,
the Estimated KOKH Amount and the Estimated Adjustment Amount,
respectively, determined under this Section 3.E. Notwithstanding this
Section 3.E and Section 3.F, if the Annualized Trailing Cash Flow has been
finally determined pursuant to Section 3.J, then the amount so finally
determined will be used to determine the amount of the ▇▇▇▇▇▇▇▇ Base Merger
Consideration to be paid at the Closing and the ultimate amount of the
▇▇▇▇▇▇▇▇ Common Base Merger Consideration, and the provisions of this
Section 3.E and Section 3.F will apply only to the KOKH Amount and the
Adjustment Amount and not the Annualized Trailing Cash Flow. For purposes
of determining the Estimated Adjustment Amount, the aggregate amount of the
Current Liabilities will be assumed to be $5,600,000 (unless ▇▇▇▇▇▇▇▇
proposes a larger amount in ▇▇▇▇▇▇▇▇'▇ Estimate Report).
(2) ▇▇▇▇▇▇▇▇'▇ Estimate Report. At least five Business Days
---------- -------- ------
prior to any date scheduled for the Closing pursuant to Section 3.H,
▇▇▇▇▇▇▇▇ will prepare and deliver to ▇▇▇▇▇▇▇▇ a written report ("▇▇▇▇▇▇▇▇'▇
----------
Estimate Report") setting forth in reasonable detail ▇▇▇▇▇▇▇▇'▇ good faith
-------- ------
estimates of the Annualized Trailing Cash Flow, the KOKH Amount and the
Adjustment Amount as of such scheduled Closing date and ▇▇▇▇▇▇▇▇'▇ good
faith estimate of the gross amount of all ▇▇▇▇▇▇▇▇ Receivables for which
the date of the underlying invoice is not earlier than the 120th day prior
to the Closing Date (the amount of such latter estimate being the
"Estimated Receivable Amount"). After delivery of ▇▇▇▇▇▇▇▇'▇ Estimate
---------- ---------- --------
Report, ▇▇▇▇▇▇▇▇ will (and will cause its Subsidiaries to) allow ▇▇▇▇▇▇▇▇
and its legal and accounting representatives and advisors reasonable access
to ▇▇▇▇▇▇▇▇'▇ and its Subsidiaries' books and records to enable ▇▇▇▇▇▇▇▇ to
verify the accuracy of the estimated amounts set forth in ▇▇▇▇▇▇▇▇'▇
Estimate Report. ▇▇▇▇▇▇▇▇ will, in good faith, consider and make revisions
to such estimated amounts, but will not be obligated to make any adjustment
with which, in good faith, it does not agree. The estimates of the
Annualized Trailing Cash Flow, the KOKH Amount and the Adjustment Amount
set forth in ▇▇▇▇▇▇▇▇'▇ Estimate Report," as they may be adjusted by
▇▇▇▇▇▇▇▇ as described in the preceding sentence, will be the "Estimated
---------
Annualized Trailing Cash Flow," the "Estimated KOKH Amount" and the
---------- -------- ---- ---- --------- ---- ------
"Estimated Adjustment Amount," respectively, for the scheduled Closing date
---------- ---------- ------
in question.
3.F Final Determination of Base Merger Consideration after the
----- ------------- -- ---- ------ ------------- ----- ---
Closing.
-------
(1) Post-Closing Report. On or prior to the one hundred tenth
------------ ------
(110th) day after the Closing Date, Post-Closing ▇▇▇▇▇▇▇▇ will prepare and
submit to the Stockholder Representative consolidated and consolidating
statements of income for ▇▇▇▇▇▇▇▇ and its Subsidiaries for the period
beginning on January 1, 1998 and ending on the Measurement Date and
consolidated and consolidating balance sheets for ▇▇▇▇▇▇▇▇ and its
Subsidiaries (including each of ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three, as if it
were a Subsidiary
15
of ▇▇▇▇▇▇▇▇ as of the Adjustment Time) as of the Adjustment Time, together
with Post-Merger ▇▇▇▇▇▇▇▇'▇ determination of the aggregate Base Merger
Consideration (the "Post-Closing Report"); provided that, if the Annualized
------------ ------ --------
Trailing Cash Flow has been finally determined prior to the Closing
pursuant to Section 3.J, then the Post-Closing Report need not contain such
consolidated and consolidating statements of income. The Acquiring Parties
will (and will cause their respective Subsidiaries to) allow the
Stockholder Representative and its legal and accounting representatives and
advisors reasonable access to Post-Merger ▇▇▇▇▇▇▇▇'▇ and its Subsidiaries'
books and records to enable the Stockholder Representative to timely review
and dispute the contents of the Post-Closing Report. Post-Closing
▇▇▇▇▇▇▇▇'▇ determination of the aggregate ▇▇▇▇▇▇▇▇ Common Base Merger
Consideration set forth in the Post-Closing Report will become final and
binding upon the Parties and the Old ▇▇▇▇▇▇▇▇ Common Stockholders on the
thirtieth (30th) day after the Post-Closing Report is given to the
Stockholder Representative unless, prior to such thirtieth (30th) day, the
Stockholder Representative gives Post-Closing ▇▇▇▇▇▇▇▇ written notice
stating that the Stockholder Representative disagrees with such
determination and stating in reasonable detail the nature, extent of, and
basis for, the Stockholder Representative's disagreement and the
Stockholder Representative's determination of the aggregate ▇▇▇▇▇▇▇▇ Common
Base Merger Consideration.
(2) Good Faith Resolution. If the Stockholder Representative
---- ----- ----------
timely gives Post-Closing ▇▇▇▇▇▇▇▇ such a dispute notice, then, during the
thirty (30) days after the Stockholder Representative gives such dispute
notice, the Stockholder Representative and Post-Merger ▇▇▇▇▇▇▇▇ will
attempt in good faith to resolve such disagreement, and any mutual
determination of the amount of the aggregate ▇▇▇▇▇▇▇▇ Common Base Merger
Consideration by the Stockholder Representative and Post-Merger ▇▇▇▇▇▇▇▇
will be final and binding upon the Parties and the Old ▇▇▇▇▇▇▇▇
Stockholders on the date of such mutual determination.
(3) Arbitration of Dispute. If any such dispute cannot be
----------- -- -------
resolved by the Stockholder Representative and Post-Merger ▇▇▇▇▇▇▇▇ on or
prior to such thirtieth (30th) day, then such dispute will be referred to
Ernst & Young, and such firm's determination of the aggregate ▇▇▇▇▇▇▇▇
Common Base Merger Consideration will be final and binding upon the Parties
and the Old ▇▇▇▇▇▇▇▇ Common Stockholders on the date such firm's report of
its determination of the aggregate ▇▇▇▇▇▇▇▇ Common Base Merger
Consideration has been delivered to Post-Merger ▇▇▇▇▇▇▇▇ and the
Stockholder Representative.
(4) Computation and Entitlement to Payment after Resolution. If
----------- --- ----------- -- ------- ----- ----------
the amount of the aggregate ▇▇▇▇▇▇▇▇ Common Base Merger Consideration
finally determined in accordance with this Section 3.F exceeds the amount
of the estimated ▇▇▇▇▇▇▇▇ Common Base Merger Consideration paid to the
Stockholder Representative for the account of the Old ▇▇▇▇▇▇▇▇ Common
Stockholders at the Closing (disregarding the amount, if any, deposited in
the Estimate Fund pursuant to Section 3.A(3)(d)) (the "Estimated ▇▇▇▇▇▇▇▇
--------- --------
Common Base Merger Consideration"), then (subject to the provisions of
------ ---- ------ -------------
Article II regarding the surrender of Old ▇▇▇▇▇▇▇▇ Certificates) the Old
▇▇▇▇▇▇▇▇ Common Stockholders will be entitled to receive the amount of such
excess pursuant to Section 3.F(5). If the Estimated ▇▇▇▇▇▇▇▇
16
Common Base Merger Consideration exceeds the amount of the aggregate
▇▇▇▇▇▇▇▇ Common Base Merger Consideration finally determined in accordance
with this Section 3.F, then (subject to the limitation set forth in Section
3.F(5)) Post-Merger ▇▇▇▇▇▇▇▇ will be entitled to receive the amount of such
excess pursuant to Section 3.F(5). Any amount which becomes payable
pursuant to this Section 3.F(4) (except to the extent paid to Post-Merger
▇▇▇▇▇▇▇▇ from the Estimate Fund) will constitute an adjustment of the
aggregate ▇▇▇▇▇▇▇▇ Common Base Merger Consideration paid at the Closing.
(5) Payment after Resolution.
------- ----- ----------
(a) If Payable to the Old ▇▇▇▇▇▇▇▇ Stockholders. Any amount
-- ------- -- --- --- -------- ------------
which becomes payable to the Old ▇▇▇▇▇▇▇▇ Common Stockholders pursuant
to Section 3.F(4) will be paid to the Stockholder Representative, for
distribution by the Stockholder Representative to the Old ▇▇▇▇▇▇▇▇
Common Stockholders, pro rata according to the remaining amounts of
the ▇▇▇▇▇▇▇▇ Common Base Merger Consideration payable to them. Any
such amount will be paid to the Stockholder Representative from the
amount (if any) deposited in the Estimate Fund pursuant to Section
3.A(3)(d), to the extent of the amount so deposited. If no such
deposit is made, or if such deposit is made and the amount to be paid
to the Old ▇▇▇▇▇▇▇▇ Common Stockholders pursuant to Section 3.F(4)
exceeds the amount so deposited, then the amount (or the remaining
amount, as applicable) so payable (for the Old ▇▇▇▇▇▇▇▇ Stockholders'
benefit) will be paid by Post-Merger ▇▇▇▇▇▇▇▇.
(b) If Payable to Post-Merger ▇▇▇▇▇▇▇▇. Any amount which
-- ------- -- ----------- --------
becomes payable to Post-Merger ▇▇▇▇▇▇▇▇ pursuant to Section 3.F(4)
will be paid from the amount (if any) deposited in the Estimate Fund
pursuant to Section 3.A(3)(d), to the extent of the amount so
deposited. If no such deposit is made, or if such deposit is made and
the amount to be paid to Post-Merger ▇▇▇▇▇▇▇▇ pursuant to Section
3.F(4) exceeds the amount so deposited, then the amount (or the
remaining amount, as applicable) so payable to Post-Merger ▇▇▇▇▇▇▇▇
may be recovered by Post-Merger ▇▇▇▇▇▇▇▇ from either or both of (i)
the proceeds of the ▇▇▇▇▇▇▇▇ Receivables received by ▇▇▇▇▇▇▇▇ and its
Subsidiaries during the Collection Period as provided in Section
3.G(4) and (ii) the amounts deposited in the Indemnity Fund, and no
additional amount will be payable to Post-Merger ▇▇▇▇▇▇▇▇ (the amount,
if any, deposited in the Estimate Fund pursuant to Section 3.A(3)(d),
the amount of such proceeds of the ▇▇▇▇▇▇▇▇ Receivables, and the
amounts deposited in the Indemnity Fund pursuant to Section 3.G(4)
being Post-Merger ▇▇▇▇▇▇▇▇'▇ sole source of payment of any amount
which may be owing to Post-Merger ▇▇▇▇▇▇▇▇ by reason of the estimated
amount of the aggregate ▇▇▇▇▇▇▇▇ Common Base Merger Consideration paid
to the Stockholder Representative at the Closing being greater than
the ▇▇▇▇▇▇▇▇ Common Base Merger Consideration as finally determined
pursuant to this Section 3.F).
(c) Interest on Certain Amounts. Any amount payable by
-------- -- ------- -------
Post-Merger ▇▇▇▇▇▇▇▇ pursuant to this Section 3.F(5) will bear
interest at the rate of 18%
17
per annum from the third (3rd) Business Day after the date upon which
the aggregate ▇▇▇▇▇▇▇▇ Common Base Merger Consideration is finally
determined in accordance with this Section 3.F through and including
the date upon which such amount and all such interest are paid in full
(it being understood that in no event will interest be payable to any
Old ▇▇▇▇▇▇▇▇ Common Stockholder in respect of any period prior to the
date upon which such Old ▇▇▇▇▇▇▇▇ Common Stockholder surrenders the
Old ▇▇▇▇▇▇▇▇ Certificate representing the ▇▇▇▇▇▇▇▇ Common Share
Equivalent in question).
(d) Payment of Undisputed Amount. To the extent the
------- -- ---------- ------
aggregate ▇▇▇▇▇▇▇▇ Common Base Merger Consideration and the resulting
amount of any payment which may be required pursuant to Section 3.F(4)
are not in dispute, Post-Merger ▇▇▇▇▇▇▇▇ may retain proceeds of
▇▇▇▇▇▇▇▇ Receivables as provided in Section 3.G(4), Post-Merger
▇▇▇▇▇▇▇▇ or the Stockholder Representative will be entitled to
withdraw amounts from the Estimate Fund and/or the Indemnity Fund, and
the Stockholder Representative will be entitled to receive payments
from Post-Merger ▇▇▇▇▇▇▇▇ (for the account of the Old ▇▇▇▇▇▇▇▇ Common
Stockholders) of the amounts payable to the Old ▇▇▇▇▇▇▇▇ Common
Stockholders, as the case may be./3/
(e) Payments from Escrow Funds. All payments made from the
-------- ---- ------ -----
Estimate Fund or the Indemnity Fund pursuant to this Section 3.F(5)
will be requested and made in accordance with the terms of the
Estimate Escrow Agreement or the Indemnity Escrow Agreement, as
applicable. Earnings on the amount (if any) deposited in the Estimate
Fund or the Indemnity Fund will be paid to the Person(s) ultimately
entitled to receive the amount so deposited, pro rata based on the
respective portions of the amount deposited in such Fund to be paid to
them.
(6) Costs of Dispute Resolution. The prevailing party in any
----- -- ------- ----------
determination pursuant to Section 3.F(3) will be entitled to recover from
the non-prevailing party such prevailing party's reasonable attorneys' fees
and disbursements in addition to any amount owing to it at the Closing, and
the nonprevailing party also will be required to pay all other reasonable
costs and expenses associated with such determination; provided that (a) if
--------
the independent public accounting firm which makes such determination is
unable to determine that a party is the prevailing party, then such costs
and expenses will be equitably
----------------
/3/ By way of illustration, assume that (a) the Estimated Adjustment Amount is
$20,000,000, (b) neither the amount of the Annualized Trailing Cash Flow nor the
KOKH Amount is in dispute, and (c) no amount is deposited in the Estimate Fund.
If the Post-Closing Report indicates that the Adjustment Amount is $18,500,000
and the Stockholder Representative disputes that determination and asserts that
the Adjustment Amount is $19,000,000, then only $500,000 is in dispute. In that
case, even prior to the resolution of such dispute, Post-Merger ▇▇▇▇▇▇▇▇ will be
entitled to retain from the proceeds of the ▇▇▇▇▇▇▇▇ Receivables as provided in
Section 3.G(4), or withdraw from the Indemnity Fund, $1,000,000 (along with a
proportionate share of the "Escrow Income" referred to in the Indemnity Escrow
Agreement, in the case of such a withdrawal from the Indemnity Fund).
18
allocated by such firm upon the basis of the outcome of such determination, and
(b) if such firm is unable to allocate such costs and expenses in such a manner,
then the costs and expenses of such arbitration will be paid one-half by Post-
Merger ▇▇▇▇▇▇▇▇ and one-half by the Stockholder Representative (on behalf of the
Old ▇▇▇▇▇▇▇▇ Stockholders), and each of them will pay the out-of-pocket expenses
incurred by it. Such independent accounting firm may designate the prevailing
party for purposes of this Section 3.F(6).
3.G ▇▇▇▇▇▇▇▇ Receivables.
-------- -----------
(1) Defined. The "▇▇▇▇▇▇▇▇ Receivables" means all trade and
------- -------- -----------
other accounts and notes receivable of ▇▇▇▇▇▇▇▇ and its Subsidiaries
(including each of ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three, for this purpose)
arising from the sale of advertising time (including so-called
"infomercials") and other paid programming time on the Stations, determined
on a consolidated basis as of the Adjustment Time.
(2) Collection and Application. On, and during the 120 days
---------- --- -----------
after, the Closing Date (the "Collection Period"), Post-Merger ▇▇▇▇▇▇▇▇ and
---------- ------
▇▇▇▇▇▇▇▇ will, and will cause their respective Subsidiaries to, use
reasonable efforts in accordance with their respective normal business
practices (not including resorting to or threatening litigation) to collect
the ▇▇▇▇▇▇▇▇ Receivables, including issuing invoices for those ▇▇▇▇▇▇▇▇
Receivables for which invoices have not been issued prior to the Closing
Date. Collections from any Person which is a debtor with respect to any
▇▇▇▇▇▇▇▇ Receivable (a "▇▇▇▇▇▇▇▇ Debtor") will be applied in the
-------- ------
chronological order of the ▇▇▇▇▇▇▇▇ of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Two, ▇▇▇▇▇▇▇▇
Three, Post-Merger ▇▇▇▇▇▇▇▇ and their respective Subsidiaries, as
applicable, to such ▇▇▇▇▇▇▇▇ Debtor (i.e., to the oldest unpaid billing
first) unless (i) such ▇▇▇▇▇▇▇▇ Debtor disputes in writing its obligation
to pay such billing, (ii) such ▇▇▇▇▇▇▇▇ Debtor indicates in writing that
such payment is to be applied in another, specified manner, or (iii) other
facts or circumstances exist in light of which it would be reasonable to
conclude that such ▇▇▇▇▇▇▇▇ Debtor does not intend such payment to be
applied in such a manner.
(3) Efforts by Stockholder Representative or Old ▇▇▇▇▇▇▇▇
------- -- ----------- -------------- -- --- --------
Stockholders. So long as Post-Merger ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ are in
------------
compliance with this Section 3.G, neither the Stockholder Representative
nor any Old ▇▇▇▇▇▇▇▇ Stockholder will make any direct solicitation of any
▇▇▇▇▇▇▇▇ Debtor for purposes of collecting any ▇▇▇▇▇▇▇▇ Receivable during
the Collection Period, except as may be agreed to by Post-Merger ▇▇▇▇▇▇▇▇
and the Stockholder Representative and except with respect to those
▇▇▇▇▇▇▇▇ Receivables which may be or become more than 180 days past due and
those ▇▇▇▇▇▇▇▇ Receivables with respect to which Post-Merger ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ or any of their respective Subsidiaries has received written
notice of a dispute from the related ▇▇▇▇▇▇▇▇ Debtor (a copy of which
notice Post-Merger ▇▇▇▇▇▇▇▇ will promptly forward to the Stockholder
Representative).
(4) Payment of Proceeds. After the end of the Collection Period
------- -- --------
and on or prior to the 150th day after the Closing Date, Post-Merger
▇▇▇▇▇▇▇▇ will pay over an amount equal to the aggregate proceeds received
by ▇▇▇▇▇▇▇▇ and its Subsidiaries in respect of ▇▇▇▇▇▇▇▇ Receivables during
the Collection Period, plus interest thereon computed
19
as described below (collectively, the "▇▇▇▇▇▇▇▇ Receivable Proceeds"), as
-------- ---------- --------
follows (without set-off in respect of any other liability or obligation of
any Person, whether arising pursuant to this Agreement or otherwise except
as expressly provided in this Section 3.G(4)):
(a) the sum of (x) an amount equal to the aggregate amount of all
Loss and Expense (as that term is defined in the Indemnity Agreement)
asserted in writing pursuant to Section 2 of the Indemnity Agreement
as recoverable under Section 3 of the Indemnity Agreement and (y) the
amount which Post-Merger ▇▇▇▇▇▇▇▇ asserts in good faith it will be
owed pursuant to Section 3.F(4), if the amount of the aggregate
▇▇▇▇▇▇▇▇ Common Base Merger Consideration has not been finally
determined in accordance with Section 3.F (or, if less than such sum,
the entire amount of the ▇▇▇▇▇▇▇▇ Receivable Proceeds) will be paid to
the Indemnity Escrow Agent and deposited in the Indemnity Fund, and
(b) the remainder of the ▇▇▇▇▇▇▇▇ Receivable Proceeds will be
paid to the Stockholder Representative, for the account of the Old
▇▇▇▇▇▇▇▇ Common Stockholders, as part of the Merger Consideration for
the ▇▇▇▇▇▇▇▇ Common Share Equivalents,
in each case by wire transfer of immediately available funds to the account
specified by the recipient thereof; provided that, from and after the time
--------
when the amount of the aggregate ▇▇▇▇▇▇▇▇ Common Base Merger Consideration
is finally determined in accordance with Section 3.F, if any amount is
payable to Post-Merger ▇▇▇▇▇▇▇▇ pursuant to Section 3.F(4) based on such
determination, then Post-Merger ▇▇▇▇▇▇▇▇ may retain from the aggregate
proceeds received by ▇▇▇▇▇▇▇▇ and its Subsidiaries in respect of the
▇▇▇▇▇▇▇▇ Receivables during the Collection Period the amount so owed to it,
and the ▇▇▇▇▇▇▇▇ Receivable Proceeds will be reduced by such amount. At
the time of the payments described in clauses (a) and (b) above, Post-
Merger ▇▇▇▇▇▇▇▇ will deliver to the Stockholder Representative a report
which specifies the application to the ▇▇▇▇▇▇▇▇ Receivables and other
accounts receivable of the collections received during the Collection
Period. Interest will be computed on the full amount of the ▇▇▇▇▇▇▇▇
Receivable Proceeds (exclusive of interest which is part thereof) from and
after the 74th day after the Closing to the date upon which the payments
described in clauses (a) and (b) above are made), at the rate of 7.125% per
annum.
(5) Transfer after Collection Period. Immediately following the
-------- ----- ---------- ------
last day of the Collection Period, Post-Merger ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ will,
and will cause their respective Subsidiaries to, transfer and assign to the
Stockholder Representative (for the account of the Old ▇▇▇▇▇▇▇▇ Common
Stockholders) all rights with respect to the ▇▇▇▇▇▇▇▇ Receivables to the
extent they have not then been collected in full, together with all files
concerning such ▇▇▇▇▇▇▇▇ Receivables, and Post-Merger ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
and their respective Subsidiaries will have no further responsibilities
pursuant to this Section 3.G with respect to any ▇▇▇▇▇▇▇▇ Receivable except
to remit to the Stockholder Representative (on behalf of the Old ▇▇▇▇▇▇▇▇
Stockholders) as provided in Section 3.G(4) any ▇▇▇▇▇▇▇▇ Receivable
Proceeds received after the Collection Period. Such transfer, assignment
and remittance will constitute a part of the payment of the ▇▇▇▇▇▇▇▇ Common
Merger
20
Consideration.
(6) Access to Information. During and after the Collection
------ -- -----------
Period, the Acquiring Parties will, and will cause their respective
Subsidiaries to, furnish the Stockholder Representative and its agents,
representatives and advisors with all information (including reasonable
access to their respective books and records) which the Stockholder
Representative reasonably requests in order to monitor, confirm or dispute
the Acquiring Parties' compliance with this Section 3.G.
3.H Closing Time and Place. Subject to Section 12.A, the
consummation of the Merger and the payment of the Base Merger Consideration for
▇▇▇▇▇▇▇▇ Share Equivalents to be paid at such time (the "Closing") will be held
-------
in the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, in New York, New York, at 10:00 a.m., local
time, on the date determined pursuant to the following two sentences, or at such
other place and/or at such other time and date as the Merger Sub and ▇▇▇▇▇▇▇▇
may agree in writing. The Closing will occur on a date designated by the Merger
Sub by written notice to ▇▇▇▇▇▇▇▇ not less than ten Business Days in advance of
such date (which designated date will be not later than the Expiration Date).
Notwithstanding the foregoing, but subject to Section 12.A, if on a date for the
Closing described in the preceding sentence or specified pursuant to this
sentence any condition of the Merger Sub or ▇▇▇▇▇▇▇▇ specified in Article IX or
X has not been satisfied (and will not be satisfied by the delivery of documents
at the Closing) or waived in writing, then the date for the Closing will be
extended to any date specified by the Merger Sub to ▇▇▇▇▇▇▇▇ with not less than
10 Business Days' notice to the other (subject to the Merger Sub's and
▇▇▇▇▇▇▇▇'▇ respective conditions to the Closing set forth in Articles IX and X
being satisfied or waived in writing on such specified date); provided that any
--------
such specified date will be on or prior to the Expiration Date.
3.I Deliveries at the Closing. All actions on the Closing Date
(including those described in Sections 11.D and 11.E) will be deemed to occur
simultaneously, and no document or payment to be delivered or made on the
Closing Date will be deemed to be delivered or made until all such documents and
payments are delivered or made to the reasonable satisfaction of ▇▇▇▇▇▇▇▇, the
Merger Sub, the Stockholder Representative and their respective legal counsel.
(1) Delivery of ▇▇▇▇▇▇▇ Money. At the Closing, to the extent
-------- -- ------- -----
then held by the ▇▇▇▇▇▇▇ Money Escrow Agent, the ▇▇▇▇▇▇▇ Money Fund
(together with all ▇▇▇▇▇▇▇ Money Income, if any, received and held by the
▇▇▇▇▇▇▇ Money Escrow Agent and the right to receive all ▇▇▇▇▇▇▇ Money
Income, if any, not yet received by the ▇▇▇▇▇▇▇ Money Escrow Agent) will be
delivered to the Merger Sub.
(2) Deliveries by ▇▇▇▇▇▇▇▇. At the Closing, ▇▇▇▇▇▇▇▇ will
---------- -- --------
deliver to the Merger Sub the following:
(a) the minute book, stock transfer book and other records
relating to the internal corporate affairs of ▇▇▇▇▇▇▇▇ and each
Subsidiary of ▇▇▇▇▇▇▇▇ (other than ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three)
which are in ▇▇▇▇▇▇▇▇'▇ and its Subsidiaries' possession, and
resignations of the officers and directors of each of ▇▇▇▇▇▇▇▇ and the
Subsidiaries of ▇▇▇▇▇▇▇▇, which
21
resignations will be effective as of the Effective Time;
(b) all mortgage discharges or releases of Liens that, upon
the repayment in full of all outstanding Funded Indebtedness and other
obligations of ▇▇▇▇▇▇▇▇ and its Subsidiaries (other than ▇▇▇▇▇▇▇▇ Two
and ▇▇▇▇▇▇▇▇ Three) under the ▇▇▇▇▇▇▇▇ Senior Debt Arrangements as
described in Section 11.E and all other Funded Indebtedness of
▇▇▇▇▇▇▇▇ and its Subsidiaries (other than ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇
Three) and all related interest and other obligations, the release of
the Mission Guarantees, any required execution and delivery thereof by
▇▇▇▇▇▇▇▇ or a Subsidiary of ▇▇▇▇▇▇▇▇ (other than ▇▇▇▇▇▇▇▇ Two and
▇▇▇▇▇▇▇▇ Three), and any requisite filing thereof, will be sufficient
to cause the Station Assets held by ▇▇▇▇▇▇▇▇ and its Subsidiaries
(other than the assets and properties transferred in the Spin-Offs)
and the capital stock of ▇▇▇▇▇▇▇▇'▇ Subsidiaries (other than ▇▇▇▇▇▇▇▇
Two and ▇▇▇▇▇▇▇▇ Three) to be as described in the second sentence of
Section 4.G(1) and in Sections 4.G(4) and 4.Q;
(c) a certificate of the President or Chief Executive
Officer of ▇▇▇▇▇▇▇▇ dated the Closing Date to the effect that, except
as specified in such certificate, to the best of such officer's
knowledge, the conditions set forth in Sections 10.A(1) and 10.A(2)
have been fulfilled;
(d) a certificate of ▇▇▇▇▇▇▇▇ dated the Closing Date to the
effect that, except as specified in such certificate, the conditions
set forth in Sections 10.A(1) and 10.A(2) have been fulfilled;
(e) a certified copy of the resolutions or action by written
consent of the board of directors and stockholders of ▇▇▇▇▇▇▇▇
authorizing the Merger and ▇▇▇▇▇▇▇▇'▇ execution, delivery and
performance of this Agreement;
(f) certificates as to the existence and/or good standing of
▇▇▇▇▇▇▇▇ and each of its Subsidiaries (other than ▇▇▇▇▇▇▇▇ Two and
▇▇▇▇▇▇▇▇ Three), in each case issued by the Secretary of State or a
comparable official of each jurisdiction specified for such
corporation on the attached Schedule 4O and dated on or after the
fifth Business Day prior to the Closing Date, certifying as to the
existence and/or good standing of such corporation in such
jurisdictions;
(g) one or more opinions of counsel or special counsel to
▇▇▇▇▇▇▇▇, each dated the Closing Date, as to the matters set forth in
the attached Exhibit C; and
------- -
(h) such other documents, instruments and receipts as the
Merger Sub may reasonably request in order to effectuate the Merger
and the other transactions contemplated by this Agreement to be
consummated at the Closing.
Each of the foregoing will be reasonably satisfactory in form to the Merger
Sub and its legal counsel.
22
(3) Deliveries by the Merger Sub. At the Closing, the Merger Sub
---------- -- --- ------ ---
will deliver or cause to be delivered to the Stockholder Representative
stock certificates for ▇▇▇▇▇▇▇▇ Common Stock (if shares of ▇▇▇▇▇▇▇▇ Common
Stock are to be part of the Merger Consideration) and cash as described in
Section 3.A representing the aggregate Base Merger Consideration in respect
of the ▇▇▇▇▇▇▇▇ Share Equivalents, determined based upon the Estimated
Annualized Trailing Cash Flow (or the Annualized Trailing Cash Flow, if it
has been finally determined pursuant to Section 3.J), the Estimated KOKH
Amount and the Estimated Adjustment Amount (subject to the provisions of
Article II), together with the following:
(a) a certificate of an officer or similar official of the
Merger Sub dated the Closing Date to the effect that, except as
specified in such certificate, to the best of such officer's or
official's knowledge, the conditions set forth in Section 9.A(1) and
9.A(2) have been fulfilled;
(b) a certificate of an officer or similar official of
▇▇▇▇▇▇▇▇ dated the Closing Date to the effect that, except as
specified in such certificate, to the best of such officer's or
official's knowledge, the conditions set forth in Sections 9.A(1) and
9.A(2) have been fulfilled;
(c) a certificate of the Merger Sub dated the Closing Date
to the effect that, except as specified in such certificate, the
conditions set forth in Sections 9.A(1) and 9.A(2) have been
fulfilled;
(d) a certificate of ▇▇▇▇▇▇▇▇ dated the Closing Date to the
effect that, except as specified in such certificate, the conditions
set forth in Sections 9.A(1) and 9.A(2) have been fulfilled;
(e) a certified copy of the resolutions or action by written
consent of the board of directors and stockholders of the Merger Sub
authorizing the Merger and the Merger Sub's execution, delivery and
performance of this Agreement;
(f) a certified copy of the resolutions or action by written
consent of the board of directors of ▇▇▇▇▇▇▇▇ authorizing ▇▇▇▇▇▇▇▇'▇
execution, delivery and performance of this Agreement;
(g) certificates as to the existence and/or good standing of
▇▇▇▇▇▇▇▇ and the Merger Sub, in each case issued by the Secretary of
State or a comparable official of such jurisdictions as ▇▇▇▇▇▇▇▇ may
reasonably request and dated on or after the fifth Business Day prior
to the Closing Date, certifying as to the existence and/or good
standing of such corporation in such jurisdictions;
(h) one or more opinions of counsel or special counsel to
▇▇▇▇▇▇▇▇ and the Merger Sub, each dated the Closing Date, as to the
matters set forth in the attached Exhibit D; and
------- -
23
(i) such other documents, instruments and receipts as
▇▇▇▇▇▇▇▇ may reasonably request in order to effectuate the Merger and
the other transactions contemplated by this Agreement to be
consummated at the Closing (including the registration and issuance of
any ▇▇▇▇▇▇▇▇ Common Stock which is part of the Merger Consideration).
Each of the foregoing will be reasonably satisfactory in form to ▇▇▇▇▇▇▇▇
and its legal counsel.
3.J Determination of Trailing Cash Flow and Gross Revenues.
------------- -- -------- ---- ---- --- ----- --------
(1) Gross Revenues Defined. The "Gross Revenues" for any period
----- -------- ------- ----- --------
means the amount of the gross revenues of ▇▇▇▇▇▇▇▇ and its Subsidiaries
from all sources, determined in accordance with GAAP on a consolidated
basis, but excluding revenues (other than from the sale of advertising or
paid programming time on the Stations) of a non-recurring nature generated
other than in the ordinary course of business.
(2) Examination of Cash Flow Reports. Without limiting Section
----------- -- ---- ---- -------
7.C(2), ▇▇▇▇▇▇▇▇ will (and will cause its Subsidiaries to) allow ▇▇▇▇▇▇▇▇
and its legal and accounting representatives and advisors reasonable access
to ▇▇▇▇▇▇▇▇'▇ and its Subsidiaries' books and records to enable ▇▇▇▇▇▇▇▇ to
evaluate and dispute ▇▇▇▇▇▇▇▇'▇ determination of the Trailing Cash Flow and
the Gross Revenues set forth in each Cash Flow Report. ▇▇▇▇▇▇▇▇'▇
determination of the Trailing Cash Flow or the Gross Revenues set forth in
any Cash Flow Report will become final and binding upon the parties to this
Agreement and the Old ▇▇▇▇▇▇▇▇ Stockholders on the fifteenth (15th)
Business Day after such Cash Flow Report is given to ▇▇▇▇▇▇▇▇ unless, prior
to such fifteenth (15th) Business Day, ▇▇▇▇▇▇▇▇ gives ▇▇▇▇▇▇▇▇ written
notice stating that ▇▇▇▇▇▇▇▇ disagrees with such determination and stating
in reasonable detail the nature, extent of, and basis for, ▇▇▇▇▇▇▇▇'▇
disagreement and ▇▇▇▇▇▇▇▇'▇ determination of the Trailing Cash Flow or
Gross Revenues, as the case may be, for the period in question.
(3) Good Faith Resolution. If ▇▇▇▇▇▇▇▇ timely gives ▇▇▇▇▇▇▇▇
---- ----- ----------
such a dispute notice, then, during the five (5) Business Days after
▇▇▇▇▇▇▇▇ gives such dispute notice, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ will attempt in
good faith to resolve such disagreement, and any mutual determination of
the amount of the Gross Revenues or the Trailing Cash Flow, as the case may
be, for the period in question by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ will be final and
binding upon the parties to this Agreement and the Old ▇▇▇▇▇▇▇▇
Stockholders on the date of such mutual determination.
(4) Arbitration of Dispute. If any such dispute cannot be
----------- -- -------
resolved by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ on or prior to such fifth (5th) Business
Day, then such dispute will be referred to Ernst & Young, and such firm's
determination of the Gross Revenues or the Trailing Cash Flow, as the case
may be, for the period in question will be final and binding upon the
parties to this Agreement and the Old ▇▇▇▇▇▇▇▇ Stockholders on the date
such firm's
24
report of its determination of the Gross Revenues or the Trailing Cash
Flow, as the case may be, for such period has been delivered to ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇.
(5) Costs of Dispute Resolution. The prevailing party in any
----- -- ------- ----------
determination pursuant to Section 3.J(4) will be entitled to recover from
the non-prevailing party such prevailing party's reasonable attorneys' fees
and disbursements, and the nonprevailing party also will be required to pay
all other reasonable costs and expenses associated with such determination;
provided that (a) if the independent public accounting firm which makes
such determination is unable to determine that a party is the prevailing
party, then such costs and expenses will be equitably allocated by such
firm upon the basis of the outcome of such determination, and (b) if such
firm is unable to allocate such costs and expenses in such a manner, then
the costs and expenses of such arbitration will be paid one-half by
▇▇▇▇▇▇▇▇ and one-half by ▇▇▇▇▇▇▇▇, and each of them will pay the out-of-
pocket expenses incurred by it. Such independent accounting firm may
designate the prevailing party for purposes of this Section 3.J(5).
(6) Outdated Determination. If the Trailing Cash Flow or the
-------- -------------
Gross Revenues for any period believed to be the Measurement Period are
determined in accordance with this Section 3.J but such period is not the
actual Measurement Period, then the Trailing Cash Flow or the Gross
Revenues, as the case may be, will later be determined for the actual
Measurement Period in accordance with this Section 3.J.
3.K Mandatory Payment to ▇▇▇▇▇▇▇▇.
--------- ------- -- --------
(1) When Mandatory Payment Becomes Owing and Due. Except as
---- --------- ------- ------- ----- --- ---
provided in Section 12.B(4)(d), on the Approval Date a payment in the
amount of Seventy Five Million Dollars ($75,000,000) will become owing to
▇▇▇▇▇▇▇▇ by the Merger Sub. Whether or not this Agreement is thereafter
terminated pursuant to Section 12.A, such payment (the "Mandatory Payment")
--------- --------
will be due and payable upon the termination of this Agreement pursuant to
Section 12.A (or, if earlier, the later of June 23, 1998 and the fifth
Business Day after the Approval Date), unless the Closing has occurred or
the circumstances described in Section 12.B(4)(d) apply. If the Merger Sub
does not pay such amount on or prior to such later date, then ▇▇▇▇▇▇▇▇ may
seek payment of such amount from the ▇▇▇▇▇▇▇ Money Fund (including by means
a drawing under the ▇▇▇▇▇▇▇ Money Letter of Credit), in accordance with the
terms of the ▇▇▇▇▇▇▇ Money Escrow Agreement, unless the circumstances
described in Section 12.B(4)(d) exist.
(2) Return of ▇▇▇▇▇▇▇ Money Fund. Upon the making of the
------ -- ------- ----- ----
Mandatory Payment, the Merger Sub will be entitled to a return of the
▇▇▇▇▇▇▇ Money Fund. Any such return to the Merger Sub of the ▇▇▇▇▇▇▇ Money
Fund may be requested, and will be effected, in accordance with the terms
of the ▇▇▇▇▇▇▇ Money Escrow Agreement. After receipt of the Mandatory
Payment by ▇▇▇▇▇▇▇▇, at the Merger Sub's request ▇▇▇▇▇▇▇▇ will execute and
deliver to the Merger Sub such joint written instructions to the ▇▇▇▇▇▇▇
Money Escrow Agent as the Merger Sub may reasonably request in order to
effect the return of the ▇▇▇▇▇▇▇ Money Fund to the Merger Sub.
25
(3) Treatment of Mandatory Payment. The Parties intend that, if
--------- -- --------- -------
the Mandatory Payment is required to be made, then the Mandatory Payment
will become the property of ▇▇▇▇▇▇▇▇, for the benefit of its
securityholders, and (whether or not the Closing occurs) will be required
to be repaid by ▇▇▇▇▇▇▇▇ only as expressly provided in Section 12.B(4)(d).
If the Mandatory Payment is made, then the amount of the Mandatory Payment
will constitute a prepayment of the portion of the aggregate Base Merger
Consideration payable in respect of the ▇▇▇▇▇▇▇▇ Share Equivalents and will
be credited against the amount of such portion of the aggregate Base Merger
Consideration to be paid at the Closing in cash. If this Agreement is
terminated pursuant to Section 12.A after the Mandatory Payment is made,
then ▇▇▇▇▇▇▇▇ may retain the Mandatory Payment except under the
circumstances described in Section 12.B(4)(d). If this Agreement is
terminated pursuant to Section 12.A prior to the making of the Mandatory
Payment, then the Mandatory Payment will thereupon become due and payable,
except under the circumstances described in Section 12.A(4)(d), and the
▇▇▇▇▇▇▇ Money Fund will not be released (except to ▇▇▇▇▇▇▇▇) until the
Mandatory Payment has been made. Unless this Agreement has been terminated
pursuant to Section 12.A and ▇▇▇▇▇▇▇▇ is entitled to retain the Mandatory
Payment, ▇▇▇▇▇▇▇▇ will not distribute or loan the proceeds of the Mandatory
Payment to its stockholders or their respective Affiliates (other than
▇▇▇▇▇▇▇▇'▇ Subsidiaries), but may utilize all or a portion of such proceeds
to repay Indebtedness of ▇▇▇▇▇▇▇▇ and its Subsidiaries (so long as the
amount repaid may be reborrowed, subject to the satisfaction of customary
conditions for the purpose of repaying such amount to ▇▇▇▇▇▇▇▇ as provided
in Section 12.B(4)(d)) or for any other purpose not prohibited hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇▇▇
Subject to Section 13.Q, ▇▇▇▇▇▇▇▇ makes the following representations
and warranties:
4.A Organization. ▇▇▇▇▇▇▇▇ is a corporation which is duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware
and is qualified to do business or has similar status under the laws of each
jurisdiction in which such qualification is required by applicable Legal
Requirements. ▇▇▇▇▇▇▇▇ has the power and authority to carry on the business
being conducted by it, to own and operate the Station Assets owned and operated
by it, and to enter into and consummate the transactions contemplated to be
consummated by it pursuant to this Agreement.
4.B Action. Each action necessary to be taken by or on the part of
------
▇▇▇▇▇▇▇▇ in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated to be consummated by ▇▇▇▇▇▇▇▇
pursuant to this Agreement and necessary to make the same effective will be duly
and validly taken by, and be effective at, the time by which such action is
required to be taken. This Agreement has been duly and validly authorized,
executed, and delivered by ▇▇▇▇▇▇▇▇ and constitutes its valid and binding
agreement, enforceable against
26
▇▇▇▇▇▇▇▇ in accordance with and subject to its terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
arrangement, moratorium or similar laws affecting the rights of creditors
generally and the availability of equitable remedies.
4.C Financial Statements.
--------- ----------
(1) Description of Statements. Attached to this Agreement as
----------- -- ----------
Schedule 4C are copies of (a) the audited consolidated balance sheet of
▇▇▇▇▇▇▇▇ as at December 31, 1996, and the related statements of operations
and cash flows for the period from January 4, 1996 (the date upon which
▇▇▇▇▇▇▇▇ acquired Act III) to December 31, 1996, and related notes, all
reported on by ▇▇▇▇▇▇▇▇'▇ independent certified public accountants
(collectively, the "12/31/96 Financial Statements"), and (b) the internally
-------- --------- ----------
prepared unaudited consolidated balance sheet of ▇▇▇▇▇▇▇▇ as at September
30, 1997 and the related statement of operations for the nine-month period
ended September 30, 1997 (the "9/30/97 Financial Statements").
(2) Representations as to 1996 Statements. The 12/31/96
--------------- -- -- ---- ----------
Financial Statements are, in all material respects, (a) as of December 31,
1996, correct, complete and in agreement with the books and records
regularly maintained by ▇▇▇▇▇▇▇▇ and its Subsidiaries, and (b) prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with past practice throughout the year involved. The 12/31/96
Financial Statements present fairly, in all material respects, the
financial position of ▇▇▇▇▇▇▇▇ and its Subsidiaries as at December 31, 1996
and the results of the operations and cash flow of ▇▇▇▇▇▇▇▇ and its
Subsidiaries for the period covered thereby.
(3) Representations as to 1997 Statements. When they are
--------------- -- -- ---- ----------
delivered as provided in Section 7.C, the 12/31/97 Financial Statements
will be, in all material respects, (a) as of December 31, 1997, correct,
complete and in agreement with the books and records regularly maintained
by ▇▇▇▇▇▇▇▇ and its Subsidiaries, and (b) prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
past practice throughout the year involved, and will present fairly in all
material respects, the financial position of ▇▇▇▇▇▇▇▇ and its Subsidiaries
as at December 31, 1997 and the results of the operations and cash flow of
▇▇▇▇▇▇▇▇ and its Subsidiaries for the period covered thereby.
(4) Representations as to Interim Statements. Subject to the
--------------- -- -- ------- ----------
effect of year-end adjustments which normally would arise in the course of
an audit, the 9/30/97 Financial Statements are, as of September 30, 1997,
in all material respects, correct, complete and in agreement with the books
and records regularly maintained by ▇▇▇▇▇▇▇▇ and its Subsidiaries, and,
taken together, present fairly, in all material respects, the financial
position of ▇▇▇▇▇▇▇▇ and its Subsidiaries as at September 30, 1997 and the
results of the operations of ▇▇▇▇▇▇▇▇ and its Subsidiaries for the nine
months then ended.
4.D Business Since September 30, 1997. Since September 30, 1997,
-------- ----- --------- --- ----
except to the extent required or permitted by this Agreement or as set forth on
the attached Schedule 4D, the
-------- --
27
business of the Stations has in all material respects been conducted in the
ordinary course of business and in the same manner as it had been conducted by
▇▇▇▇▇▇▇▇ and its Subsidiaries from January 4, 1996 (the date upon which ▇▇▇▇▇▇▇▇
acquired Act III) through December 31, 1996.
4.E FCC Authorizations. As of the date of this Agreement, each
--- --------------
Person specified in the attached Schedule 4E as the holder of an FCC
-------- --
Authorization has been authorized by the FCC to hold and is the holder of each
of the FCC Authorizations specified for such Person on the attached Schedule 4E.
-------- --
Except as set forth on the attached Schedule 4E, (i) such FCC Authorizations
-------- --
constitute all of the licenses and authorizations required under the
Communications Act, or the current rules, regulations, and policies of the FCC,
for the operation of the Stations as now conducted; (ii) such FCC Authorizations
are in full force and effect and are subject to or scheduled for renewal on the
respective dates specified on the attached Schedule 4E (unless theretofore
-------- --
renewed after the date of this Agreement); (iii) such FCC Authorizations are
valid for the full respective terms thereof; (iv) none of ▇▇▇▇▇▇▇▇, its
Subsidiaries, ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three has any reason to believe that
such FCC Authorizations will not be renewed for a full and customary term in the
ordinary course with no materially adverse conditions (except with respect to
general rule-making and similar matters relating generally to television
broadcast stations); (v) there is not pending, or, to the knowledge of ▇▇▇▇▇▇▇▇
or any of its Subsidiaries, threatened, any action by or before the FCC to
revoke, cancel, rescind, modify, or refuse to renew in the ordinary course any
of the FCC Authorizations, and there is not now pending, or, to the knowledge of
any such Person, threatened, issued, or outstanding by or before the FCC, any
investigation, order to show cause, notice of violation, notice of apparent
liability, or notice of forfeiture or complaint against ▇▇▇▇▇▇▇▇, any of its
Subsidiaries, ▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three with respect to any Station; (vi)
the Stations are operating in compliance, in all material respects, with the FCC
Authorizations, the Communications Act, and the current rules, regulations and
policies of the FCC; (vii) to the knowledge of ▇▇▇▇▇▇▇▇ and its Subsidiaries, no
Station (other than any Station which is a low-power television station) is
short-spaced, on a grandfathered basis or otherwise, to any existing broadcast
television station, outstanding construction permit or pending application
therefor, domestic or international, or to any existing or proposed TV
allotment, domestic or international; (viii) neither ▇▇▇▇▇▇▇▇, any of its
Subsidiaries, ▇▇▇▇▇▇▇▇ Two nor ▇▇▇▇▇▇▇▇ Three has received any written notice to
the effect that it is causing objectionable interference to the transmissions of
any other television station or communications facility or has received any
written complaints with respect thereto; (ix) no other television station or
communications facility is causing objectionable interference to any Station's
transmissions or the public's reception of such transmissions; and (x) all
documents required by 47 C.F.R. Section 73.3526 to be kept in each Station's
public inspection file are in such file, and such file will be maintained in
proper order and complete up to and through the Closing Date. Except with
respect to Market Cable Systems that are parties to retransmission agreements,
for each Station, there has been made a valid election of must carry with
respect to each Market Cable System. Except as set forth on Schedule 4.E, no
-------- ---
Market Cable System has advised ▇▇▇▇▇▇▇▇, its Subsidiaries, ▇▇▇▇▇▇▇▇ Two or
▇▇▇▇▇▇▇▇ Three of any signal quality deficiency or copyright indemnity or other
prerequisite to cable carriage of any Station's signal, and no Market Cable
System has declined or threatened to decline such carriage of such Station or
failed to respond to a request for carriage of such Station or sought any form
of relief from carriage of such Station from the FCC. ▇▇▇▇▇▇▇▇, its
Subsidiaries, ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three have filed with the FCC, on a
timely basis, all material reports and other material
28
reports and other material filings required to be filed by them in connection
with the Stations pursuant to the Communications Act and the rules, regulations
and policies of the FCC.
4.F Condition of Assets. Except as set forth on the attached
--------- -- ------
Schedule 4F, the material tangible assets of ▇▇▇▇▇▇▇▇ and its Subsidiaries and
-------- --
the improvements on the Realty which are used by them (a) are in all material
respects in good and technically sound operating condition (ordinary wear and
tear excepted) and are not in need of repair, (b) are in all material respects
in a condition which would be sufficient to permit the owner thereof to operate
or program the Stations (in the manner in which the Stations are operated or
programmed by ▇▇▇▇▇▇▇▇ and its Subsidiaries as of the date of this Agreement) in
compliance with the terms of the FCC Authorizations, the Communications Act and
current FCC rules and regulations, and (c) have in all material respects been
maintained in a manner consistent with generally accepted standards of good
engineering practice and to the knowledge of ▇▇▇▇▇▇▇▇, all applicable federal,
state and local statutes, ordinances, rules and regulations, including, without
limitation, all applicable tower painting and lighting requirements.
4.G Title, Etc.
------ ---
(1) Realty. The attached Schedule 4G contains a description of
------ -------- ---
all parcels of Realty owned by ▇▇▇▇▇▇▇▇, its Subsidiaries, ▇▇▇▇▇▇▇▇ Two and
▇▇▇▇▇▇▇▇ Three (collectively, the "Owned Realty"). The Person designated as
----- ------
the "Titleholder" on the attached Schedule 4G has good and marketable fee
-------- --
title to such parcel, free and clear of all Liens, except for Permitted
Encumbrances. Included in the attached Schedule 4G is a copy of the policy
-------- --
(if any) insuring the Titleholder's title thereto as of the date of this
Agreement. ▇▇▇▇▇▇▇▇ and its Subsidiaries have valid leasehold interests in
all real property subject to the leases (the "Leases") described on the
------
attached Schedule 4G. The attached Schedule 4G contains a description of
-------- -- -------- --
all the material Leases to which ▇▇▇▇▇▇▇▇, any Subsidiary of ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three is a party as a tenant (or subtenant) or
landlord with respect to any Station as of the date of this Agreement,
other than any lease pursuant to which ▇▇▇▇▇▇▇▇ or a Subsidiary (as lessor)
leases space on a tower on terms which were customary when such lease was
entered into. Neither ▇▇▇▇▇▇▇▇, any of its Subsidiaries, ▇▇▇▇▇▇▇▇ Two nor
▇▇▇▇▇▇▇▇ Three is in material default under any of the Leases, and
▇▇▇▇▇▇▇▇, any ▇▇▇▇▇▇▇▇ Subsidiary, ▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three is the
holder of the leaseholds purported to be granted to it under the Leases
under which it is a lessee. Each of the Leases (x) is valid as to
▇▇▇▇▇▇▇▇, any ▇▇▇▇▇▇▇▇ Subsidiary, ▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three and, to
the knowledge of ▇▇▇▇▇▇▇▇, is valid as to any other party thereto, (y) is
in full force and effect and constitutes a legal and binding obligation of,
and is legally enforceable against, ▇▇▇▇▇▇▇▇, any ▇▇▇▇▇▇▇▇ Subsidiary,
▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three and, to ▇▇▇▇▇▇▇▇'▇ knowledge, each other
party thereto, subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, arrangement, moratorium or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies, and (z) grants substantially the leasehold interest it
purports to grant, including any rights to nondisturbance and peaceful and
quiet enjoyment that may be contained therein. To ▇▇▇▇▇▇▇▇'▇ knowledge,
each party other than ▇▇▇▇▇▇▇▇, any ▇▇▇▇▇▇▇▇ Subsidiary, ▇▇▇▇▇▇▇▇ Two or
▇▇▇▇▇▇▇▇ Three is in compliance in all material respects with the
provisions of the Leases. The Owned Realty and the real property
29
subject to the Leases listed in the attached Schedule 4G constitute all of
-------- --
the real property owned, leased or used by ▇▇▇▇▇▇▇▇, any ▇▇▇▇▇▇▇▇
Subsidiary, ▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three in the business and operations
of the Stations which is material to the businesses and operations of the
Stations.
(2) Compliance. The Owned Realty and its present uses comply in
----------
all material respects with all applicable zoning laws and ordinances and no
material exemption or waiver thereunder will expire or be terminated by
reason of the Merger. To the knowledge of ▇▇▇▇▇▇▇▇ and its Subsidiaries,
there exists no notice of any material uncorrected violations of housing,
building, safety, or fire ordinances with respect to the Owned Realty or
the real property leased by ▇▇▇▇▇▇▇▇ or a Subsidiary pursuant to any Lease.
Except as disclosed on the attached Schedule 4G, the Owned Realty is
-------- --
currently serviced by a community sewage system.
(3) Condemnation or Disposition. Neither ▇▇▇▇▇▇▇▇, any of its
------------ -- -----------
Subsidiaries, ▇▇▇▇▇▇▇▇ Two nor ▇▇▇▇▇▇▇▇ Three has received any notice of,
and none of them has knowledge of, any pending, threatened, or contemplated
condemnation proceeding affecting the Owned Realty or the real property
leased by ▇▇▇▇▇▇▇▇ or a Subsidiary pursuant to any Lease, or any part
thereof, or of any sale or other disposition of the Owned Realty or any
portion thereof in lieu of condemnation.
(4) Non-Realty. Taken together, ▇▇▇▇▇▇▇▇, its Subsidiaries,
----------
▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three have good title to, or a valid leasehold
in, the tangible assets (other than the Realty) and personal property
included in the Station Assets, and all such assets and personal property
will on the Closing Date (after the repayment in full of the Funded
Indebtedness of ▇▇▇▇▇▇▇▇ and its Subsidiaries and all related interest and
other obligations and the release of all related Liens and the Mission
Guarantees) be free and clear of all Liens other than Permitted
Encumbrances.
4.H Call Letters, Trademarks, Etc. Taken together, ▇▇▇▇▇▇▇▇, its
---- -------- ----------- ---
Subsidiaries, ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three possess (and immediately after
the Merger, will possess) adequate rights, licenses, or other authority to use
the call letters presently used by the Stations and all trademarks and trade
names relating to the Stations which are required for the operation of the
Stations or which are material to the conduct of the business of the Stations,
in each case as presently conducted by ▇▇▇▇▇▇▇▇ and its Subsidiaries, and have
good title to such call letters, trademarks and trade names which they purport
to own, and ▇▇▇▇▇▇▇▇'▇, its Subsidiaries', ▇▇▇▇▇▇▇▇ Two's and ▇▇▇▇▇▇▇▇'▇ Three's
respective rights thereto are free and clear of all Liens other than Permitted
Encumbrances. None of ▇▇▇▇▇▇▇▇, its Subsidiaries, ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇
Three has received any written notice with respect to any alleged infringement
or unlawful or improper use of any copyright, trademark, trade name, or other
intangible property right owned or alleged to be owned by others and used in
connection with the Stations.
4.I Insurance. The attached Schedule 4I is, in all material
--------- -------- --
respects, a correct and complete summary of the material terms of each material
policy of insurance which is in effect on the date of this Agreement insuring
▇▇▇▇▇▇▇▇ and its Subsidiaries against loss or damage to any
30
Station Assets by fire, casualty and other hazards and risks relating to their
tangible assets, and each such policy of insurance is in full force and effect
in all material respects.
4.J Contracts. The attached Schedule 4J contains a list of each of
--------- -------- --
the following to which any of ▇▇▇▇▇▇▇▇ or its Subsidiaries is a party on the
date of this Agreement (other than any Contract (i) which does not require
▇▇▇▇▇▇▇▇ and its Subsidiaries to furnish consideration in an aggregate amount
for such Contract of more than $25,000, (ii) which is terminable by ▇▇▇▇▇▇▇▇ or
any of its Subsidiaries without penalty upon advance notice of thirty (30) days
or less, (iii) which is a barter programming contract pursuant to which the
remaining telecasting term as of December 31, 1997 was twelve months or less, or
(iv) which is a Time Sale Contract):
(1) television network affiliation agreements;
(2) Trades which could require the furnishing of advertising time
on any Station at any time after the Closing Date;
(3) sales agency or advertising representation contracts;
(4) employment contracts;
(5) licenses or other contracts under which ▇▇▇▇▇▇▇▇ or any of
its Subsidiaries is authorized to broadcast on any Station filmed or taped
programming supplied by others;
(6) leases of personal property which have a term, including
renewal options exercisable by any party thereto other than ▇▇▇▇▇▇▇▇ or any
of its Subsidiaries, ending more than one year after the date of this
Agreement; and
(7) any other contract which is material to the business and
operation of the Stations.
Neither ▇▇▇▇▇▇▇▇, any of its Subsidiaries, ▇▇▇▇▇▇▇▇ Two nor ▇▇▇▇▇▇▇▇ Three is in
material breach of any contract or agreement described on the attached Schedule
--------
4J, nor is there any fact or circumstance which, with the giving of notice or
--
the passage of time, or both, would constitute such a breach. Each material
Contract described on the attached Schedule 4J (other than any such Contract
-------- --
which expires or is terminated in the ordinary course of business after the date
of this Agreement) is in all material respects in full force and effect, valid
and binding and enforceable as to ▇▇▇▇▇▇▇▇, its Subsidiaries, ▇▇▇▇▇▇▇▇ Two
and/or ▇▇▇▇▇▇▇▇ Three, as applicable, and, to ▇▇▇▇▇▇▇▇'▇ knowledge, each other
party thereto (subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, arrangement, moratorium or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies).
4.K Employees. The attached Schedule 4K lists all employees of
--------- -------- --
▇▇▇▇▇▇▇▇ or any of its Subsidiaries as of December 31, 1997 and their respective
current budgeted annual base salary and bonus or annualized wages as of such
date and their respective dates of hire. Except as
31
described on the attached Schedule 4J or the attached Schedule 4K, on the date
-------- -- -------- --
of this Agreement (a) ▇▇▇▇▇▇▇▇ and its Subsidiaries have no written or oral
contract of employment with any such employee (other than a Contract for
employment at the will of the employer), and (b) ▇▇▇▇▇▇▇▇ and its Subsidiaries
are not a party to or subject to any collective bargaining agreement with
respect to any such employee or any contract with any labor union or other labor
organization with respect to the Stations. ▇▇▇▇▇▇▇▇ and its Subsidiaries are not
parties to any pending labor dispute affecting the Stations, nor, to the
knowledge of ▇▇▇▇▇▇▇▇, is any such dispute threatened, on the date of this
Agreement and, on the Closing Date, no such pending or threatened dispute will
be material. With respect to employees of and service providers to ▇▇▇▇▇▇▇▇ and
its Subsidiaries, ▇▇▇▇▇▇▇▇ and the Subsidiaries are and have been in compliance
in all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and have not and are not
engaged in any unfair labor practice. The persons classified by ▇▇▇▇▇▇▇▇ and the
Subsidiaries as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and ▇▇▇▇▇▇▇▇ and its Subsidiaries have
in all material respects fully and accurately reported their compensation on IRS
Forms 1099 when required to do so.
4.L Litigation. Except as set forth on the attached Schedule 4L:
---------- -------- --
(1) on the date of this Agreement, ▇▇▇▇▇▇▇▇ and its Subsidiaries
are not operating under or subject to or in default with respect to any
order, writ, injunction, or decree of any court or federal, state,
municipal, or other governmental department, commission, board, agency, or
instrumentality arising out of a proceeding to which it is or was a party,
and on the Closing Date, no such item will have or reasonably be expected
to result in a Material Adverse Change; and
(2) on the date of this Agreement, there is no litigation pending
by or against, or to the knowledge of ▇▇▇▇▇▇▇▇ threatened against, ▇▇▇▇▇▇▇▇
or any of its Subsidiaries which interferes with, or could reasonably be
expected to interfere with, (a) the operations of the Stations as presently
conducted or (b) the ability of ▇▇▇▇▇▇▇▇ to carry out the transactions
contemplated to be carried out by it pursuant to this Agreement, and on the
Closing Date, no such pending or threatened litigation will have or will
reasonably be expected to result in a Material Adverse Change.
There are no attachments, executions, or assignments for the benefit of
creditors or voluntary or involuntary proceedings in bankruptcy initiated or
contemplated by, or, to the knowledge of ▇▇▇▇▇▇▇▇, threatened or pending
against, ▇▇▇▇▇▇▇▇ or any of its Subsidiaries.
4.M Compliance with Laws. Other than with respect to matters
---------- ---- ----
disclosed in the attached Schedule 4E or the attached Schedule 4L, subject to
-------- -- -------- --
obtaining all applicable Consents: (a) ▇▇▇▇▇▇▇▇ and its Subsidiaries, with
respect to the Station Assets, are in compliance in all material respects with
all applicable Legal Requirements, and (b) the present uses by ▇▇▇▇▇▇▇▇ and its
Subsidiaries of the Station Assets which they own do not in any material respect
violate any such
32
Legal Requirements.
4.N No Defaults. Except for (w) any item described on the attached
-- --------
Schedule 4N, (x) the requisite approval of the FCC, (y) compliance with the
-------- --
requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, and (z) any Consent which may be
required under any Contract, on the Closing Date (after giving effect to all
Consents which have been obtained) neither the execution and delivery by
▇▇▇▇▇▇▇▇ of this Agreement, nor the consummation by ▇▇▇▇▇▇▇▇ of the Merger or
the other transactions contemplated by this Agreement to be consummated by
▇▇▇▇▇▇▇▇, requires any Consent under, will constitute, or, with the giving of
notice or the passage of time or both, would constitute, a material violation of
or would conflict in any material respect with or result in any material breach
of or any material default under, or will result in the creation of any Lien
(other than any Permitted Encumbrance or any Lien in favor of one or more of the
Acquiring Parties) under, any of the terms, conditions, or provisions of any
Legal Requirement to which ▇▇▇▇▇▇▇▇ or any of its Subsidiaries is subject, or of
the certificate of incorporation or by-laws of ▇▇▇▇▇▇▇▇ or any of its
Subsidiaries. No Lease for the main studio site of any Station, no lease
pursuant to which ▇▇▇▇▇▇▇▇, any of its Subsidiaries, ▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇
Three leases (as lessee) space on a transmission tower for the location of any
transmission equipment of any Station, and neither Existing LMA, contains any
provision which expressly requires a Consent by reason of a merger or change of
control or ownership of ▇▇▇▇▇▇▇▇.
4.O Subsidiaries.
------------
(1) Subsidiaries' Stock. All of the issued and outstanding
------------- -----
capital stock of each of the corporations named on the attached Schedule 4O
-------- --
(other than ▇▇▇▇▇▇▇▇, and other than ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three, as of
the Closing Date) is owned of record (directly or indirectly through one or
more of its Subsidiaries) by ▇▇▇▇▇▇▇▇ free and clear of all Liens other
than Permitted Encumbrances. All such capital stock has been validly
issued and is fully paid and nonassessable, there is not outstanding any
right to acquire any capital stock or other equity securities of any
Subsidiary of ▇▇▇▇▇▇▇▇ (by exercise of any right or by conversion, exchange
or otherwise), and such capital stock is not subject to any option,
warrant, voting trust, outstanding proxy, registration rights agreement or
other agreement regarding voting rights, other than any Permitted
Encumbrance.
(2) Subsidiaries' Status. Each of ▇▇▇▇▇▇▇▇'▇ Subsidiaries named
------------- ------
on the attached Schedule 4O is a corporation duly organized, validly
-------- --
existing and in good standing (or having comparable active status) under
the laws of the jurisdiction indicated on such Schedule under the heading
"Organization" and has the power and authority to carry on the business
conducted by it and own the properties owned by it under the laws of such
jurisdiction and each other jurisdiction in which it is required to have
such authority. A true and correct copy of the certificate or articles of
incorporation and by-laws of each of such Subsidiary has been provided to
the Merger Sub. On the Closing Date, neither ▇▇▇▇▇▇▇▇ nor any other
corporation named on the attached Schedule 4O will own any shares of stock
-------- --
or other equity or debt securities of or any interest in any Person other
than another Person named on the attached Schedule 4O, ▇▇▇▇▇▇▇▇ Two or
-------- --
▇▇▇▇▇▇▇▇ Three.
33
4.P Tax Matters.
--- -------
(1) Tax Returns. Except as set forth on the attached Schedule 4P
--- ------- -------- --
or as has not caused and is not reasonably expected to cause a Material
Adverse Change: (a) all federal, state, local and foreign tax returns and
tax reports required to be filed by ▇▇▇▇▇▇▇▇ or any of its Subsidiaries
have been timely filed (taking into account any extensions of which
▇▇▇▇▇▇▇▇ or any of its Subsidiaries may have availed itself) with the
appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed, and all of the foregoing
(including any summary balance sheets included therein) are true, correct,
and complete; (b) all federal, state, local and foreign income, profits,
franchise, sales, use, occupation, property, excise, and other taxes
(including interest and penalties) due and payable by ▇▇▇▇▇▇▇▇ and its
Subsidiaries have been fully paid; (c) no issues have been raised in
writing (or, to ▇▇▇▇▇▇▇▇'▇ knowledge, orally) and are currently pending by
the Internal Revenue Service or any other taxing authority in connection
with any of such returns and reports; (d) no waivers of statutes of
limitations as to tax matters have been given or requested with respect to
▇▇▇▇▇▇▇▇ and its Subsidiaries; (e) the federal, state, local, and foreign
income tax and franchise tax returns of or with respect to ▇▇▇▇▇▇▇▇ and its
Subsidiaries have not been examined by the Internal Revenue Service or by
appropriate state, provincial, or departmental tax authorities; (f) no
issue has been raised in writing (or, to ▇▇▇▇▇▇▇▇'▇ knowledge, orally) with
▇▇▇▇▇▇▇▇ or any of its Subsidiaries by any taxing authority which can
reasonably be expected to result in a deficiency for any fiscal year or all
deficiencies asserted or assessments (including interest and penalties)
made as a result of any examinations have been fully paid, and no proposed
(but unassessed) additional taxes, interest, or penalties have been
asserted; (g) neither ▇▇▇▇▇▇▇▇ nor any of its Subsidiaries is (or has ever
been) a party to any Tax sharing agreement with any Person who was not a
member of an affiliated group of corporations (as that term is defined in
Section 1504(a) of the Tax Code, or any analogous combined, consolidated or
unitary group defined under state, local or foreign Tax law) consisting in
whole or in part of the parties to such agreement, and neither ▇▇▇▇▇▇▇▇ nor
any of its Subsidiaries has any liability for the Taxes of any other Person
(other than ▇▇▇▇▇▇▇▇ and its Subsidiaries) pursuant to Reg. Section 1.1502-
6 under the Tax Code (or any similar provision of state, local or foreign
Tax law) or as a transferee or successor or by contract; and (h) ▇▇▇▇▇▇▇▇
has provided ▇▇▇▇▇▇▇▇ with copies of all federal and state income or
franchise tax returns that have been filed with respect to ▇▇▇▇▇▇▇▇ or any
of its Subsidiaries since January 4, 1996.
(2) Tax Elections and Special Tax Status. Except as set forth on
--- --------- --- ------- --- ------
the attached Schedule 4P: (a) neither ▇▇▇▇▇▇▇▇ nor any of its Subsidiaries
-------- --
is or has been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Tax Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Tax Code, and ▇▇▇▇▇▇▇▇ is not
required to withhold tax in respect of the Merger Consideration for the
▇▇▇▇▇▇▇▇ Share Equivalents by reason of Section 1445 of the Tax Code; (b)
neither ▇▇▇▇▇▇▇▇ nor any of its Subsidiaries has made any election or filed
any consent pursuant to Section 341(f) of the Tax Code relating to
collapsible corporations; (c) neither ▇▇▇▇▇▇▇▇ nor any of its Subsidiaries
has entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a
nondeductible expense
34
to ▇▇▇▇▇▇▇▇ or any of its Subsidiaries pursuant to Section 280G of the Tax
Code or an excise tax to the recipient of such payment pursuant to Section
4999 of the Tax Code; and (d) ▇▇▇▇▇▇▇▇ has not agreed to make, nor is it
required to make, any adjustment under Section 481(a) of the Tax Code by
reason of a change in accounting method or otherwise.
4.Q Capital Stock. As of the date of this Agreement, ▇▇▇▇▇▇▇▇ has
------- -----
authorized capital stock consisting of 90,000,000 shares of capital stock, of
which (a) 25,000,000 shares are designated Class A Common Stock, par value
$0.001 per share, of which no shares are issued and outstanding, (b) 25,000,000
shares are designated Class B-1 Common Stock, par value $0.001 per share, of
which 1,201,577 shares are issued and outstanding, (c) 25,000,000 shares are
designated Class B-2 Common Stock, par value $0.001 per share, of which
6,158,211 shares are issued and outstanding, (d) 5,000,000 shares are designated
Class C Common Stock, par value $0.001 per share, of which 1,021,872 shares are
issued and outstanding, and (e) 10,000,000 shares are designated Preferred
Stock, $0.001 par value per share, of which 1,150,000 shares are issued and
outstanding. All of the issued and outstanding capital stock of ▇▇▇▇▇▇▇▇ is
duly authorized and validly issued, fully paid and nonassessable, and there are
no preemptive rights in respect thereof in favor of any Person (other than any
Person which holds ▇▇▇▇▇▇▇▇ Share Equivalents). Except for warrants which are
presently exercisable for 2,406,307 shares of Class B-1 Common Stock, there are
no outstanding options, warrants or other rights to subscribe for or purchase
from ▇▇▇▇▇▇▇▇, no contracts or commitments providing for the issuance of, or the
granting of rights to acquire, and no securities convertible into or
exchangeable for, any shares of capital stock or any other ownership interest of
▇▇▇▇▇▇▇▇.
4.R Books and Records. The minute books of each of ▇▇▇▇▇▇▇▇ and its
----- --- -------
Subsidiaries contain records which are complete and accurate in all material
respects of all meetings and other corporate actions of its stockholders, its
board of directors and all committees, if any, appointed by its board of
directors. The books of accounts, ledgers, order books, records and documents
of each of ▇▇▇▇▇▇▇▇ and its Subsidiaries, in all material respects, accurately
and completely reflect information relating to its business, the nature,
acquisitions, maintenance and location of its assets and the transactions giving
rise to its obligations and accounts receivable.
4.S Absence of Significant Undisclosed Liabilities. Neither ▇▇▇▇▇▇▇▇
------- -- ----------- ----------- -----------
nor its Subsidiaries has any debt, liability or obligation of any kind, whether
accrued, absolute, contingent or otherwise, including any liability or
obligation on account of Taxes or any governmental charges or penalty, interest
or fines, which would be required to be reflected in ▇▇▇▇▇▇▇▇'▇ consolidated
balance sheet prepared in accordance with GAAP and which would have, or which in
the case of contingent or inchoate liabilities, would have if accrued or
absolute, a material adverse effect on the financial condition of ▇▇▇▇▇▇▇▇ and
its Subsidiaries, other than any liability or obligation (a) reflected in any
Financial Statement, (b) identified with particularity in any attached Schedule
or arising since September 30, 1997 under any Contract which is described, or
which is not required to be described, on any attached Schedule, (c) incurred in
the ordinary course of business since September 30, 1997, or (d) incurred in
connection with the transactions contemplated by this Agreement. Each of
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Broadcasting has filed with the Securities and Exchange
Commission all material documents required by the Securities Act or the
Securities Exchange Act to be filed by it since January 4, 1996 (the "▇▇▇▇▇▇▇▇
--------
SEC Reports"). Neither ▇▇▇▇▇▇▇▇ nor ▇▇▇▇▇▇▇▇ Broadcasting has
--- -------
35
any liability by reason of any ▇▇▇▇▇▇▇▇ SEC Report not complying in all material
respects at the time of the filing thereof with the requirements of the
Securities Act, and the rules and regulations thereunder, or the Securities
Exchange Act, and the rules and regulations thereunder, as the case may be, or
containing any untrue statement of a material fact or omitting to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.T Employee Benefit Plans. Except as set forth on the attached
-------- ------- -----
Schedule 4T, neither ▇▇▇▇▇▇▇▇ nor its Subsidiaries maintains or is a party to or
-------- --
makes contributions to any of the following: (a) any "employee pension benefit
plan," (as such term is defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA")); or (b) any "employee welfare benefit
-----
plan" (as such term is defined in Section 3(a) of ERISA), whether written or
oral. All employee benefit plans and other Benefit Arrangements now or formerly
maintained by ▇▇▇▇▇▇▇▇ or its Subsidiaries or to which ▇▇▇▇▇▇▇▇ or its
Subsidiaries is obligated to contribute, are, and have in the past been, in all
material respects maintained, funded and administered in compliance with ERISA,
and other applicable law. No such employee benefit plan holds any securities
issued by ▇▇▇▇▇▇▇▇. Neither ▇▇▇▇▇▇▇▇ nor any of its ERISA Affiliates has ever
sponsored or maintained, had any obligation to sponsor or maintain, or had any
liability (whether actual or contingent, with respect to any of its assets or
otherwise) with respect to any employee pension benefit plan subject to Section
302 of ERISA or Section 412 of the Tax Code or Title IV of ERISA (including any
multiemployer plan). Excluding routine claims for benefits, there are no
pending claims or lawsuits by, against, or relating to any employee benefit
plans or other Benefit Arrangements that would, if successful, result in
liability of ▇▇▇▇▇▇▇▇ or any of its Subsidiaries. Neither ▇▇▇▇▇▇▇▇ nor any
Subsidiary has maintained or contributed to any plan intended to qualify under
Section 401(a) of the Tax Code since January 4, 1996, other than the ▇▇▇▇▇▇▇▇
Broadcasting Company 401(k) Plan (the "401(k) Plan"). The 401(k) Plan has
always qualified in all material respects in form and operation under Section
401(a) of the Tax Code and has a currently applicable determination letter from
the Internal Revenue Service, and its trust has always been exempt under Section
501 of the Tax Code, and nothing has occurred with respect to such plan and
trust that could cause the loss of such qualification or exemption or the
imposition of any liability, lien, penalty, or tax under ERISA or the Tax Code.
The employee benefit plans and Benefit Arrangements maintained by ▇▇▇▇▇▇▇▇ are
not presently under audit or examination (and have not received notice of
potential audit or examination) by any governmental authority, and no matters
are pending with respect to the 401(k) Plan under any governmental compliance
programs. No employee benefit plan or Benefit Arrangement contains any
provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions this Agreement contemplates, and ▇▇▇▇▇▇▇▇ has not declared
or paid any bonus or other incentive compensation or established any severance
plan, program, or arrangement in contemplation of the transactions contemplated
by this Agreement, in each case other than those which have been paid or which
will be included as part of the Current Liabilities. ▇▇▇▇▇▇▇▇ has made or has
recorded proper accruals for all required contributions to its employee benefit
plans as of the last day of each plan's most recent fiscal year, and all
benefits accrued under any unfunded ▇▇▇▇▇▇▇▇ employee benefit plan or Benefit
Arrangement will have been paid, accrued, or otherwise adequately reserved in
accordance with GAAP. All group health plans of ▇▇▇▇▇▇▇▇ and its ERISA
Affiliates have been operated in material compliance with the requirements of
Section 4980B (and its predecessor) and
36
5000 of the Code. No employee or former employee of ▇▇▇▇▇▇▇▇ or its
Subsidiaries, and no beneficiary of any such employee or former employee, is, by
reason of such employee's or former employee's employment by ▇▇▇▇▇▇▇▇ or such
ERISA Affiliate, entitled to receive any benefits, including death or medical
benefits (whether or not insured) beyond retirement or other termination of
employment as described in Statement of Financial Accounting Standards No. 106,
other than continuation coverage mandated under Section 4980B of the Tax Code or
comparable state law.
4.U Brokers. There is no broker or finder or other Person who would
-------
have any valid claim against ▇▇▇▇▇▇▇▇, any Subsidiary thereof, or any Acquiring
Party for a commission or brokerage fee in connection with this Agreement or the
transactions contemplated hereby as a result of any agreement or understanding
of or action taken by ▇▇▇▇▇▇▇▇ or any of its Affiliates.
4.V Disclosure. To the knowledge of ▇▇▇▇▇▇▇▇, no statement of a
----------
material fact set forth in this Article IV contains any statement of any
material fact which is untrue in any material respect or omits to state a
material fact which is necessary in order to make the statements set forth in
this Article IV not misleading in any material respect.
4.W Environmental. All of the operations of ▇▇▇▇▇▇▇▇ and its
-------------
Subsidiaries at or from any Realty comply in all material respects with
applicable Environmental Laws. Neither ▇▇▇▇▇▇▇▇ nor its Subsidiaries has engaged
in or permitted any operations or activities upon any of the Realty for the
purpose of or involving the treatment, storage, use, generation, release,
discharge, emission, or disposal of any Hazardous Materials at the Realty,
except in substantial compliance with applicable Environmental Laws. To the
knowledge of ▇▇▇▇▇▇▇▇, there are no conditions existing at the Realty that
require, or which with the giving of notice or the passage of time or both would
likely require remedial or corrective action, removal or closure pursuant to the
Environmental Laws. To the knowledge of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and its Subsidiaries
have all the material permits, authorizations, licenses, consents and approvals
necessary for the current operation of the Stations and for the operations on,
in or at the Realty which are required under applicable Environmental Laws and
are in substantial compliance with the terms and conditions of all such permits,
authorizations, licenses, consents and approvals.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
▇▇▇▇▇▇▇▇ AND THE MERGER SUB
▇▇▇▇▇▇▇▇ and the Merger Sub, jointly and severally, represent and
warrant as follows:
5.A Incorporation. ▇▇▇▇▇▇▇▇ is a corporation duly organized, validly
-------------
existing, and in good standing (or has comparable active status) under the laws
of the State of Maryland, and ▇▇▇▇▇▇▇▇ has the corporate power and authority to
enter into and consummate the transactions contemplated to be consummated by it
pursuant to this Agreement. From and after the time it is formed, the Merger
Sub will be a corporation duly organized, validly existing, and in good standing
(or has comparable active status) under the laws of the State of Delaware and
will have the corporate
37
power and authority to enter into and consummate the transactions contemplated
to be consummated by it pursuant to this Agreement.
5.B Corporate Action. Each action necessary to be taken by or on the
--------- ------
part of either ▇▇▇▇▇▇▇▇ or the Merger Sub in connection with the execution and
delivery of this Agreement and the consummation of transactions contemplated
hereby to be consummated by it and necessary to make the same effective duly and
validly taken by, and be effective at, the time by which such action is required
to be taken. This Agreement has been duly and validly authorized, executed, and
delivered by each of ▇▇▇▇▇▇▇▇ and the Merger Sub and constitutes a valid and
binding agreement, enforceable against each of them in accordance with and
subject to its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or
similar laws affecting the rights of creditors generally and the availability of
equitable remedies.
5.C No Defaults. Except as set forth on the attached Schedule 4H,
-- -------- -------- --
the requisite approval of the FCC and compliance with the requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, on the Closing Date (after giving effect to all approvals
and consents which have been obtained), neither the execution and delivery by
▇▇▇▇▇▇▇▇ or the Merger Sub of this Agreement, nor the consummation by ▇▇▇▇▇▇▇▇
or the Merger Sub of the Merger and the other transactions contemplated by this
Agreement to be consummated by it, will constitute, or, with the giving of
notice or the passage of time or both, would constitute, a material violation of
or would conflict in any material respect with or result in any material breach
of or any material default under, any of the terms, conditions, or provisions of
any Legal Requirement to which ▇▇▇▇▇▇▇▇ or the Merger Sub is subject, or of
▇▇▇▇▇▇▇▇'▇ or the Merger Sub's certificate of incorporation or by-laws or
similar organizational documents, or of any material contract, agreement, or
instrument to which ▇▇▇▇▇▇▇▇ or the Merger Sub is a party or by which ▇▇▇▇▇▇▇▇
or the Merger Sub is bound.
5.D Brokers. There is no broker or finder or other Person who would
-------
have any valid claim against ▇▇▇▇▇▇▇▇ (except after the Effective Time) or any
Old ▇▇▇▇▇▇▇▇ Stockholder for a commission or brokerage fee in connection with
this Agreement or the transactions contemplated hereby as a result of any
agreement or understanding of or action taken by ▇▇▇▇▇▇▇▇, the Merger Sub or any
Affiliate of any of them.
5.E Litigation. There is no litigation pending by or against, or to
----------
▇▇▇▇▇▇▇▇'▇ or the Merger Sub's knowledge (after due inquiry) threatened against,
▇▇▇▇▇▇▇▇ or the Merger Sub related to or affecting ▇▇▇▇▇▇▇▇'▇ or the Merger
Sub's ability fully to carry out the transactions contemplated to be consummated
by them pursuant to this Agreement. There are no attachments, executions, or
assignments for the benefit of creditors or voluntary or involuntary proceedings
in bankruptcy contemplated by, or, to ▇▇▇▇▇▇▇▇'▇ or the Merger Sub's knowledge,
threatened or pending against, ▇▇▇▇▇▇▇▇ or the Merger Sub.
5.F ▇▇▇▇▇▇▇▇ Common Stock. The ▇▇▇▇▇▇▇▇ Common Stock, if any, issued
-------- ------ -----
as part of the Merger Consideration will be duly authorized, validly issued,
fully-paid and nonassessable and will, upon issuance and registration under the
Securities Act, be tradeable on the NASDAQ National Market without further
registration under the Securities Act or any other federal or state
38
securities law. ▇▇▇▇▇▇▇▇ has filed with the Securities and Exchange Commission
all material documents required by the Securities Act or the Securities Exchange
Act to be filed by it since January 1, 1996 (the "▇▇▇▇▇▇▇▇ SEC Reports"). As of
-------- --- -------
their respective filing dates, the ▇▇▇▇▇▇▇▇ SEC Reports complied in all material
respects with the requirements of the Securities Act, and the rules and
regulations thereunder, or the Securities Exchange Act, and the rules and
regulations thereunder, as the case may be, and at the time filed with the SEC
none of the SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Parties acknowledge that no representation or
warranty will be deemed to be made pursuant to this Section 5.F if no ▇▇▇▇▇▇▇▇
Common Stock is issued as part of the Merger Consideration.
5.G Disclosure. To ▇▇▇▇▇▇▇▇'▇ and the Merger Sub's knowledge, no
----------
statement of a material fact set forth in this Article V contains a statement of
any material fact which is untrue in any material respect or omits to state a
material fact which is necessary in order to make the statements set forth in
this Article V not misleading in any material respect.
ARTICLE VI
APPLICATIONS FOR REQUIRED FCC CONSENT
6.A For Spin-Offs. On or prior to ▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ will, and
--- ---------
will cause its Subsidiaries to, complete the portions of the applications for
the Required FCC Consents and will file such applications with the FCC.
▇▇▇▇▇▇▇▇ will, and will cause its Subsidiaries to, diligently take or cooperate
in the taking of all steps which are reasonably within its ability to take and
which are necessary, proper, or desirable to expedite the prosecution of such
applications and to cause the Required FCC Consents expeditiously to be Granted
and expeditiously to become Final Orders, and will refrain from making any
filing or announcement or taking (or causing or assisting any other Person to
take) any other action which reasonably could be expected to delay in any
respect such Required FCC Consents being Granted or becoming Final Orders
without ▇▇▇▇▇▇▇▇'▇ prior written consent. ▇▇▇▇▇▇▇▇ will promptly provide
▇▇▇▇▇▇▇▇ with a copy of any pleading, order, or other document served on
▇▇▇▇▇▇▇▇ or any of its Subsidiaries relating to such applications (other than
any of the same which is addressed to or states that it is to be served upon or
delivered to ▇▇▇▇▇▇▇▇ or its communications counsel).
ARTICLE VII
COVENANTS OF ▇▇▇▇▇▇▇▇
7.A Maintenance of Business until the Closing.
----------- -- -------- ----- --- -------
(1) Operation in Ordinary Course. Until the Closing, ▇▇▇▇▇▇▇▇
--------- -- -------- ------
will, and will cause its Subsidiaries to, (a) with respect to the Station
Assets, continue to carry on
39
the business and operations of the Stations, keep the books of account,
records, and files of ▇▇▇▇▇▇▇▇ and its Subsidiaries, realize upon the
accounts receivable of ▇▇▇▇▇▇▇▇ and its Subsidiaries, and satisfy their
accounts payable, all of which will be carried on by ▇▇▇▇▇▇▇▇ and its
Subsidiaries in the ordinary and usual course, in a manner which is
consistent with their respective past practices, (b) without limiting the
generality of the foregoing, not utilize ▇▇▇▇▇▇▇▇'▇ and its Subsidiaries'
rights under any Program Contract in a manner which will render exhibitions
of programming thereunder unavailable to Post-Merger ▇▇▇▇▇▇▇▇ and its
Subsidiaries after the Adjustment Time, except in accordance with their
past practices, (c) promptly execute and timely file any applications
reasonably required for renewal of the FCC Authorizations, (d) timely file
(taking into account any extensions of which ▇▇▇▇▇▇▇▇ or any of its
Subsidiaries may avail itself) true, correct and complete federal, state,
local and foreign tax returns and tax reports required to be filed by
▇▇▇▇▇▇▇▇ or any of its Subsidiaries, (e) fully pay all federal, state,
local and foreign income, profits, franchise, sales, use, occupation,
property, excise and other taxes (including interest and penalties) due and
payable by ▇▇▇▇▇▇▇▇ and its Subsidiaries, and (f) sell advertising time on
the Stations only in the ordinary and usual course in a manner consistent
with their respective past practices, and (g) to the extent necessary to
the conduct of its business, use reasonable efforts to (i) perform its
obligations under all Station Contracts to which it is a party, (ii)
preserve the Station Assets held by it, and (iii) maintain in full force
and effect the FCC Authorizations.
(2) Maintenance of Insurance. ▇▇▇▇▇▇▇▇ will, and will cause its
----------- -- ---------
Subsidiaries to, maintain in full force and effect through the Closing
property damage insurance with respect to the Station Assets which is not
materially less comprehensive, and in amounts which are not materially less
than, the insurance coverage described on the attached Schedule 4I,
including timely paying the premiums associated therewith.
(3) Additional Program Contracts. Until the Closing, ▇▇▇▇▇▇▇▇
---------- ------- ---------
may, and may cause or permit its Subsidiaries to, enter into any Program
Contract, or effect any such amendment, termination or modification, which
is material only with the prior consent of ▇▇▇▇▇▇▇▇, which consent may be
withheld in ▇▇▇▇▇▇▇▇'▇ sole discretion and will be deemed given if not
denied by written notice by ▇▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇▇ within five (5) Business
Days after it is requested in writing; provided that such notice and
--------
consent will not be required as to the entry into any such Program
Contracts so long as (x) the aggregate amount of the cash payment
obligations under such Program Contracts as to which such consent is not
given and not deemed given does not exceed $50,000 for any Station, and (y)
if ▇▇▇▇▇▇▇▇ or any of its Subsidiaries is required to provide advertising
time in consideration for the use of any programming covered by such
Program Contract, then the term during which such advertising time may be
required to be provided commences prior to May 31, 1999 and does not exceed
one (1) year in duration.
(4) Other Contracts. From the date of this Agreement to and
----- ---------
including the Closing, ▇▇▇▇▇▇▇▇ will be entitled to, and will be entitled
to cause or permit its Subsidiaries to, renew or extend the term of any
Time Sale Contract or any other Contract which, by its terms, has expired
at the time of such renewal or extension or which would expire prior to the
sixtieth day after the effective date of such renewal or extension, and, in
40
connection therewith, to agree to increase the amounts payable or other
obligations thereunder during any such renewal or extended term in
accordance with ▇▇▇▇▇▇▇▇'▇ and its Subsidiaries' past practice in the
operation of the Stations, and to enter into any new Contract (other than a
Program Contract or except as prohibited by Section 7.A(5)) in the ordinary
course of its business or which is reasonably required in order to enable
it to comply with its obligations under this Agreement
(5) Restrictions. Prior to the Closing, except (i) as otherwise
------------
permitted by Section 7.A(3) or 7.A(4), (ii) as required as part of a Spin-
Off, (iii) the transfer of the Headquarters Assets to ABRY Partners or an
Affiliate thereof for value and/or to one or more of the Corporate
Personnel as compensation, or (iv) as disclosed on the attached Schedule
4F, ▇▇▇▇▇▇▇▇ will not, and will not cause or permit any of its Subsidiaries
to, without the prior written consent of ▇▇▇▇▇▇▇▇ (to the extent the
following restrictions are permitted by the FCC and all other applicable
Legal Requirements):
(a) other than in the ordinary course of business, sell,
lease (as lessor), transfer, or agree to sell, lease (as lessor), or
transfer, or agree to sell, lease (as lessor) or transfer, any Station
Assets
(x) which are required for the operation of any
Station, or
(y) which have individually or in the aggregate
(together with all other Station Assets transferred by ▇▇▇▇▇▇▇▇
or any of its Subsidiaries since the date of this Agreement other
than in the ordinary course of business and not replaced with
functionally equivalent or superior assets of substantially equal
or greater value) a replacement cost in excess of $130,000 (it
being understood that sales, leases and/or transfers of Station
Assets described in this clause (y) and having an aggregate
replacement cost of $130,000 or less ("Designated Sales") will
---------- -----
not be prohibited by this Agreement)
without replacement thereof with a functionally equivalent or superior
asset of substantially equal or greater value;
(b) enter into any contract of employment (other than (x)
any contract for employment at the will of the employer, (y) any
contract for employment entered into in the ordinary course of
business and providing for consideration payable upon or after
termination which is consistent with that payable under employment
contracts for present or former employees of ▇▇▇▇▇▇▇▇ and its
Subsidiaries having similar seniority or responsibilities, or (z) any
contract or Benefit Arrangement not described in clause (y) with
respect to the employment of any Person whose employment will be
terminated at the time of the Closing, it being understood that the
costs of severance and other payments to be made under any contract or
Benefit Arrangement described in this clause (z) in connection with or
after such termination will be reflected in the Current Liabilities)
or collective
41
bargaining agreement which will be binding on Post-Merger ▇▇▇▇▇▇▇▇
after the Merger, or permit any increases in the compensation of the
employees of ▇▇▇▇▇▇▇▇ or any of its Subsidiaries with respect to the
Stations (but excluding the Corporate Personnel), in each case except
to the extent consistent with ▇▇▇▇▇▇▇▇'▇ and its Subsidiaries' past
practices; provided that ▇▇▇▇▇▇▇▇ and its Subsidiaries may pay bonuses
--------
to any of their employees, grant raises in salary and wages which do
not represent, in the aggregate, an increase in the employees'
aggregate annualized base compensation of more than 4% of the
employees' present annualized base compensation, and enter into any
employment agreement with on-air talent under which the annual salary
payable does not exceed $50,000 during any twelve-month period;
(c) enter into any new Trade arrangement which will
involves the furnishing of advertising time in exchange for services
or merchandise after the Adjustment Time on any Station, other than
any Trade arrangement which (i) does not involve goods and services
having an aggregate fair value in excess of $25,000, (ii) together
with all other Trade arrangements for such Station entered into after
the date of this Agreement by ▇▇▇▇▇▇▇▇ and its Subsidiaries does not
involve goods and services having an aggregate fair value in excess of
$50,000, and (iii) does not have a duration in excess of twelve months
(it being understood that ▇▇▇▇▇▇▇▇ and its Subsidiaries may perform
their obligations and exercise their rights under such Trade
arrangements and all Trade arrangements in effect on the date of this
Agreement);
(d) apply to the FCC for any construction permit that would
materially restrict any Station's present operations or make any
material adverse change in the buildings or leasehold improvements
which constitute Station Assets;
(e) merge or consolidate, or agree to merge or consolidate,
with or into any other Person, other than ▇▇▇▇▇▇▇▇ or a Subsidiary of
▇▇▇▇▇▇▇▇;
(f) enter into any Contract with any of its Affiliates
(other than ▇▇▇▇▇▇▇▇ or any of its Subsidiaries) which will not be
performed in its entirety or by its terms terminate at or prior to the
time of the Closing;
(g) cause any of its assets or properties to become subject
to any Lien, other than any Permitted Encumbrance;
(h) commit any material breach of any Contract which is
described on the attached Schedule 4J or any material Contract entered
into by it after the date of this Agreement; or
(i) change any material tax election, or make any material
change in accounting practice or policy, if such change could
reasonably be expected to have an adverse effect on Post-Merger
▇▇▇▇▇▇▇▇, except to the extent required by any Legal Requirement, any
Contract or GAAP.
42
(6) Efforts to Pursue Certain Remedies. Without limiting the
------- -- ------ ------- --------
foregoing, prior to the Closing, ▇▇▇▇▇▇▇▇ will (and will cause its
Subsidiaries to), use reasonable efforts to assert and prosecute any
claims, and resolve any unresolved claims, for indemnity or other payment
which they may have pursuant to the Act III Purchase Agreement and, upon
request, will keep ▇▇▇▇▇▇▇▇ reasonably informed of the status of any such
claim.
7.B Organization/Goodwill. Prior to the Closing, ▇▇▇▇▇▇▇▇ will, and
---------------------
will cause its Subsidiaries to, use reasonable efforts to preserve the business
organization of the Stations and preserve the goodwill of the Stations'
suppliers, customers, and others having business relations with ▇▇▇▇▇▇▇▇ and its
Subsidiaries. This Section 7.B will not apply to the Corporate Personnel or any
Non-Continuing Station Manager, with respect to continued service by them after
the Closing (it being understood that the Corporate Personnel intend to resign
their respective positions with ▇▇▇▇▇▇▇▇ and its Subsidiaries effective as of
the Effective Time).
7.C Reports; Access to Facilities, Files, and Records.
-------- ------ -- ----------- ------ --- -------
(1) Interim Reports. On or prior to March __, 1998, ▇▇▇▇▇▇▇▇
---------------
will provide to ▇▇▇▇▇▇▇▇ copies of the audited consolidated balance sheet
of ▇▇▇▇▇▇▇▇ and its Subsidiaries as of December 31, 1997 and the related
audited statements of income and cash flows for the twelve-month period
then ended (the "12/31/97 Financial Statements)". In addition, prior to the
-------- --------- ----------
Closing, ▇▇▇▇▇▇▇▇ will provide to ▇▇▇▇▇▇▇▇ (x) within twenty (20) days
after the end of each calendar month, (i) an income statement for such
month, substantially in the form in which ▇▇▇▇▇▇▇▇ and its Subsidiaries
have prepared such statements for internal purposes prior to the date of
this Agreement, and (ii) in the case of the months of March, April, May,
June, July and August 1998, a report setting forth in reasonable detail
▇▇▇▇▇▇▇▇'▇ good faith determination of the Trailing Cash Flow and the Gross
Revenues, each determined as if the last day of the applicable month were
the Measurement Date (the "Cash Flow Report" for such month), and (z) on or
---- ---- ------
prior to the Wednesday of each week, a pacing report for the prior week,
substantially in the form furnished to ▇▇▇▇▇▇▇▇ by ▇▇▇▇▇▇▇▇ prior to the
date of this Agreement. The statements and reports described in the
preceding sentence will be prepared in good faith consistent with past
practices but will be furnished to the Acquiring Parties without
representation or warranty as to their contents or otherwise.
(2) Access Generally. From time to time at the request of any
------ ---------
Acquiring Party, ▇▇▇▇▇▇▇▇ will give or cause to be given to the officers,
employees, accountants, counsel, and representatives of each Acquiring
Party
(a) access (in the presence of any representative
designated by ▇▇▇▇▇▇▇▇, at ▇▇▇▇▇▇▇▇'▇ option), upon reasonable prior
notice, during normal business hours, to all facilities, property,
accounts, books, deeds, title papers, insurance policies, licenses,
agreements, contracts, commitments, records, equipment, machinery,
fixtures, furniture, vehicles, accounts payable and receivable, and
inventories of ▇▇▇▇▇▇▇▇ and its Subsidiaries (but, in any event, not
personnel, unless ▇▇▇▇▇▇▇▇ otherwise consents) related to the
Stations, including for purposes of
43
permitting the Acquiring Parties to perform "Phase One" (and, after
consulting with ▇▇▇▇▇▇▇▇ as to the scope thereof, "Phase Two")
environmental surveys with respect to the Station Assets,
(b) ▇▇▇▇▇▇▇▇ will use its commercially reasonable efforts
to obtain the consent of its auditors to permit inclusion of the
Financial Statements in applicable securities filings of ▇▇▇▇▇▇▇▇ and,
if ▇▇▇▇▇▇▇▇ requests, it shall have the right to have the access
provided by Section 7.C(2)(a) to conduct an audit of each Station's
financial information, and, subject to the foregoing, ▇▇▇▇▇▇▇▇ shall
cooperate with ▇▇▇▇▇▇▇▇'▇ reasonable requests in connection with such
audit, including giving all reasonable consents in connection
therewith; and
(c) all such other information in ▇▇▇▇▇▇▇▇'▇ and its
Subsidiaries' possession concerning the affairs of the Stations as
such Acquiring Party may reasonably request,
in each case at the Acquiring Parties' expense; provided that the foregoing
--------
does not disrupt or interfere with the business and operations of ▇▇▇▇▇▇▇▇,
its Subsidiaries or any Station in any material respect ("materiality," for
purposes of this proviso, being determined by reference to ▇▇▇▇▇▇▇▇, each
of its Subsidiaries and each Station individually, and not taken as a
whole).
7.D ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Matters. As soon as practicable, but in any
----------------- -------
event not later than March 20, 1998, ▇▇▇▇▇▇▇▇ will complete all documents
required to be filed with the Federal Trade Commission (the "FTC") and the
---
United States Department of Justice (the "DOJ") with respect to itself and/or
---
its Affiliate(s) and concerning the Merger in order to comply with the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Act and together with ▇▇▇▇▇▇▇▇ and/or the appropriate Affiliate(s)
of ▇▇▇▇▇▇▇▇ who are required to join in such filings, will file the same with
the FTC and the DOJ. ▇▇▇▇▇▇▇▇ will reimburse ▇▇▇▇▇▇▇▇ for one-half of the
filing fees associated with all such filings. ▇▇▇▇▇▇▇▇ will promptly furnish
all materials thereafter required by the FTC, the DOJ or any other governmental
entity having jurisdiction over such filings, and will take all reasonable
actions and will file and use reasonable efforts to have declared effective or
approved all documents and notifications with any such governmental entity, as
may be required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act or other federal antitrust laws
for the consummation of the Merger.
7.E Consents. Except as provided in Sections 6.A and 7.D, it is
--------
agreed that (1) as between ▇▇▇▇▇▇▇▇ and the Acquiring Parties, it will be the
sole responsibility of the Acquiring Parties to timely obtain all Acquiring
Party Consents, including with respect to the Stations' network affiliations and
Program Contracts and with respect to the ▇▇▇▇▇▇▇▇ Indentures, (2) so long as
▇▇▇▇▇▇▇▇ complies with its obligations pursuant to the following sentence and
Sections 6.A and 7.D, ▇▇▇▇▇▇▇▇, the Old ▇▇▇▇▇▇▇▇ Stockholders and the
Stockholder Representative will not be liable to any Person for any failure to
obtain or other absence of any effective Acquiring Party Consent, and (3) except
as provided in Sections 10.C and 10.D, the absence of any effective Consent will
not excuse any Acquiring Party from consummating the Merger. ▇▇▇▇▇▇▇▇ will send
notices requesting all Consents required under Program Contracts, and will use
reasonable efforts (without being
44
required to make any payment not specifically required by the terms of any
licenses, leases, and other contracts), including executing any related
agreement or undertaking which does not take effect until the Effective Time, to
obtain the ▇▇▇▇▇▇▇▇ Consents and to assist the Acquiring Parties (at the
Acquiring Parties' request and expense) to (a) timely obtain prior all Acquiring
Party Consents or, in the absence of any Acquiring Party Consent (where
applicable), one or more replacement agreements, and (b) cause each Consent or
replacement agreement to become effective as of the time of the ▇▇▇▇▇▇▇▇ Two
Spin-Off, the time of ▇▇▇▇▇▇▇▇ Three Spin-Off or the Effective Time as
applicable.
7.F Notice of Proceedings. Prior to the Closing, ▇▇▇▇▇▇▇▇ will
------ -- -----------
promptly notify ▇▇▇▇▇▇▇▇ in writing upon becoming aware of any order or decree
or any complaint praying for an order or decree restraining or enjoining the
consummation of either Spin-Off, the Merger or any other transaction
contemplated by this Agreement, or upon receiving any notice from any
governmental department, court, agency, or commission of its intention to
institute an investigation into or institute a suit or proceeding to restrain or
enjoin the consummation of either Spin-Off, the Merger or any such other
transaction, or to nullify or render ineffective this Agreement, either Spin-
Off, the Merger or any such other transaction if consummated.
7.G Confidential Information. If for any reason the transactions
------------ -----------
contemplated in this Agreement are not consummated, ▇▇▇▇▇▇▇▇ will not use or
disclose to any Person (except to its agents, representatives and advisors, to
its lenders and security holders and their respective agents, representatives
and advisors, or as may be required by any Legal Requirement) any confidential
information received from any Acquiring Party or any of their respective agents,
representatives and advisors (each a "disclosing party" for purposes of this
Section 7.G) in the course of investigating, negotiating, and completing the
transactions contemplated by this Agreement. Nothing will be deemed to be
confidential information for purposes of this Section 7.G that: (a) is or was
known to any ▇▇▇▇▇▇▇▇-Related Entity at the time of its initial disclosure by a
disclosing party to any ▇▇▇▇▇▇▇▇-Related Entity; (b) has become or becomes
publicly known or available other than through disclosure by any ▇▇▇▇▇▇▇▇-
Related Entity; (c) is or was rightfully received by any ▇▇▇▇▇▇▇▇-Related Entity
from any Person unrelated to any ▇▇▇▇▇▇▇▇-Related Entity (other than any Person
engaged by any ▇▇▇▇▇▇▇▇-Related Entity in connection with the transactions
contemplated by this Agreement); or (d) is or was independently developed by any
▇▇▇▇▇▇▇▇-Related Entity.
7.H Efforts to Consummate. Subject to the provisions of Article IX
------- -- ----------
and Section 12.A, ▇▇▇▇▇▇▇▇ will use reasonable efforts to fulfill and perform
all conditions and obligations on its part to be fulfilled and performed under
this Agreement and to cause the conditions set forth in Articles IX and X to be
fulfilled and cause the Spin-Offs, the Merger and the other transactions
contemplated by this Agreement in connection with the Merger to be fully carried
out. Without limiting the foregoing, ▇▇▇▇▇▇▇▇ will use, and will cause its
Subsidiaries to use, reasonable efforts to consummate the Merger in a manner to
avoid the increase in the Cash Flow Multiplier caused by any delay in the
Closing and the increase in the element of the Adjustment Amount described in
Section 3.D(1)(b). In addition, promptly after ▇▇▇▇▇▇▇▇ becomes aware prior to
the Closing of a breach of any fact or circumstance which constitutes or would
constitute a breach of any other Party's representation or warranty set forth in
this Agreement, ▇▇▇▇▇▇▇▇ will give such Party notice thereof so that such Party
may attempt to cure the same.
45
7.I Notice of Certain Developments. ▇▇▇▇▇▇▇▇ will give prompt
------ -- ------- ------------
written notice to ▇▇▇▇▇▇▇▇ if, prior to the Closing: (1) ▇▇▇▇▇▇▇▇ or any of its
Subsidiaries receives a National Labor Relations Board union election petition
relating to employees of any Station, (2) ▇▇▇▇▇▇▇▇ or any of its Subsidiaries
receives notice from any Market Cable System currently carrying a Station's
signal of such Market Cable System's intention to delete such Station from
carriage or change such Station's channel position on such Market Cable System,
or (3) ▇▇▇▇▇▇▇▇ becomes aware of any breach of any representation or warranty of
▇▇▇▇▇▇▇▇ set forth in Article IV.
7.J Updated Information. ▇▇▇▇▇▇▇▇ agrees to provide to ▇▇▇▇▇▇▇▇ and
------- -----------
the Merger Sub at or prior to the Closing, for informational purposes only,
copies of all Contracts in existence at the time of the Closing which would have
been required to be described on the attached Schedule 4J if such Contracts had
existed on the date of this Agreement and which are not so disclosed.
7.K Non-Solicitation. From the date of this Agreement until the
----------------
Closing or the earlier termination of this Agreement, each of ABRY Partners and
▇▇▇▇▇▇▇▇ will not, and each of them will not cause (and will use reasonable
efforts not to permit) any of its Subsidiaries, affiliates, directors, officers,
employees, representatives or agents to, directly or indirectly solicit, or
initiate, entertain or enter into any discussions or transactions with, or
encourage or provide any information to, any Person (other than any Person
described in Section 7.C(2)), concerning any sale of any of the assets of
▇▇▇▇▇▇▇▇ or its Subsidiaries (other than any sale which is not prohibited by
Section 7.A(5)) or any merger, stock acquisition or similar transaction
involving ▇▇▇▇▇▇▇▇ or its Subsidiaries (other than an issuance of capital stock
or capital stock equivalents by ▇▇▇▇▇▇▇▇ and the Spin-Offs); provided that
--------
nothing in this Section 7.K will prohibit ABRY Partners or ▇▇▇▇▇▇▇▇ from
furnishing, or causing or permitting any other Person to furnish, information
concerning ▇▇▇▇▇▇▇▇ or its Subsidiaries to any governmental authority or court
of competent jurisdiction or any other Person as may be required by any Legal
Requirement.
7.L Interruption of Broadcast Transmission.
------------ -- --------- ------------
(1) Notice of Loss or Damage. In the event of any loss, damage,
------ -- ---- -- ------
impairment, confiscation or condemnation of any of the Station Assets prior
to the Approval Date that interferes with the normal operations of the
Stations, ▇▇▇▇▇▇▇▇ will notify ▇▇▇▇▇▇▇▇ of the same in writing promptly
after ▇▇▇▇▇▇▇▇ becomes aware thereof, specifying with reasonable
particularity the loss, damage or impairment, confiscation or condemnation
incurred, the cause thereof, if known or reasonably ascertainable, and any
applicable insurance coverage. To the extent thereof, ▇▇▇▇▇▇▇▇ will apply
the proceeds of any insurance policy, judgment or award with respect
thereto as necessary to repair, replace or restore such Station Assets to
their prior condition as soon as practicable after such loss, damage,
impairment, confiscation or condemnation.
(2) Interruption of Transmission. If before the Approval Date,
------------ -- ------------
due to damage or destruction of the assets of any Station, the regular
broadcast transmission of one (1) or more of the Stations in the normal and
usual manner is interrupted for a period of twelve (12) continuous hours or
more, ▇▇▇▇▇▇▇▇ will give prompt written notice thereof to
46
▇▇▇▇▇▇▇▇. If prior to the Approval Date, due to damage or destruction of
the assets of one (1) or more of the Stations, the regular broadcast
transmission of one (1) or more Stations in the normal and usual manner is
interrupted such that the regular broadcast signal of any such Station
(including its effective radiated power) is diminished in any material
respect, then (i) ▇▇▇▇▇▇▇▇ will give written notice to ▇▇▇▇▇▇▇▇ promptly
after ▇▇▇▇▇▇▇▇ becomes aware thereof, and (ii) ▇▇▇▇▇▇▇▇ shall have the
right, by giving prompt written notice to ▇▇▇▇▇▇▇▇ to postpone the Closing
for a period up to sixty (60) days.
(3) Failure to Resume Transmission. In the event any one (1) or
------- -- ------ ------------
more Stations' normal and usual transmission has not been substantially
resumed by the date scheduled for the Closing, as postponed pursuant to
Section 7.L(2) above, ▇▇▇▇▇▇▇▇ may, pursuant to Section 12.A(2)(c),
terminate this Agreement by written notice to ▇▇▇▇▇▇▇▇. Notwithstanding
the foregoing, however, ▇▇▇▇▇▇▇▇ may, at its option, proceed to complete
the Merger and complete the restoration and replacement of any damaged
assets of the Station in question after the Closing Date, in which event:
(a) all insurance or other proceeds received in connection therewith, to
the extent such proceeds are received by ▇▇▇▇▇▇▇▇ and have not therefore
been used in the restoration or replacement of such assets, will be
excluded from the Current Assets, and (b) the lesser of $5,000,000 and the
excess (if any) of the reasonable cost to complete such restoration or
replacement over the amount of such proceeds will be included in the
computation of the Current Liabilities (the exclusion of such proceeds and
the inclusion of such cost being in lieu and to the exclusion of any remedy
pursuant to the Indemnity Agreement in respect of the failure of such
restoration or replacement to be completed).
(4) Interruption Notice/Termination. If before the Approval
------------ ------------------
Date, due to damage or destruction of the Station Assets, the regular
broadcast transmission of any Station in the normal and usual manner is
interrupted for a period of seven (7) continuous days or more, ▇▇▇▇▇▇▇▇
shall give prompt written notice thereof (the "Interruption Notice") to
------------ ------
▇▇▇▇▇▇▇▇. During the two (2) Business Days after the receipt of the
Interruption Notice, ▇▇▇▇▇▇▇▇ shall have the right, in its sole and
absolute discretion, by giving written notice thereof to ▇▇▇▇▇▇▇▇ to
terminate this Agreement pursuant to Section 12.A(2)(c).
7.M No Premature Assumption of Control. Nothing contained in this
-- --------- ---------- -- -------
Agreement will give any Acquiring Party any right to control the programming,
operations, or any other matter relating to the Stations, and the respective
licensees thereof, will have complete control of the programming, operations,
and all other matters relating to the Stations (it being agreed that in any
event ▇▇▇▇▇▇▇▇ will have the right to withhold its Consent to any Program
Contract to the extent provided in Section 7.A(3), if not deemed granted as
provided therein).
ARTICLE VIII
COVENANTS OF ▇▇▇▇▇▇▇▇ AND THE MERGER SUB
8.A ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Matters. On or prior to March 20, 1998,
----------------- -------
▇▇▇▇▇▇▇▇ will
47
complete all documents required to be filed with the FTC and the DOJ with
respect to itself and/or its Affiliate(s) and concerning the Merger in order to
comply with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and together with ▇▇▇▇▇▇▇▇ and/or the
appropriate Affiliate(s) of ▇▇▇▇▇▇▇▇ who are required to join in such filings,
will file the same with the FTC and the DOJ. ▇▇▇▇▇▇▇▇ will pay the filing fees
associated with all such filings (subject to partial reimbursement by ▇▇▇▇▇▇▇▇
as provided in Section 7.D). ▇▇▇▇▇▇▇▇ and the Merger Sub will promptly furnish
all materials thereafter required by the FTC, the DOJ or any other governmental
entity having jurisdiction over such filings, and will take all reasonable
actions and will file and use reasonable efforts to have declared effective or
approved all documents and notifications with any such governmental entity, as
may be required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act or other federal antitrust laws
for the consummation of the Merger.
8.B Confidential Information. If for any reason the transactions
------------ -----------
contemplated in this Agreement are not consummated, each of ▇▇▇▇▇▇▇▇ and the
Merger Sub will not use or disclose to any Person (except to its agents,
representatives and advisors, to its lenders and their respective agents,
representatives and advisors, or as may be required by any Legal Requirement)
any confidential information received from ▇▇▇▇▇▇▇▇, any of its Subsidiaries,
▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three or any of their respective agents,
representatives and advisors (each a "disclosing party" for purposes of this
Section 8.B) in the course of investigating, negotiating, and completing the
transactions contemplated by this Agreement. Nothing will be deemed to be
confidential information for purposes of this Section 8.B that: (a) is or was
known to any ▇▇▇▇▇▇▇▇-Related Entity at the time of its initial disclosure by a
disclosing party to any ▇▇▇▇▇▇▇▇-Related Entity; (b) has become or becomes
publicly known or available other than through disclosure by any ▇▇▇▇▇▇▇▇-
Related Entity; (c) is or was rightfully received by any ▇▇▇▇▇▇▇▇-Related Entity
from any Person unrelated to any ▇▇▇▇▇▇▇▇-Related Entity (other than any Person
engaged by any ▇▇▇▇▇▇▇▇-Related Entity in connection with the transactions
contemplated by this Agreement); or (d) is or was independently developed by any
▇▇▇▇▇▇▇▇-Related Entity. In addition, the Merger Sub agrees to be bound by the
same obligations as ▇▇▇▇▇▇▇▇ is bound pursuant to the confidentiality agreement
dated as of November 20, 1997 between ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ Broadcasting, which
confidentiality agreement will survive the execution and delivery of this
Agreement and will survive the execution and termination of this Agreement, and
no provision of this Section 8.B will be deemed to supersede or in any way limit
any obligation or right under such confidentiality agreement.
8.C Efforts to Consummate. Subject to the provisions of Article X
------- -- ----------
and Section 12.A, each of ▇▇▇▇▇▇▇▇ and the Merger Sub will use reasonable
efforts to fulfill and perform all conditions and obligations on its part to be
fulfilled and performed under this Agreement and to cause the conditions set
forth in Articles IX and X to be fulfilled and cause each Spin-Off, the Merger
and the transactions contemplated by this Agreement in connection with the
Merger to be fully carried out. In addition, promptly after ▇▇▇▇▇▇▇▇ or the
Merger Sub becomes aware prior to the Closing of a breach of any fact or
circumstance which constitutes or would constitute a breach of any
representation or warranty of ▇▇▇▇▇▇▇▇ set forth in this Agreement, ▇▇▇▇▇▇▇▇
will give ▇▇▇▇▇▇▇▇ notice thereof so that ▇▇▇▇▇▇▇▇ may attempt to cure the same.
8.D Notice of Proceedings. Each of ▇▇▇▇▇▇▇▇ and the Merger Sub will
------ -- -----------
promptly notify ▇▇▇▇▇▇▇▇ (prior to the Closing) or the Stockholder
Representative (after the Closing) in writing upon becoming aware of any order
or decree or any complaint praying for an order or decree
48
restraining or enjoining the consummation of either Spin-Off, the Merger or any
other transaction contemplated by this Agreement, or upon receiving any notice
from any governmental department, court, agency, or commission of its intention
to institute an investigation into or institute a suit or proceeding to restrain
or enjoin the consummation of either Spin-Off, the Merger or any such other
transaction, or to nullify or render ineffective this Agreement, either Spin-
Off, the Merger or any such other transaction, if consummated. ▇▇▇▇▇▇▇▇ will
give the Stockholder Representative prompt written notice if any Acquiring Party
becomes aware of any breach of any representation or warranty of any Acquiring
Party set forth in Article V.
8.E Continued Employment.
--------- ----------
(1) Generally. Except as provided in Section 8.E(2), the Merger
---------
Sub, in its capacity as Post-Merger ▇▇▇▇▇▇▇▇ after the Effective Time,
agrees to employ after the Closing, directly or indirectly through one or
more of its Subsidiaries, all of those Persons who are common law employees
of ▇▇▇▇▇▇▇▇ and its Subsidiaries at the time of the Closing at the same
rates of base pay and the other terms and conditions applicable to such
employment at such time, and ▇▇▇▇▇▇▇▇ and the Merger Sub agree to indemnify
and hold harmless the Old ▇▇▇▇▇▇▇▇ Stockholders, the Stockholder
Representative and the present and former officers, directors, employees
and agents of each of the Old ▇▇▇▇▇▇▇▇ Stockholders, the Stockholder
Representative, ▇▇▇▇▇▇▇▇ and their respective Subsidiaries in respect of
any loss, liability, cost, damage, claim or expense which may be incurred
by or asserted against any of them arising out of or relating to any
failure or refusal to so employ any such Person (including any change in
any term or condition of such employment), or the termination of the
employment of any such Person, at or after the Closing. Without limiting
the foregoing indemnity, it is acknowledged that except as provided in any
agreement referred to on the attached Schedule 4J, such employees will
continue to be at-will employees, and the respective employers may
terminate their employment or change their terms of employment at will,
and/or Post-Merger ▇▇▇▇▇▇▇▇ or its Subsidiaries may cover such employees
under existing or new benefit plans, programs, and arrangements, and may
amend or terminate the terms of any such plans, programs, or arrangements
at any time (in each case, without reducing the indemnity obligation set
forth in the preceding sentence). No employee or beneficiary of Post-
Merger ▇▇▇▇▇▇▇▇ or its Subsidiaries may ▇▇▇ to enforce the terms of this
Agreement, including specifically this Section 8.E, and no such employee or
beneficiary shall be treated as a third party beneficiary of this
Agreement.
(2) Excluded Employees. The provisions of Section 8.E(1) will
-------- ---------
not apply to the Corporate Personnel, the Non-Continuing Station Managers
or any Person employed by ▇▇▇▇▇▇▇▇ or any of its Subsidiaries pursuant to
an agreement of a type described in clause (z) of Section 7.A(5)(b).
▇▇▇▇▇▇▇▇ will cause the employment of each Non-Continuing Manager and the
Corporate Personnel to be terminated, effective as of the time of the
Closing. The liabilities of ▇▇▇▇▇▇▇▇ and its Subsidiaries for amounts
required to be paid in connection with or after the termination of any such
excluded Person whose employment is terminated prior to or at the time of
the Closing will be reflected in the computation of the Current
Liabilities.
49
8.F Section 338 Election. Without the Stockholder Representative's
------- --- --------
prior written consent, ▇▇▇▇▇▇▇▇ will not, and will not cause or permit any of
its Subsidiaries to, make an election under Section 338 of the Tax Code, or
under any analogous provision of any other Legal Requirements relating to Taxes,
with respect to the Merger.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SULLIVANAT THE CLOSING
The obligation of ▇▇▇▇▇▇▇▇ to consummate the Merger is, at ▇▇▇▇▇▇▇▇'▇
option, subject to the fulfillment of the following conditions at the time of
the Closing (▇▇▇▇▇▇▇▇ expressly acknowledging that the effectiveness of the
▇▇▇▇▇▇▇▇ Consents is not a condition to such obligation):
9.A Representations, Warranties, Covenants.
---------------- ----------- ---------
(1) Each of the representations and warranties of the Acquiring
Parties set forth in Article V, considered without regard to any
materiality qualifiers contained therein, will be deemed to be made again
at and as of the time of the Closing (other than any such representation or
warranty which is expressly made with reference to a time prior to the time
of the Closing, which will be deemed remade as of such time only), and
taken as a whole such representations and warranties, as so remade, will
have been true and accurate in all material respects, except to the extent
of deviations therefrom permitted or contemplated by this Agreement; and
(2) each Acquiring Party will in all material respects have
performed and complied with the covenants and agreements required by this
Agreement to be performed or complied with by it prior to or at the time of
the Closing, taken as a whole (other than the delivery of the Merger
Consideration for the ▇▇▇▇▇▇▇▇ Share Equivalents, which the Merger Sub will
have established to ▇▇▇▇▇▇▇▇'▇ reasonable satisfaction that it is prepared
to deliver).
9.B Proceedings.
-----------
(1) No action or proceeding will have been instituted and be
pending before any court or governmental body to restrain or prohibit, or
to obtain a material amount of damages in respect of, the consummation of
the transactions contemplated by this Agreement that, in the reasonable
opinion of ▇▇▇▇▇▇▇▇, may reasonably be expected to result in a preliminary
or permanent injunction against such consummation or, if the transactions
contemplated hereby were consummated, an order to nullify or render
ineffective this Agreement or such transactions or for the recovery against
any ▇▇▇▇▇▇▇▇-Related Entity or any officer, director or stockholder of any
▇▇▇▇▇▇▇▇-Related Entity of a material amount of damages; and
(2) no Party will have received written notice from any
governmental body of (a) such governmental body's intention to institute
any action or proceeding to
50
restrain or enjoin or nullify this Agreement or the transactions
contemplated hereby, or to commence any investigation (other than a routine
letter of inquiry, including, without limitation, a routine Civil
Investigative Demand) into the consummation of the transactions
contemplated by this Agreement, or (b) the actual commencement of such an
investigation, in each case unless the same has been withdrawn, resolved,
concluded or abandoned.
9.C ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The requisite waiting period under the ▇▇▇▇-
-----------------
▇▇▇▇▇-▇▇▇▇▇▇ Act for the consummation of the Merger will have expired or been
terminated.
9.D Spin-Offs. The Required FCC Consent for each Spin-Off will have
---------
been Granted and be in full force and effect and all Acquiring Party Consents
for the Spin-Offs will have been obtained and be in full force and effect;
provided that the Grant and effectiveness of such Required FCC Consent and the
--------
effectiveness of such Acquiring Party Consents will not be conditions to
▇▇▇▇▇▇▇▇'▇ obligation to consummate the Merger so long as any ▇▇▇▇▇▇▇▇ Consent
for the Spin-Offs is not in effect.
9.E Sufficient Funds to Satisfy Obligations. ▇▇▇▇▇▇▇▇ will have
---------------------------------------
received evidence which is reasonably satisfactory to ▇▇▇▇▇▇▇▇ to the effect
that the Merger Sub and Post-Merger ▇▇▇▇▇▇▇▇ and/or its Subsidiaries have or
will have the funds described in Section 11.E.
9.F ▇▇▇▇▇▇▇▇ Common Stock. If the Merger Sub has elected to pay part
---------------------
of the Merger Consideration for the ▇▇▇▇▇▇▇▇ Share Equivalents in the form of
shares of ▇▇▇▇▇▇▇▇ Common Stock as provided in Section 3.A(3), then ▇▇▇▇▇▇▇▇
will have taken such actions as may be required, or are reasonably requested by
the Stockholder Representative, in order that the ▇▇▇▇▇▇▇▇ Common Stock be
registered and tradeable as described in Section 3.C(3), including any
registration, notice of issuance or other action or notice to or by NASDAQ,
Nasdaq National Market or any relevant securities exchange in order that such
shares of ▇▇▇▇▇▇▇▇ Common Stock be tradeable thereon.
9.G Other. The Merger Sub will have delivered, or will stand ready
-----
to deliver, to ▇▇▇▇▇▇▇▇ such instruments, documents, and certificates as are
contemplated by Section 3.I(3).
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF
THE MERGER SUB AT THE CLOSING
The obligations of the Merger Sub to pay the Merger Consideration for
the ▇▇▇▇▇▇▇▇ Share Equivalents and consummate the Merger on the Closing Date
are, at the Merger Sub's option, subject to the fulfillment of the following
conditions at the time of the Closing (▇▇▇▇▇▇▇▇ and the Merger Sub expressly
acknowledging that neither the availability to the Merger Sub of funds
sufficient to pay such Merger Consideration and to fulfill the obligations under
Section 11.E, nor the effectiveness of the Acquiring Party Consents, is a
condition to such obligations):
51
10.A Representations, Warranties, Covenants.
--------------------------------------
(1) Each of the representations and warranties of ▇▇▇▇▇▇▇▇ and
set forth in Article IV (other than any representation or warranty which
speaks as of a time after the Closing), considered without regard to any
materiality qualifiers contained therein, will be deemed to be made again
at and as of the time of the Closing (other than any such representation or
warranty which is expressly made with reference to a time prior to the time
of the Closing, which will be deemed remade as of such time only), and
taken as a whole such representations and warranties, as so remade, will
have been true and accurate, except to the extent of deviations therefrom
which are permitted or contemplated by this Agreement or which, in the
aggregate, do not constitute and have not caused a Material Adverse Change;
and
(2) ▇▇▇▇▇▇▇▇ will in all material respects have performed and
complied with the covenants and agreements required by this Agreement to be
performed or complied with by it prior to or at the time of the Closing,
taken as a whole.
10.B Proceedings.
-----------
(1) No action or proceeding will have been instituted and be
pending before any court or governmental body to restrain or prohibit, or
to obtain a material amount of damages in respect of, the consummation of
the transactions contemplated by this Agreement that, in the reasonable
opinion of ▇▇▇▇▇▇▇▇, ▇▇▇ reasonably be expected to result in a preliminary
or permanent injunction against such consummation or, if the transactions
contemplated hereby were consummated, an order to nullify or render
ineffective this Agreement or such transactions or for the recovery against
any ▇▇▇▇▇▇▇▇-Related Entity or any officer, director or stockholder of any
▇▇▇▇▇▇▇▇-Related Entity of a material amount of damages; and
(2) no Party will have received written notice from any
governmental body of (a) such governmental body's intention to institute
any action or proceeding to restrain or enjoin or nullify this Agreement or
the transactions contemplated hereby, or to commence any investigation
(other than a routine letter of inquiry, including, without limitation, a
routine Civil Investigative Demand) into the consummation of the
transactions contemplated by this Agreement, or (b) the actual commencement
of such an investigation, in each case unless the same has been withdrawn,
resolved, concluded or abandoned.
10.C ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ and Other Consents. The requisite waiting
------------------------------------
period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act for the consummation of the Merger will
have expired or been terminated and all ▇▇▇▇▇▇▇▇ Consents will have been
obtained and be effective. If the representation and warranty set forth in the
final sentence of Section 4.N is untrue, then each Consent of a type described
therein will have been obtained and be effective.
10.D Spin-Offs. The Required FCC Consents for the Spin-Offs will have
---------
been Granted and be in full force and effect and ▇▇▇▇▇▇▇▇ will stand ready to
effect, or will have effected,
52
the Spin-Offs, and each of ▇▇▇▇▇▇▇▇ Two and ▇▇▇▇▇▇▇▇ Three will have entered
into the New LMA applicable to it; provided that the foregoing will not be
--------
conditions to the Merger Sub's obligation to consummate the Merger so long as
any Acquiring Party Consent to a Spin-Off or the Merger is not in effect.
10.E Minimum Gross Revenues. The amount of the Gross Revenues for the
----------------------
Measurement Period will have been determined in accordance with Section 3.J and
will be not less than the amount set forth below:
Last Day of
Measurement Period Gross Revenues
------------------ --------------
March 31, 1998 $32,042,000
April 30, 1998 $44,913,000
May 31, 1998 $58,693,000
June 30, 1998 $71,630,000
July 31, 1998 $82,729,000
August 31, 1998 $94,391,000
10.F Limit on Dissenters. The holders of ▇▇▇▇▇▇▇▇ Common Stock who
-------------------
have demanded appraisal pursuant to Section 262 of the Delaware General
Corporation Act and who have not subsequently withdrawn or waived (or been
deemed to have withdrawn or waived) or who are not otherwise barred from
requiring any such appraisal, if there are any such holders at the time of the
Closing, will not hold ▇▇▇▇▇▇▇▇ Common Stock which (absent such right of
appraisal) would be entitled to receive in excess of 6% of the aggregate Merger
Consideration for the ▇▇▇▇▇▇▇▇ Share Equivalents (determined based on the
Estimated Annualized Trailing Cash Flow, or the Annualized Trailing Cash Flow,
if it has been finally determined in accordance with Section 3.J, and the
Estimated KOKH Amount and the Estimated Adjustment Amount determined pursuant to
Section 3.E) if the Merger were consummated.
10.G Other Instruments. ▇▇▇▇▇▇▇▇ will have delivered, or will stand
-----------------
ready to deliver, to the Merger Sub such instruments, documents, and
certificates as are contemplated by Section 3.I(2).
ARTICLE XI
POST-CLOSING MATTERS
11.A Survival. The representations, warranties and certifications of
--------
the Parties contained in or made pursuant to this Agreement (including any
certification contained in any certificate to be delivered pursuant to Section
3.I) will survive the execution of this Agreement and the Closing only to the
extent expressly provided in the Indemnity Agreement. The covenants and
agreements of the Parties set forth in this Agreement will survive until
performed and discharged
53
in full.
11.B Limitation of Recourse. Except as provided in the Indemnity
----------------------
Agreement, after the Closing, no claim may be brought or maintained against any
Party or any Old ▇▇▇▇▇▇▇▇ Stockholder or any of their respective present or
former officers, directors, employees or other affiliates by any Party or Old
▇▇▇▇▇▇▇▇ Stockholder or any of its successors or assigns, and no recourse may be
sought or granted against any Person, by virtue of or based upon any alleged
misstatement, omission, inaccuracy in, or breach of any representation, warranty
or certification of any Party set forth in or made pursuant to this Agreement,
and in no event ▇▇▇▇ ▇▇▇▇▇▇▇▇ or Post-Merger ▇▇▇▇▇▇▇▇ be entitled to claim or
seek any rescission of the Merger or any of the other transactions consummated
pursuant to the Transaction Documents, any such right of rescission or rights to
damages which any such Party might otherwise have being hereby expressly waived
and any claims or judgments being limited accordingly; provided that nothing in
--------
this Agreement will constitute a waiver of or limit any Old ▇▇▇▇▇▇▇▇
Stockholder's recourse or remedy pursuant to any federal or state securities
laws arising out of or relating to the offering or issuance of ▇▇▇▇▇▇▇▇ Common
Stock hereunder.
11.C Acknowledgment by the Acquiring Parties. Each of the Acquiring
---------------------------------------
Parties has conducted, to its satisfaction, an independent investigation and
verification of ▇▇▇▇▇▇▇▇, its Subsidiaries, the Stations and the Station Assets
and the financial condition, results of operations, assets, liabilities,
properties and projected operations of ▇▇▇▇▇▇▇▇, its Subsidiaries, the Stations
and the Station Assets. In determining to enter into this Agreement and proceed
with the transactions contemplated by this Agreement, each Acquiring Person has
relied on the covenants of ▇▇▇▇▇▇▇▇, the results of such independent
investigation and verification and the representations and warranties of
▇▇▇▇▇▇▇▇ (in conjunction with the Schedules hereto) set forth in this Agreement
(including the certifications to be made in any certificate to be delivered
pursuant to Section 3.I), all of which each Acquiring Party acknowledges and
agrees will survive for a limited duration. SUCH REPRESENTATIONS, WARRANTIES AND
CERTIFICATIONS CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS, WARRANTIES
AND CERTIFICATIONS WITH RESPECT TO ▇▇▇▇▇▇▇▇, ITS SUBSIDIARIES, THE STATIONS AND
THE STATION ASSETS TO THE ACQUIRING PARTIES IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY, AND EACH ACQUIRING PARTY UNDERSTANDS, ACKNOWLEDGES AND
AGREES THAT ALL OTHER REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS OF ANY KIND
OR NATURE AND WHETHER ORAL OR CONTAINED IN ANY WRITING OTHER THAN THIS AGREEMENT
OR ANY SUCH CERTIFICATE (INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION,
WARRANTY OR CERTIFICATION RELATING TO THE PROJECTED, FUTURE OR HISTORICAL
FINANCIAL CONDITION, RESULTS OR OPERATIONS, ASSETS OR LIABILITIES RELATING TO
THE STATIONS) ARE SPECIFICALLY DISCLAIMED BY ▇▇▇▇▇▇▇▇, THE STOCKHOLDER
REPRESENTATIVE, THE OFFICERS OF ▇▇▇▇▇▇▇▇ AND ITS SUBSIDIARIES AND THE OLD
▇▇▇▇▇▇▇▇ STOCKHOLDERS.
11.D Corporate Names. After the Merger (but on the Closing Date),
---------------
Post-Merger ▇▇▇▇▇▇▇▇ will take and will cause its Subsidiaries to take such
action as is necessary to change its
54
corporate name in its certificate or articles of incorporation filed with the
Secretary of State or similar official of the jurisdiction of its incorporation
to a name which does not include, and is not confusingly similar to, the name
"▇▇▇▇▇▇▇▇" and will cease the use of all ▇▇▇▇▇▇▇▇ Broadcasting logos or any
similar ▇▇▇▇. Notwithstanding anything in this Agreement to the contrary, Post-
Merger ▇▇▇▇▇▇▇▇ and its Subsidiaries will be entitled to continue to use its
present corporate name until such time as such name change is effective and to
the extent necessary to accomplish such name change, and may endorse checks and
other instruments in such name.
11.E Satisfaction of Certain Obligations. On the Closing Date,
-----------------------------------
immediately after the Effective Time, the Merger Sub will, and ▇▇▇▇▇▇▇▇ will
cause Post-Merger ▇▇▇▇▇▇▇▇ and each of Post-Merger ▇▇▇▇▇▇▇▇'▇ Subsidiaries to,
pay in full all Funded Indebtedness of ▇▇▇▇▇▇▇▇ and its Subsidiaries pursuant
to, and otherwise satisfy all obligations of ▇▇▇▇▇▇▇▇ and its Subsidiaries
under, the ▇▇▇▇▇▇▇▇ Senior Debt Arrangements and the Mission Guarantees (other
than Funded Indebtedness incurred pursuant to any ▇▇▇▇▇▇▇▇ Indenture, to the
extent any Consent necessary to permit the same to remain outstanding after the
Closing) . Without limiting the foregoing, ▇▇▇▇▇▇▇▇ will cause Post-Merger
▇▇▇▇▇▇▇▇ and/or one or more of its Subsidiaries to have on the Closing Date
funds which are sufficient to permit Post-Merger ▇▇▇▇▇▇▇▇ and/or its
Subsidiaries to take the actions contemplated by this Section 11.E and will
cause the Merger Sub to have funds necessary to permit the Merger Sub to pay the
Merger Consideration for the ▇▇▇▇▇▇▇▇ Share Equivalents and make the deposit (if
any) in the Estimate Fund pursuant to Section 3.A(3)(d).
ARTICLE XII
TERMINATION
12.A Termination of Agreement Prior to Closing. Subject to Section
-----------------------------------------
12.A(3), this Agreement may be terminated at any time prior to the Closing as
follows:
(1) By ▇▇▇▇▇▇▇▇. By ▇▇▇▇▇▇▇▇, by written notice (a "▇▇▇▇▇▇▇▇
----------- --------
Termination Notice") to ▇▇▇▇▇▇▇▇:
------------------
(a) at any time when any material breach by any Acquiring
Party of its obligations pursuant to this Agreement has occurred and
is continuing, if both
(i) such breach materially and adversely affects the
likelihood that any of the conditions set forth in any of Article
IX or Article X which has not been satisfied or waived will be
satisfied or materially and adversely affects any Party's ability
to comply with its obligations pursuant to this Agreement, and
(ii) at least thirty days have elapsed since ▇▇▇▇▇▇▇▇
gave ▇▇▇▇▇▇▇▇ written notice requesting that such Acquiring Party
cure such breach,
unless prior to the giving of the ▇▇▇▇▇▇▇▇ Termination Notice each
such breaching
55
Acquiring Party has cured such breach;
(b) at any time after the Merger Sub has failed to make the
Mandatory Payment when required by Section 3.K(1), if the Merger Sub
has not made the Mandatory Payment prior to the giving of such
▇▇▇▇▇▇▇▇ Termination Notice (in which event the termination of this
Agreement pursuant to the delivery of such ▇▇▇▇▇▇▇▇ Termination Notice
will be effective at 5:00 p.m., Boston, Massachusetts, time, on the
second Business Day after such Notice is given, unless the Mandatory
Payment is made prior to such time);
(c) at any time after the Expiration Dat, if
(i) as of the Expiration Date, each of ▇▇▇▇▇▇▇▇'▇ and
the Merger Sub's conditions to closing set forth in Articles IX
and X was satisfied or waived in writing,
(ii) as of the Expiration Date, (x) each of ▇▇▇▇▇▇▇▇'▇
and the Merger Sub's conditions to closing set forth in Articles
IX and X (other than any set forth in Sections 9.D and 10.D) was
satisfied or waived in writing, (y) the Required FCC Consent has
been Granted and each ▇▇▇▇▇▇▇▇ Consent for the Spin-Offs had been
obtained, and (z) any Acquiring Party Consent for a Spin-Off was
not obtained,
(iii) the absence of satisfaction of each of ▇▇▇▇▇▇▇▇'▇
and the Merger Sub's conditions to closing set forth in Articles
IX and X which was not waived in writing or satisfied as of the
Expiration Date was caused by a breach by one or more of the
Acquiring Parties of any of its or their representations,
warranties and/or obligations under this Agreement and/or the
failure of any Acquiring Party Consent to have been obtained,
(iv) the Approval Date had not occurred on or prior to
the Expiration Date as a result of any breach by one or more of
the Acquiring Parties of any provision of this Agreement, or
(v) one or more of the Acquiring Parties and the
Affiliates thereof refused, failed or declined to take any action
(other than divesting itself of a broadcast television or radio
station of which it or one of its Subsidiaries is the licensee or
terminating any time brokerage or similar arrangement) which the
FCC, the FTC, the DOJ or the staff of any of them indicates to
any Acquiring Party or agent thereof is a condition to the grant
of the Required FCC Consent or the expiration or termination of
the requisite waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act for
the Merger; or
(d) at any time after the Expiration Date, in any
circumstance
56
which is not described in Section 12.A(1)(c), unless the absence of
satisfaction of each of ▇▇▇▇▇▇▇▇'▇ and the Merger Sub's closing
conditions set forth in Articles IX and X which has not been satisfied
or waived in writing has been caused by a breach by ▇▇▇▇▇▇▇▇ of its
obligations under this Agreement.
(2) By ▇▇▇▇▇▇▇▇. By ▇▇▇▇▇▇▇▇, by written notice (a "▇▇▇▇▇▇▇▇
----------- --------
Termination Notice") to ▇▇▇▇▇▇▇▇:
------------------
(a) at any time when any material breach by ▇▇▇▇▇▇▇▇ of its
obligations pursuant to this Agreement has occurred and is continuing,
if both
(i) such breach materially and adversely affects the
likelihood that any of the conditions set forth in Article IX or
Article X will be satisfied or materially and adversely affects
any Party's ability to comply with its obligations pursuant to
this Agreement and
(ii) at least thirty days have elapsed since ▇▇▇▇▇▇▇▇
gave ▇▇▇▇▇▇▇▇ written notice requesting that ▇▇▇▇▇▇▇▇ cure such
breach,
unless prior to the giving of such ▇▇▇▇▇▇▇▇ Termination Notice
▇▇▇▇▇▇▇▇ has cured such breach;
(b) at any time on or prior to the fifth (5th) Business Day
after ▇▇▇▇▇▇▇▇ delivers to ▇▇▇▇▇▇▇▇ any amendment and restatement or
modification of any attached Schedule pursuant to Section 13.P, if
such amendment and restatement or modification reflects any fact or
circumstance which (alone or in the aggregate with all other facts and
circumstances reflected in the attached Schedules as so amended and
restated or modified and not reflected in the attached Schedules as
initially attached to this Agreement) represents or has caused a
Material Adverse Change;
(c) (i) at any time when there has occurred a Material
Adverse Change and at least 30 days have elapsed since ▇▇▇▇▇▇▇▇ gave
▇▇▇▇▇▇▇▇ notice of the occurrence of such Material Adverse Change,
unless the facts or circumstances causing or constituting such
Material Adverse Change have been cured or otherwise no longer exist,
or (ii) under the circumstances described in Section 7.L(3) or 7.L(4);
(d) at any time during the five (5) Business Days after the
amount of the Gross Revenues (as if the Measurement Date were June 30,
1998) is finally determined pursuant to Section 3.J, if such amount is
less than $71,630,000;
(e) at any time after the Expiration Date, under any
circumstances described in Section 12.A(1)(c); or
(f) at any time after the Expiration Date, in any case not
described in Section 12.A(2)(e).
57
(3) When Termination Not Permitted. ▇▇▇▇▇▇▇▇ may not terminate this
------------------------------
Agreement pursuant to Section 12.A(1) at any time when ▇▇▇▇▇▇▇▇ is in
material breach of a material obligation under this Agreement. ▇▇▇▇▇▇▇▇
may not terminate this Agreement pursuant to Section 12.A(2) (other than
pursuant to Section 12.A(2)(e)) at any time when any Acquiring Party is in
material breach of a material obligation under this Agreement.
12.B Survival of Certain Provisions; Remedies.
----------------------------------------
(1) General. No Party will have any liability to any other Party
-------
for costs, expenses, damages (consequential or otherwise), loss of
anticipated profits, or otherwise as a result of a termination pursuant to
Section 12.A, except as provided in Section 12.B(2), 12.B(3) or 12.B(4).
The Parties agree that time is of the essence with respect to the
provisions of Sections 3.H., 3.K and 12.A. Sections 7.G and 7.B, this
Article XII and Article XIII will survive the termination of this Agreement
pursuant to Section 12.A.
(2) Disposition of ▇▇▇▇▇▇▇ Money Fund and Income. If this
--------------------------------------------
Agreement is terminated pursuant to any of Sections 12.A(1)(a), 12.A(1)(b),
12.A(1)(c) or 12.A(2)(e), then the ▇▇▇▇▇▇▇ Money Fund will be paid to
▇▇▇▇▇▇▇▇ (unless the Mandatory Payment has theretofore been made to
▇▇▇▇▇▇▇▇), and all ▇▇▇▇▇▇▇ Money Income will be paid to ▇▇▇▇▇▇▇▇. If this
Agreement is terminated pursuant to any of Sections 12.A(1)(d), 12.A(2)(a),
12.A(2)(b), 12.A(2)(c), 12.A(2)(d) or 12.A(2)(f), then the ▇▇▇▇▇▇▇ Money
Fund and all ▇▇▇▇▇▇▇ Money Income will be paid to ▇▇▇▇▇▇▇▇ (unless the
Mandatory Payment is due and payable and has not been paid, in which case
the Mandatory Payment will be made from the ▇▇▇▇▇▇▇ Money Fund and the
▇▇▇▇▇▇▇ Money Income, and the remainder thereof will be paid to ▇▇▇▇▇▇▇▇).
Any payment to be made pursuant to this Section 12.B(2) may be requested,
and will be made, in accordance with the ▇▇▇▇▇▇▇ Money Escrow Agreement.
(3) For ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇'▇ sole and exclusive remedy for any
------------
termination of this Agreement or any failure of performance or compliance
by any Acquiring Party with any covenant or agreement contained in this
Agreement prior to the Closing will be ▇▇▇▇▇▇▇▇'▇ right (if any) to receive
the ▇▇▇▇▇▇▇ Money Fund as provided in the ▇▇▇▇▇▇▇ Money Escrow Agreement
(or its right, if any, to receive or retain the Mandatory Payment, unless
otherwise expressly provided in Section 12.B(4)(d), as liquidated damages
and not as a penalty).
(4) For the Acquiring Parties. The Acquiring Parties' sole and
-------------------------
exclusive remedies for the termination of this Agreement or any failure of
performance or compliance by ▇▇▇▇▇▇▇▇ with any covenant or agreement
contained in this Agreement prior to the Closing will be
(a) in the case of any such termination pursuant to Section
12.A, ▇▇▇▇▇▇▇▇'▇ right (if any) to receive the ▇▇▇▇▇▇▇ Money Fund and
the ▇▇▇▇▇▇▇ Money Income (including the right to any ▇▇▇▇▇▇▇ Money
Income not yet received by the ▇▇▇▇▇▇▇ Money Escrow Agent) as provided
in Section 12.B(2) and the ▇▇▇▇▇▇▇
58
Money Escrow Agreement;
(b) in the case of any such failure, their respective rights
(if any) under applicable law or equitable principles to seek damages
in respect of their direct out-of-pocket losses or expenses (but not
any damages in respect of lost profits or other similar or
consequential or incidental damages) occasioned by and as a
consequence of such breach;
(c) their respective rights (if any) under applicable law or
equitable principles to seek specific enforcement of this Agreement
against ▇▇▇▇▇▇▇▇, including specific enforecement of ▇▇▇▇▇▇▇▇'▇
obligation to consummate the Merger (subject to FCC approval and other
required Consents being obtained), it being acknowledged by ▇▇▇▇▇▇▇▇
that the Acquiring Parties would not have an adequate remedy at law in
the event of any such failure, provided that no Acquiring Party will
--------
be entitled to such specific performance unless (i) each Acquiring
Party has complied in all material respects with its material
obligations under this Agreement and (ii) either (A) each condition to
closing of ▇▇▇▇▇▇▇▇ set forth in Article IX has been satisfied or
waived in writing or (B) the absence of satisfaction of each such
condition to closing which has not been satisfied or waived in writing
is caused solely by a breach by ▇▇▇▇▇▇▇▇ of its obligations under this
Agreement;
(d) in the case of any such failure after the Approval Date,
the release of the Merger Sub from the obligation to pay, or the
return of, as the case may be, the Mandatory Payment, if (i) ▇▇▇▇▇▇▇▇
has terminated this Agreement pursuant to Section 12.A(2)(a) or
Section 12.A(2)(d), (ii) each Acquiring Party complied in all material
respects with its material obligations under this Agreement prior to
such termination, and (iii) if ▇▇▇▇▇▇▇▇ terminated this Agreement
pursuant to Section 12.A(2)(a), then either (A) each condition to
closing set forth in Articles IX was satisfied or waived in writing as
of the Expiration Date or (B) the absence of satisfaction of each such
condition which was not satisfied or waived in writing as of the
Expiration Date was caused solely by a breach by ▇▇▇▇▇▇▇▇ of its
obligations under this Agreement (it being agreed that, except as
expressly provided in this Section 12.B(4)(d), if the Approval Date
occurs and this Agreement is terminated prior to the Closing, then the
Merger Sub will nonetheless be required to make the Mandatory Payment
and, if the Mandatory Payment has been made prior to such termination,
then ▇▇▇▇▇▇▇▇ will be entitled to retain the Mandatory Payment); and
(e) if (i) ▇▇▇▇▇▇▇▇ has terminated this Agreement pursuant
to Section 12.A(2)(a) based on a willful breach of this Agreement by
▇▇▇▇▇▇▇▇, (ii) the circumstances described in clauses (ii) and (iii)
of Section 12.B(4)(d) apply, and (iii) ▇▇▇▇▇▇▇▇ has disclaimed in
writing its right to seek specific performance as described in Section
12.B(4)(c) or ▇▇▇▇▇▇▇▇ has asserted such right and such remedy has
been denied in a final, nonappealable judgment on the grounds that the
obligation of ▇▇▇▇▇▇▇▇ to consummate the Merger hereunder is not of a
type for which specific enforcement is an available remedy, then in
addition to ▇▇▇▇▇▇▇▇'▇ right to receive the
59
▇▇▇▇▇▇▇ Money Fund as the ▇▇▇▇▇▇▇ Money Income as provided in Section
12.B(4)(a), upon the occurrence of the event described in clause (iii)
above, ▇▇▇▇▇▇▇▇ will pay to ▇▇▇▇▇▇▇▇ the amount of Seventy Five
Million Dollars ($75,000,000) in cash as liquidated damages.
ARTICLE XIII
MISCELLANEOUS
13.A Expenses. Except as otherwise expressly provided in this
--------
Agreement, ▇▇▇▇▇▇▇▇ will bear all of the expenses incurred prior to the Closing
by ▇▇▇▇▇▇▇▇ and the Stockholder Representative in connection with the
transactions contemplated by this Agreemen, and each of the Acquiring Parties
will bear all of its expenses incurred in connection with the transactions
contemplated by this Agreement, in each case including, without limitation,
accounting and legal fees incurred in connection herewith.
13.B Assignments.
-----------
(1) By ▇▇▇▇▇▇▇▇. This Agreement may not be assigned by ▇▇▇▇▇▇▇▇
-----------
without the prior written consent of the Acquiring Parties.
(2) By ▇▇▇▇▇▇▇▇ or the Merger Sub. Prior to the Closing, this
-----------------------------
Agreement may be assigned by ▇▇▇▇▇▇▇▇ or the Merger Sub (or the Merger Sub
may cease to be a wholly-owned Subsidiary of ▇▇▇▇▇▇▇▇ prior to the Closing)
only with the prior written consent of ▇▇▇▇▇▇▇▇, except that at any time
▇▇▇▇▇▇▇▇ or the Merger Sub may assign its rights and interests hereunder
absolutely to one or more directly or indirectly wholly-owned Subsidiaries
of ▇▇▇▇▇▇▇▇ without obtaining such consent; provided in each case, that the
--------
assigning Person gives ▇▇▇▇▇▇▇▇, prior to the Closing, or the Stockholder
Representative, after the Closing, prior written notice of such assignment
and that such assignment will not delay the satisfaction of any condition
to closing set forth in this Agreement, and provided further that any such
--------------------
assignment will not relieve the assigning Person of any of its obligations
or liabilities hereunder.
(3) Exceptions. Notwithstanding the foregoing, any Party may
----------
assign its rights under this Agreement for collateral purposes only to any
lender to it, or any agent for any such lender(s), without the consent of
any other Party, and any such lender or agent may transfer such rights
pursuant to the exercise of remedies with respect to such collateral
security to any other Person (it being understood that any such lender or
agent will be a third-party beneficiary of the agreement constituted by
this Section 13.B(3)).
(4) General Rules. Any attempt to assign this Agreement or any
-------------
rights or obligations hereunder without first obtaining any consent which
is required by this Section 13.B will be void. This Agreement will be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Each Old ▇▇▇▇▇▇▇▇
60
Stockholder is an express third-party beneficiary of this Agreement.
13.C Further Assurances. From time to time prior to, at, and after
------------------
the Closing, each Party will execute all such instruments and take all such
actions as any other of them, being advised by counsel, may reasonably request
in connection with carrying out and effectuating the intent and purpose hereof,
and all transactions and things contemplated by this Agreement, including the
execution and delivery of any and all consents, confirmatory and other
instruments, in addition to those to be delivered at the Closing, and any and
all actions which may reasonably be necessary to complete the transactions
contemplated hereby.
13.D Notices. All notices, demands, and other communications which
-------
may or are required to be given under or with respect to this Agreement will be
in writing, will be delivered personally or sent by nationally recognized
overnight delivery service, charges prepaid, or by registered or certified mail,
return-receipt requested, and will be deemed to have been given or made when
personally delivered, or on the next Business Day after delivery to such
overnight delivery service, or on the fifth day after it is deposited in the
mail, registered or certified, first class postage prepaid, as the case may be,
if addressed as follows:
(1) If to ▇▇▇▇▇▇▇▇ (prior to the Closing) or the Stockholder
--------------------------------------------------------
Representative:
--------------
c/o ABRY Partners, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
with a copy (which will not constitute notice to ▇▇▇▇▇▇▇▇ or the
Stockholder Representative) to:
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
or to such other address and/or with such other copies as the Person
to whom such notice is to be given may from time to time designate by
notice to the Acquiring Parties given in accordance with this Section
13.D.
(2) If to ▇▇▇▇▇▇▇▇, the Merger Sub or Post-Merger ▇▇▇▇▇▇▇▇:
-------------------------------------------------------
▇▇▇▇▇▇▇▇ Broadcast Group, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
with a copy (which will not constitute notice to ▇▇▇▇▇▇▇▇, the
Merger Sub or
61
Post-Merger ▇▇▇▇▇▇▇▇) to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and
---
▇▇▇▇▇▇▇▇ Communications, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
and
---
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address and/or with such other copies as the Person
to whom such notice is to be given may from time to time designate by
notice to ▇▇▇▇▇▇▇▇ (if prior to the Closing) and the Stockholder
Representative given in accordance with this Section 13.D.
13.E Captions. The captions of Articles and Sections of this
--------
Agreement are for convenience only, and will not control or affect the meaning
or construction of any of the provisions of this Agreement.
13.F Law Governing. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED,
-------------
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCES TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT THE FEDERAL LAW OF THE UNITED STATES GOVERNS THE
TRANSACTIONS CONTEMPLATED HEREBY.
13.G Waiver of Provisions. The terms, covenants, representations,
--------------------
warranties, and conditions of this Agreement may be waived as to any Party only
by a written instrument executed by such Party. The terms, covenants,
representations, warranties, and conditions of this Agreement may be waived as
to any Old ▇▇▇▇▇▇▇▇ Stockholder only by a written instrument executed by
▇▇▇▇▇▇▇▇, prior to the Closing, or the Stockholder Representative, after the
Closing. The failure of any Party or any Old ▇▇▇▇▇▇▇▇ Stockholder at any time or
times to require performance of any provision of this Agreement will in no
manner affect the right at a later date to enforce the same. No waiver by or on
behalf of any Party to this Agreement or any Old ▇▇▇▇▇▇▇▇ Stockholder of any
condition or the breach of any provision, term, covenant, representation, or
warranty contained in
62
this Agreement, whether by conduct or otherwise, in any one or more instances,
will be deemed to be or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
13.H Counterparts. This Agreement may be executed in two (2) or more
-----------
counterparts, and all counterparts so executed will constitute one (1) agreement
binding on all of the parties hereto, notwithstanding that all the parties
hereto are not signatory to the same counterpart.
13.I Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits hereto) and the confidentiality agreement referred to in Section 8.C
(including the Acquiring Parties' obligations with respect thereto, as provided
in Section 8.C), constitute the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersede any and all prior
agreements, understandings, negotiations, and discussions, whether oral or
written, between them relating to the subject matter hereof.
13.J Access to Books and Records.
---------------------------
(1) Post-Merger ▇▇▇▇▇▇▇▇ will, and will cause its Subsidiaries
to, preserve for not less than five (5) years after the Closing Date all
books and records included in the Station Assets. After such five-year
period, Post-Merger ▇▇▇▇▇▇▇▇ will not, and will not cause or permit its
Subsidiaries to, destroy any books or records relating to the conduct of
business of the Stations prior to the Effective Time unless Post-Merger
▇▇▇▇▇▇▇▇ first offers to transfer such books and records to the Stockholder
Representative at no cost to the Stockholder Representative, and if Post-
Merger ▇▇▇▇▇▇▇▇ is requested to do so, Post-Merger ▇▇▇▇▇▇▇▇ will transfer,
or cause a Subsidiary of Post-Merger ▇▇▇▇▇▇▇▇ to transfer, such books or
records to the Stockholder Representative.
(2) At the request of the Stockholder Representative, Post-Merger
▇▇▇▇▇▇▇▇ will, and will cause each of its Subsidiaries to, permit the
Stockholder Representative (including its officers, employees, accountants,
and counsel) any access, upon reasonable prior written notice during normal
business hours, to all of its property, accounts, books, contracts,
records, accounts payable and receivable, records of employees, FCC logs
and other information concerning the affairs or operation of the Stations
as the Stockholder Representative may reasonably request for any reasonable
purpose relating to the transactions contemplated by this Agreement or the
ownership or operation of any Station prior to the Effective Time, and to
make extracts or copies from the foregoing at the Stockholder
Representative's expense. At Post-Merger ▇▇▇▇▇▇▇▇'▇ request, prior to
receiving any such requested information, the Stockholder Representative
will execute a confidentiality agreement with respect thereto which is
reasonably acceptable to Post-Merger ▇▇▇▇▇▇▇▇.
13.K Public Announcements. Prior to the Closing, no Party will,
--------------------
except by mutual agreement of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ (including agreement as to
content, text and method of distribution or release), make any press release or
other public announcement or disclosure concerning the transactions contemplated
by this Agreement, except as may be required by any Legal
63
Requirement (including filings and reports required to be made with or pursuant
to the rules of the Securities and Exchange Commission); provided that, prior to
--------
making any such announcement or disclosure required by any Legal Requirement, to
the extent practicable, the disclosing Party gives each Person named above prior
written notice of the context, text and content of, the method of distribution
or release of, and all other material facts concerning, such disclosure.
13.L Disclosure. If and to the extent that any information required
----------
to be furnished by ▇▇▇▇▇▇▇▇ in any attached Schedule is contained in this
Agreement or in any attached Schedule, such information will be deemed to have
been included in each other attached Schedule in which such information is
required to be included to the extent its relevance to such latter Schedule is
reasonably apparent. By including any information in any attached Schedule,
▇▇▇▇▇▇▇▇ will not be deemed to have admitted or acknowledged that such
information is material to or outside the ordinary course of the business of
▇▇▇▇▇▇▇▇ or any Station.
13.M Definitional Provisions.
-----------------------
(1) Terms Defined in Appendix. Each capitalized term which is
-------------------------
used and not otherwise defined in this Agreement or any attached Schedule
has the meaning which is specified for such term in the Appendix which is
attached to this Agreement.
(2) Materiality. For purposes of Sections 9.A(2), and 10.A(2),
-----------
materiality (as embodied in the phrase "in all material respects" will be
measured by reference to the business or operations of the Stations, taken
as a whole, the value of the Station Assets, taken as a whole, or the
ability of ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ and the Merger Sub, taken as a whole, as
the case may be, to perform or carry out the transactions contemplated by
this Agreement, as the context requires.
(3) Knowledge. As used in this Agreement, the term "knowledge"
---------
of ▇▇▇▇▇▇▇▇ will refer only to the actual knowledge, without any particular
inquiry (except as specified in this Agreement), of the Corporate
Personnel, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇, after inquiry of the general
managers of the Stations; and the "knowledge" of ▇▇▇▇▇▇▇▇ or the Merger Sub
will refer only to the actual knowledge, without any particular inquiry
(except as specified in this Agreement) of ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇.
(4) Interpretation. Words used in this Agreement, regardless of
--------------
the gender and number specifically used, will be deemed and construed to
include any other gender, masculine, feminine or neuter, and any other
number, singular or plural, as the context requires. Whether or not used
in conjunction with the words "without limitation" or words of similar
import, the term "including" as used in this Agreement imports that the
items referred to are illustrative only and do not purport to be a complete
listing of the items of the type in question. The wording of the
provisions of this Agreement is the result of arms-length negotiations
among the parties to this Agreement and was selected by them to reflect
their mutual intentions; therefore, no party will be deemed the "drafter"
of this Agreement and no rule of strict construction will be applied
against or in favor of any party to this Agreement.
64
13.N Arbitration.
-----------
(1) Generally. Except as expressly provided in the Estimate
---------
Escrow Agreement or the Indemnity Escrow Agreement or for purposes of
pursuing any remedy pursuant to Section 12.B(3)(b), the arbitration
procedures described in this Section 13.N will be the sole and exclusive
method of resolving and remedying claims arising under this Agreement and
the other Transaction Documents ("Disputes"); provided that nothing in this
-------- --------
Section 13.N will prohibit a Party from instituting litigation to enforce
any Final Arbitration Award. Except as otherwise provided in the
Commercial Arbitration Rules of the American Arbitration Association as in
effect from time to time (the "AAA Rules"), the arbitration procedures
---------
described in this Section 13.N and any Final Arbitration Award will be
governed by, and will be enforceable pursuant to, the Uniform Arbitration
Act as in effect in the State of New York from time to time. No Person
will be entitled to claim or recover punitive damages in any such
proceeding.
(2) Notice of Arbitration. If a Party asserts that there exists
---------------------
a Dispute, then such Person (the "Disputing Person") will give each other
----------------
Person involved in such Dispute a written notice setting forth the nature
of the asserted Dispute. If all such Persons do not resolve any such
asserted Dispute prior to the tenth Business Day after such notice is
given, then the Disputing Person may commence arbitration pursuant to this
Section 13.N by giving each other Person involved in such Dispute a written
notice to that effect (an "Arbitration Notice"), setting forth any matters
------------------
which are required to be set forth therein in accordance with the AAA
Rules. Unless otherwise notified, the Acquiring Parties are entitled to
assume that the Stockholder Representative is authorized to act on behalf
of each Old ▇▇▇▇▇▇▇▇ Stockholder with respect to any Dispute.
(3) Selection of Arbitrator. The Persons involved in such
-----------------------
Dispute will attempt to select a single arbitrator by mutual agreement. If
no such arbitrator is selected prior to the twentieth Business Day after
the related Arbitration Notice is given, then an arbitrator which is
experienced in matters of the type which are the subject matter of the
Dispute will be selected in accordance with the AAA Rules.
(4) Conduct of Arbitration. The arbitration will be conducted
----------------------
under the AAA Rules, as modified by any written agreement among the Persons
involved in such Dispute. The arbitrator will conduct the arbitration in a
manner so that the final result, determination, finding, judgment or award
determined by the arbitrator (the "Final Arbitration Award") is made or
-----------------------
rendered as soon as practicable, and the Persons involved in such Dispute
will use reasonable efforts to cause a Final Arbitration Award to occur not
later than the sixtieth day after the arbitrator is selected. Any Final
Arbitration Award will be final and binding upon the Persons involved in
such Dispute, and there will be no appeal from or reexamination of any
Final Arbitration Award, except as provided in the Uniform Arbitration Act,
as in effect in the State of New York from time to time.
(5) Enforcement. A Final Arbitration Award may be enforced in
-----------
any state or federal court having jurisdiction over the subject matter of
the related Dispute.
65
(6) Expenses. The prevailing Person(s) in any arbitration
--------
proceeding in connection with this Agreement will be entitled to recover
from the non-prevailing Person(s) their reasonable attorneys' fees and
disbursements in addition to any damages or other remedies awarded to such
prevailing Person(s), and the non-prevailing Person(s) will be required to
pay all other costs and expenses associated with the arbitration; provided
--------
that (i) if an arbitrator is unable to determine that a Person is a
prevailing Person in any such arbitration proceeding, then such costs and
expenses will be equitably allocated by such arbitrator upon the basis of
the outcome of such arbitration proceeding, and (ii) if such arbitrator is
unable to allocate such costs and expenses in such a manner, then the costs
and expenses of such arbitration will be paid one-half by ▇▇▇▇▇▇▇▇ and one-
half by ▇▇▇▇▇▇▇▇, and each Party will pay the out-of-pocket expenses
incurred by it. As part of any Final Arbitration Award, the arbitrator may
designate the prevailing Person(s) for purposes of this Section 13.N(6).
Except as provided in the preceding sentences, each Person involved in a
Dispute will bear its own costs and expenses (including legal fees and
disbursements) in connection with any such proceeding or submission.
13.O Stockholder Representative.
--------------------------
(1) Appointment; Authority Generally. On behalf of the Old
--------------------------------
▇▇▇▇▇▇▇▇ Stockholders, ▇▇▇▇▇▇▇▇ hereby appoints ABRY Partners as the
initial Stockholder Representative under this Agreement, to serve in
accordance with the terms, conditions and provisions of this Agreement, and
ABRY Partners, by its execution of this Agreement, hereby agrees to act as
such, upon the terms, conditions and provisions of this Agreement. From
and after the Closing, the Stockholder Representative will be authorized to
act on behalf of the Old ▇▇▇▇▇▇▇▇ Stockholders in accordance with this
Agreement.
(2) Authorization. The Stockholder Representative, in such
-------------
capacity, will be entitled to take all actions on behalf of the holders of
▇▇▇▇▇▇▇▇ Shares or the Old ▇▇▇▇▇▇▇▇ Stockholders, as the case may be, with
respect to this Agreement and the other agreements contemplated hereby, and
omit to take any action, each as directed by
(a) prior to the Effective Time, the holders of capital
stock of ▇▇▇▇▇▇▇▇ having a majority of the voting power represented by
the outstanding capital stock of ▇▇▇▇▇▇▇▇ at the time in question, and
(b) after the Effective Time, Persons who immediately prior
to the Effective Time held ▇▇▇▇▇▇▇▇ Shares which represented a
majority of the voting power of the ▇▇▇▇▇▇▇▇ Shares,
(in either case, the "Majority ▇▇▇▇▇▇▇▇ Stockholders"). The Stockholder
------------------------------
Representative may be removed and replaced from time to time as the
representative of the holders of the ▇▇▇▇▇▇▇▇ Shares or the Old ▇▇▇▇▇▇▇▇
Stockholders by written notice given by the Majority ▇▇▇▇▇▇▇▇ Stockholders
to ▇▇▇▇▇▇▇▇ (prior to the Effective Time) and the Acquiring Parties.
(3) Responsibility. The Stockholder Representative will have no
--------------
duties
66
or responsibilities except those expressly set forth in this Agreement or
any other agreement which may be entered into by it hereunder. The
Stockholder Representative will have no responsibility for the validity of
this Agreement or any agreement referred to in this Agreement or for the
performance of any such agreements by any party thereto or for the
interpretation of any of the provisions of any such agreements. The
Stockholder Representative's liability in fulfilling its duties will be
limited to bad faith, willful misconduct or gross negligence on its part.
The Stockholder Representative will be protected in acting upon any
certificate, notice or other instrument whatsoever received by the
Stockholder Representative as to its due execution, the validity and
effectiveness of its provisions, and the truth and accuracy of any
information therein contained that the Stockholder Representative in good
faith believes to be genuine and to have been signed or presented by a
proper Person or Persons. The Stockholder Representative may, in its sole
discretion, consult with and obtain advice from legal counsel and any other
Person in the event of any question as to any of the provisions of this
Agreement, any other agreement entered into in connection herewith or its
duties hereunder or thereunder. The reasonable cost of such services, to
the extent not borne by ▇▇▇▇▇▇▇▇, ▇▇▇▇ be borne among the Old ▇▇▇▇▇▇▇▇
Stockholders who held ▇▇▇▇▇▇▇▇ Shares immediately prior to the Merger
Effective Time, pro rata in accordance with the respective amounts of the
Merger Consideration to be received by them in respect of the ▇▇▇▇▇▇▇▇
Shares.
(4) Resignation; Replacement. The Stockholder Representative
------------------------
will have the right, in its sole discretion, to resign as the Stockholder
Representative (in its capacity as the representative of the holders of
▇▇▇▇▇▇▇▇ Shares or the Old ▇▇▇▇▇▇▇▇ Stockholders) at any time by giving at
least 30 days prior written notice to ▇▇▇▇▇▇▇▇ (prior to the Effective
Time) and the Acquiring Parties. In such event, ▇▇▇▇▇▇▇▇ (prior to the
Effective Time) or the Majority ▇▇▇▇▇▇▇▇ Stockholders (after the Effective
Time) will promptly appoint another Stockholder Representative to represent
the holders of ▇▇▇▇▇▇▇▇ Shares and the Old ▇▇▇▇▇▇▇▇ Stockholders and give
notice of such selection to the Acquiring Parties and the Old ▇▇▇▇▇▇▇▇
Stockholders (after the Effective Time). Such resignation of the
Stockholder Representative will be effective upon such notice being given
and such new Stockholder Representative's acceptance of such appointment
and will relieve the resigning Stockholder Representative of all duties and
responsibilities of the Stockholder Representative in such capacity
thereafter arising.
13.P Completion of ▇▇▇▇▇▇▇▇'▇ Schedules. The Acquiring Parties
----------------------------------
acknowledge that ▇▇▇▇▇▇▇▇ has executed this Agreement without having the
opportunity to request of personnel of the Stations information which may be
material to the preparation of the attached Schedules referred to in Article IV
(and that, therefore, some or all of such attached Schedules may not be correct
and complete and, as a result, some or all of the representations and warranties
set forth in Article IV which refer to such attached Schedules may not be true
and correct). On or prior to ▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ may deliver to ▇▇▇▇▇▇▇▇ an
amendment and restatement of any such attached Schedule, or any portion thereof,
or a supplement to any such attached Schedule or any portion thereof, which may
be required in order to accurately depict facts and circumstances which exist on
the date of this Agreement (or any other applicable date referred to in any such
representation or warranty), and the attached Schedule or portion thereof in
question will be deemed to have been so
67
amended and restated or modified, as the case may be, as of the time of the
execution and delivery of this Agreement. The Acquiring Parties' sole and
exclusive remedy under this Agreement with respect to any matter which may be
disclosed by any such amendment and restatement or supplement will be ▇▇▇▇▇▇▇▇'▇
right (if any) to terminate this Agreement as described in Section 12.A(2)(b).
13.Q Treatment of Station KOKH. Each Acquiring Party acknowledges
-------------------------
that, notwithstanding any language to the contrary in this Agreement, ▇▇▇▇▇▇▇▇
has not made and will not make any representation, warranty or certification of
any kind with respect to Station KOKH (including with respect to the assets,
liabilities and operations related to Station KOKH), and no representation or
warranty set forth in Article IV, and no certification relating thereto
delivered pursuant to Sections 3.I, will be deemed to apply to Station KOKH
(including to any related asset, liability or operations). The Annualized
Trailing Cash Flow, the Gross Revenues, the Current Assets, the Current
Liabilities and the ▇▇▇▇▇▇▇▇ Receivables will be determined without regard to
the results of operations and assets of Station KOKH.
[SIGNATURE PAGES TO FOLLOW
-- REST OF PAGE LEFT INTENTIONALLY BLANK]
68
IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be duly executed by their duly authorized officers, all as of the day
and year first above written.
▇▇▇▇▇▇▇▇ BROADCAST HOLDINGS, INC.
By:
-----------------------------------------
Its:
----------------------------------------
▇▇▇▇▇▇▇▇ BROADCAST GROUP, INC.,
in its own right and on behalf of a Subsidiary
to be formed by it
By:
-----------------------------------------
Its:
----------------------------------------
ABRY PARTNERS, INC.
By:
-----------------------------------------
Its:
----------------------------------------
69
APPENDIX
Additional Defined Terms. The following capitalized terms have the
---------- ------- -----
following meanings when used in this Agreement and the Schedules attached to
this Agreement:
"ABRY Fund" means ABRY Broadcast Partners II, L.P., a Delaware limited
---- ----
partnership and a stockholder of ▇▇▇▇▇▇▇▇.
"Acquiring Parties" means ▇▇▇▇▇▇▇▇, the Merger Sub and Post-Merger
--------- -------
▇▇▇▇▇▇▇▇.
"Acquiring Party Consents" means all Consents other than the Required
--------- ----- --------
FCC Consent, any Consent required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, or any
▇▇▇▇▇▇▇▇ Consent.
"Act III" means Act III Broadcasting, Inc., a predecessor by merger to
--- ---
▇▇▇▇▇▇▇▇ Broadcasting.
"Act III Purchase Agreement" means the Stock Purchase Agreement dated
--- --- -------- ---------
as of June 19, 1995, among A-3 Acquisition, Inc., Act III and certain of
the stockholders of Act III, as amended and in effect from time to time.
"Adjustment Time" means, with respect to each Station, 12:01 a.m.,
---------- ----
local time, on the Closing Date.
"Affiliate" of any Person means any other Person which is controlled
---------
by, controls, or is under common control with, such first Person.
"Affiliated Group" means an affiliated group of corporations, as that
---------- -----
term is defined in Section 1504(a) of the Tax Code (or in any analogous
combined, consolidated or unitary group defined under state, local or
foreign income Tax law).
"Approval Date" means the first day upon which the Required FCC
-------- ----
Consent has been Granted and the requisite waiting period under the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Act for the consummation of such Merger has expired or been
terminated.
"Average Trading Price" means the average of the Closing Trading
------- ------- -----
Prices for the third Business Day prior to the Closing Date and the nine
(9) preceding Business Days. The "Closing Trading Price" for any day means
------- ------- -----
the closing price of ▇▇▇▇▇▇▇▇ Common Stock on the Nasdaq National Market as
of 4:00 P.M., New York time, on such day.
"Benefit Arrangement" means any benefit arrangement, obligation,
------- -----------
custom, or practice to provide benefits, other than salary, as compensation
for services rendered, to present or former directors, employees, agents,
or independent contractors (other than any obligation, arrangement, custom
or practice that is an employee benefit plan under ERISA),
70
including employment agreements, severance agreements, executive
compensation arrangements, stock options, restricted stock rights and
performance unit awards, incentive programs or arrangements, sick leave,
vacation pay, severance pay policies, plant closing benefits, salary
continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation,
bonus, stock purchase, hospitalization, medical insurance, life insurance,
tuition reimbursement or scholarship programs, employee discounts, employee
loans, employee banking privileges, any plans subject to Section 125 of the
Tax Code, and any plans providing benefits or payments in the event of a
change of control, change in ownership, or sale of a substantial portion
(including all or substantially all) of the assets of any business or
portion thereof, in each case with respect to any present or former
employees, directors, or agents.
A "Business Day" means any day other than a Saturday, a Sunday or
-------- ---
another day upon which banks in New York, New York generally are not open
for business.
"Closing Date" means the date upon which the Closing occurs.
------- ----
"Communications Act" means the Communications Act of 1934, as amended
-------------- ---
and as in effect from time to time.
"Consent" means any consent, order, approval, authorization or other
-------
action of, or any filing with or notice to or other action by or with
respect to, any Person which is required for any of the execution, delivery
or performance of this Agreement, the consummation of either Spin-Off, the
Merger, or the conduct of the business of ▇▇▇▇▇▇▇▇ Two, ▇▇▇▇▇▇▇▇ Three or
Post-Merger ▇▇▇▇▇▇▇▇ or any of its Subsidiaries or the holding or
utilization of any Station Asset thereafter, whether such requirement
arises pursuant to any Legal Requirement, Contract, a Person's
organizational documents or otherwise, including any of the foregoing which
is required in order to prevent a breach of or a default under or a
termination or modification of any Contract.
"Contract" means any agreement, lease, arrangement, commitment, or
--------
understanding to which ▇▇▇▇▇▇▇▇ or any of its Subsidiaries, with respect to
the Stations, is a party.
"Corporate Personnel" means J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
--------- ---------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and any successor to any of
them in his capacity as an employee of ▇▇▇▇▇▇▇▇ and its Subsidiaries,
▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three.
"▇▇▇▇▇▇▇ Money Escrow Agent" means the "Escrow Agent" to which the
------- ----- ------ -----
▇▇▇▇▇▇▇ Money Escrow Agreement refers.
"▇▇▇▇▇▇▇ Money Escrow Agreement" means the Escrow Agreement entered
------- ----- ------ ---------
into among ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (on behalf of the Merger Sub) and The Chase
Manhattan Bank (as Escrow Agent) dated as of the date of this Agreement, as
such agreement is in effect from time to time.
71
"▇▇▇▇▇▇▇ Money Fund" means the "Escrow Fund" to which the ▇▇▇▇▇▇▇
------- ----- ----
Money Escrow Agreement refers.
"▇▇▇▇▇▇▇ Money Income" means the "Escrow Income" to which the ▇▇▇▇▇▇▇
------- ----- ------
Money Escrow Agreement refers.
"▇▇▇▇▇▇▇ Money Letter of Credit" means a stand-by letter of credit
------- ----- ------ -- ------
delivered to the ▇▇▇▇▇▇▇ Money Escrow Agent on the date of this Agreement
issued by The Chase Manhattan Bank in the face amount of $75,000,000 and
otherwise substantially in the form of the attached Exhibit E, or any
------- -
replacement stand-by letter of credit delivered to the ▇▇▇▇▇▇▇ Money Escrow
Agent in accordance with the ▇▇▇▇▇▇▇ Money Escrow Agreement.
"Environmental Laws" means the rules and regulations of the FCC, the
------------- ----
United States Environmental Protection Agency and any other federal, state
or local government authority pertaining to human exposure to RF radiation
and all applicable rules and regulations of federal, state and local laws,
including statutes, regulations, ordinances, codes, and rules, as amended,
relating to the discharge of air pollutants, water pollutants or process
waste water or hazardous or toxic substances, including the Federal Solid
Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act,
the Federal Resource Conservation and Recovery Act of 1976, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Occupational Safety and Health Act of 1970, each as amended,
regulations of the Occupational Safety and Health Administration and
regulations of any state department of natural resources or state
environmental protection agency now in effect.
"Effective Time" means the time of the filing of the Certificate of
--------- ----
Merger described in Article II.
"ERISA Affiliate" means any Person that, together with ▇▇▇▇▇▇▇▇, would
----- ---------
be or was at any time treated as a single employer under Section 414 of the
Code or 4001 of ERISA and any general partnership of which ▇▇▇▇▇▇▇▇ or any
Subsidiary of ▇▇▇▇▇▇▇▇ is or has been a general partner.
"Estimate Escrow Agent" means the "Escrow Agent" to which the Estimate
-------- ------ -----
Escrow Agreement refers.
"Estimate Escrow Agreement" means the Estimate Escrow Agreement
-------- ------ ---------
entered into among the Stockholder Representative, ▇▇▇▇▇▇▇▇ (on behalf of
the Merger Sub) and The Chase Manhattan Bank (as Escrow Agent) dated as of
the date of this Agreement, as such agreement is in effect from time to
time.
"Estimate Fund" means the "Escrow Fund" to which the Estimate Escrow
-------- ----
Agreement refers.
"Existing LMAs" means the time brokerage and local marketing
-------- ----
agreements
72
pursuant to which ▇▇▇▇▇▇▇▇ and its Subsidiaries conduct their operations
with respect to the LMA Stations.
"Expiration Date" means May 16, 1999.
---------- ----
"FCC" means the Federal Communications Commission or any successor
---
thereto.
"FCC Authorizations" means the authorizations issued by the FCC and
--- --------------
described on the attached Schedule 4E.
"Film Obligations" means all cash payment obligations of ▇▇▇▇▇▇▇▇ or
---- -----------
any of its Subsidiaries under any Program Contract.
A "Final Order" means the Required FCC Consent if (a) the Required FCC
----- -----
Consent has been Granted and has not been reversed, stayed, set aside,
enjoined, annulled or suspended (whether under Section 402 or 405 of the
Communications Act or otherwise) and (b) (i) no request has been filed for
administrative or judicial review, reconsideration, appeal, certiorari or
stay and the time for filing any such request and for the FCC to review the
Required FCC Consent on its own motion has expired, or (2) if such a
review, reconsideration or appeal has occurred, such review,
reconsideration or appeal has been denied and the time for further review,
reconsideration or appeal has expired.
"Funded Indebtedness" means the indebtedness for borrowed money of
------ ------------
▇▇▇▇▇▇▇▇ and its Subsidiaries under the ▇▇▇▇▇▇▇▇ Senior Debt Arrangements,
the indebtedness for borrowed money of ▇▇▇▇▇▇▇▇ and its Subsidiaries
represented by the ▇▇▇▇▇▇▇▇ Notes, and all other indebtedness of ▇▇▇▇▇▇▇▇
and its Subsidiaries for money borrowed by them. As used herein, the term
"money borrowed" does not refer to the receipt or benefit of trade credit
for the purchase of goods or services.
"GAAP" means United States generally accepted accounting principles,
----
as in effect from time to time, as applied by ▇▇▇▇▇▇▇▇ and its Subsidiaries
from time to time.
The Required FCC Consent is "Granted" on the effective date, as
-------
determined under the FCC's rules, regulations and policies, of the grant
thereof by the FCC or its staff.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
----------------- ---
Improvements Act of 1976, as in effect from time to time.
"Hazardous Material" means any substance or waste containing any
--------- --------
hazardous substance, pollutant or contaminant, as those terms are defined,
in the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, 42 U.S.C. (S)9601 et seq., and any other substance
similarly defined or identified in any applicable Environmental Laws,
including toxic materials or harmful physical agents, as defined in the
Occupational Safety and Health Act of 1979, as amended, 29 U.S.C. (S)651 et
seq. "Hazardous Materials" includes asbestos, asbestos-containing
materials, petroleum and
73
petroleum-based products, polycholorinated biphenyls (PCBs), infectious
wastes and radioactive materials and wastes.
"Headquarters Assets" means the assets of ▇▇▇▇▇▇▇▇ and its
------------ ------
Subsidiaries located in the offices of ▇▇▇▇▇▇▇▇ and its Subsidiaries
located in Franklin, Tennessee, and Boston, Massachusetts, and any so-
called "personal seat license" or other right of ▇▇▇▇▇▇▇▇ or any of its
Subsidiaries to subscribe for tickets to events at the stadium presently
being constructed or proposed to be constructed in the Nashville,
Tennessee, metropolitan area.
"Indemnity Agreement" means the Indemnity Agreement entered into among
--------- ---------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and certain other Persons dated as of the date of this
Agreement, as such agreement is in effect from time to time.
"Indemnity Escrow Agent" means the "Escrow Agent" to which the
--------- ------ -----
Indemnity Escrow Agreement refers.
"Indemnity Escrow Agreement" means the Escrow Agreement entered into
--------- ------ ---------
among the Stockholder Representative, ▇▇▇▇▇▇▇▇ and certain other Persons
and The Chase Manhattan Bank (as Escrow Agent) dated as of the date of this
Agreement, as such agreement is in effect from time to time.
"Indemnity Fund" means the "Escrow Fund" to which the Indemnity Escrow
--------- ----
Agreement refers.
"KOKH Purchase Agreement" means the Asset Purchase Agreement dated as
---- -------- ---------
of January 6, 1998 among ▇▇▇▇▇▇▇▇, SBOC and SBLH, as in effect from time to
time.
"Legal Requirements" means the Communications Act, the rules,
----- ------------
regulations and published policies of the FCC, and all other federal, state
and local laws, rules, regulations, ordinances, judgments, orders and
decrees.
"Lien" means any mortgage, pledge, hypothecation, encumbrance, lien
----
(statutory or otherwise), preference, priority or other security agreement
of any kind or nature whatsoever (including any conditional sale or other
title retention agreement and any lease having substantially the same
effect as any of the foregoing and any assignment or deposit arrangement in
the nature of a security device).
"LMA Stations" means broadcast television station WUXP, Nashville,
--- --------
Tennessee; and broadcast television station WUPN-TV, Greensboro, North
Carolina; in each case together with all related translator stations (if
any).
"Market Cable System" means, with respect to any Station, any cable
------ ----- ------
television system located within such Station's television market, as that
term is defined in Section 76.55(e) of the rules of the FCC.
74
"Material Adverse Change" means a material adverse change after the
-------- ------- ------
date of this Agreement in the operations, business, financial condition or
results of operations of the Stations, taken as a whole, or in the
condition of the Station Assets, taken as a whole (as compared with the
operations, business, financial condition and results of operations of the
Stations, taken as a whole, and the condition of the Station Assets, taken
as a whole, on the date of this Agreement) which occurs on or prior to the
Approval Date; provided that none of the following (or any combination
--------
thereof) will be a Material Adverse Change: (i) a change in the financial
performance of the Stations; (ii) any change caused in whole or in part by
(A) any change in employees, suppliers or customers of the Stations, (B) a
change in general economic, financial or capital market conditions on a
national, state, regional or local basis, (C) a change in conditions
(including legislation, regulations or competitive activities) applicable
to the broadcast television industry generally on a national, state,
regional or local basis, (D) any matter disclosed on the attached Schedules
to this Agreement, (E) the establishment of a union or collective
bargaining arrangement, or actual or threatened union organizing activity,
involving employees of ▇▇▇▇▇▇▇▇, any of its Subsidiaries, ▇▇▇▇▇▇▇▇ Two or
▇▇▇▇▇▇▇▇ Three, (F) the departure of any employees of ▇▇▇▇▇▇▇▇, any of its
Subsidiaries, ▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three after the date of this
Agreement, whether or not in anticipation of the Merger, or (G) the loss of
cable system carriage of any Station.
"Mission Guarantees" means the (i) Guaranty of ▇▇▇▇▇▇▇▇ dated as of
------- ----------
July 11, 1996 in favor of NationsBank of Texas, N.A., and any other lenders
referred to therein relating to certain indebtedness of Mission
Broadcasting I, Inc., a Delaware corporation, and (ii) the Guaranty of
▇▇▇▇▇▇▇▇ dated as of July 29, 1996 in favor of NationsBank of Texas, N.A.,
and any other lenders referred to therein relating to certain indebtedness
of Mission Broadcasting II, Inc., a Delaware corporation, in each case as
in effect from time to time.
"9-5/8% Indenture" means the Indenture dated as of December 15, 1993
------ ---------
among ▇▇▇▇▇▇▇▇ Broadcasting (as the successor by merger to Act III), its
Subsidiaries and The State Street Bank and Trust Company, as successor
trustee, as in effect from time to time.
"9-5/8% Notes" means the 9-5/8% Notes due 2003 of ▇▇▇▇▇▇▇▇
------ -----
Broadcasting (as the successor by merger to Act III) issued pursuant to the
9-5/8% Indenture, as such Notes are in effect from time to time.
"New LMAs" means the ▇▇▇▇▇▇▇▇ Two LMA and the ▇▇▇▇▇▇▇▇ Three LMA.
--- ----
"Non-Continuing Station Manager" means any general manager or general
-------------- ------- -------
sales manager of a Station, if ▇▇▇▇▇▇▇▇ notifies ▇▇▇▇▇▇▇▇ in writing not
fewer than 10 days prior to the Closing Date that ▇▇▇▇▇▇▇▇ desires that the
employment of such general manager or general sales manager be terminated
effective as of the Closing Date and ▇▇▇▇▇▇▇▇ does not withdraw such notice
by contrary written notice to ▇▇▇▇▇▇▇▇ on or prior to the Closing Date.
"Old ▇▇▇▇▇▇▇▇ Stockholder" means any holder of record of any ▇▇▇▇▇▇▇▇
--- -------- -----------
Share Equivalent immediately prior to the Effective Time.
75
"ordinary course of business" means the ordinary course of the conduct
-------- ------ -- --------
of business by ▇▇▇▇▇▇▇▇ and is Subsidiaries, substantially consistent with
their respective past practices.
"Owned Stations" means broadcast television station WZTV, Nashville,
----- --------
TN; broadcast television station WUTV, Buffalo, New York; broadcast
television station WXLV-TV, Winston-Salem, North Carolina; broadcast
television station WRGT-TV, Dayton, Ohio; broadcast television station
WRLH-TV, Richmond, Virginia; broadcast television station WVAH-TV,
Charleston, West Virginia; broadcast television station WUHF, Rochester,
New York; broadcast television station WTAT-TV, Charleston, South Carolina;
broadcast television station WFXV, Utica, New York; low-power television
station WPNY-LP, Rome, New York; broadcast television station WMSN-TV,
Madison, Wisconsin; and Station KOKH; in each case together with all
associated translator stations (if any) owned by ▇▇▇▇▇▇▇▇ or any of its
Subsidiaries immediately prior to the Spin-Offs.
"Parties" means the parties to this Agreement.
-------
"Permitted Encumbrances" means (i) Liens arising by operation of law
--------- ------------
and securing the payment of Taxes which are not yet due and payable, (ii)
with respect to any property leased by ▇▇▇▇▇▇▇▇, any of its Subsidiaries,
▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three as lessee, the interest of the lessor in
such property, (iii) easements, rights-of-way, reservations of rights,
conditions or covenants, zoning, building or similar restrictions or other
non-monetary Liens or defects that do not, individually or in the
aggregate, materially interfere with the use of the affected property in
the operation of the Stations as currently conducted or as presently
proposed by ▇▇▇▇▇▇▇▇ and its Subsidiaries to be conducted, (iv)
restrictions on transfer imposed under state or federal securities laws or
pursuant to the Communications Act or the FCC Regulations, (v) Liens
disclosed on the attached Schedule 4G, including those described in the
title policies which are a part of such Schedule, and (vi) Liens securing
indebtedness under the ▇▇▇▇▇▇▇▇ Senior Debt Arrangements, other Funded
Indebtedness and the Mission Guarantees.
A "Person" means any individual, partnership, limited liability
------
company, joint venture, corporation, trust, unincorporated association or
government or department thereof.
"Program Contracts" means all program licenses and other Contracts
------- ---------
which authorize the broadcast of film product or programs on any Station,
including those described under the heading "Program Contracts" on the
attached Schedule 4J and any of the same entered into after the date of
this Agreement and prior to the Closing in accordance with this Agreement,
and any of the same which are not required to be described on any Schedule
to this Agreement by reason of the dollar-amount or term thresholds set
forth in Section 4.J, in each case to the extent existing and as in effect
from time to time.
"Realty" means all real property interests described on the attached
------
Schedule 4G.
"Required FCC Consent" means the action(s) or order(s) by the FCC
-------- --- -------
granting its Consent to the transfer of the FCC Authorizations in the Spin-
Offs, in each case without any
76
condition which in the reasonable judgment of ▇▇▇▇▇▇▇▇ and the Acquiring
Parties is adverse to such Person (or, in ▇▇▇▇▇▇▇▇'▇ or the Stockholder
Representative's reasonable judgment, adverse to any of the Old ▇▇▇▇▇▇▇▇
Stockholders or the stockholders of ▇▇▇▇▇▇▇▇ Two or ▇▇▇▇▇▇▇▇ Three), as the
case may be, in any material respect.
"Sale of ▇▇▇▇▇▇▇▇" means any transfer, or transfer of control, of all
---- -- --------
or substantially all of the assets of ▇▇▇▇▇▇▇▇, its Subsidiaries, ▇▇▇▇▇▇▇▇
Two and ▇▇▇▇▇▇▇▇ Three, taken as a whole, whether by means of a sale of
assets, merger, stock acquisition or similar transaction, other than to the
ABRY Fund or an Affiliate of the ABRY Fund.
"Securities Act" means the Securities Act of 1933, as amended and in
---------- ---
effect from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
---------- -------- ---
as amended and in effect from time to time.
"▇▇▇▇▇▇▇▇ Common Stock" means the Class A Common Stock of ▇▇▇▇▇▇▇▇,
-------- ------ -----
par value $0.01 per share.
"▇▇▇▇▇▇▇▇-Related Entity" means ▇▇▇▇▇▇▇▇, the Merger Sub, any direct
---------------- ------
or indirect assignee or proposed assignee (by operation of law or
otherwise) of any of the rights of any of them pursuant to this Agreement
or any other agreement contemplated hereby, any direct or indirect
successor or proposed successor to Post-Merger ▇▇▇▇▇▇▇▇'▇ and its
Subsidiaries' or ▇▇▇▇▇▇▇▇ Two's business or operation with respect to any
Station, or any Affiliate or any of them.
"Station Assets" means all of ▇▇▇▇▇▇▇▇'▇ and its Subsidiaries' rights
------- ------
in, to and under the assets and properties of the Stations, real and
personal, tangible and intangible, of every kind and description which are
owned and used by ▇▇▇▇▇▇▇▇ or its Subsidiaries in connection with the
business and operations of the Stations, including rights under con tracts
and leases, real and personal property, plant and equipment, inventories,
intangibles, licenses and goodwill, and all other assets and properties of
▇▇▇▇▇▇▇▇ and its Subsidiaries used solely in connection with the operation
of any Station; provided that the Station Assets will not include the
--------
Headquarters Assets.
"Station KOKH" means broadcast television station KOKH-TV, Oklahoma
------- ----
City, Oklahoma, together with all related translator stations (if any)
owned by ▇▇▇▇▇▇▇▇ and its Subsidiaries immediately prior to the Spin-Offs.
"Stations" means the Owned Stations and the LMA Stations.
--------
"Stockholder Representative" means ABRY Partners, Inc., a Delaware
----------- --------------
corporation, or any successor thereto as the Stockholder Representative
designated pursuant to Section 13.O.
77
"Straddle Period" means any Taxable period beginning before and ending
-------- ------
on or after the Closing Date.
With respect to any Person, a "Subsidiary" means any corporation,
----------
partnership, limited liability company, association or other business
entity of which, at the time of such reference, (i) if a corporation, a
majority of the total voting power of shares of stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof, or a majority economic interest,
is at the time owned or controlled, directly or indirectly, by that Person
or one or more of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a partnership, limited liability company, association
or other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons will be
deemed to have a majority ownership interest in a partnership, limited
liability company, association or other business entity if such Person or
Persons will be allocated a majority of partnership, company, association
or other business entity gains or losses or will be or control the managing
director or general partner of such partnership, company, association or
other business entity.
"▇▇▇▇▇▇▇▇ Broadcasting" means ▇▇▇▇▇▇▇▇ Broadcasting Company, Inc., a
-------- ------------
Delaware corporation.
"▇▇▇▇▇▇▇▇ Common Stock" means ▇▇▇▇▇▇▇▇ Shares which are common stock.
-------- ------ -----
"▇▇▇▇▇▇▇▇ Consents" means all Consents of the board of directors or
-------- --------
stockholders of ▇▇▇▇▇▇▇▇ or any of its Subsidiaries and all Consents (if
any) for a Spin-Off required under any lease under which ▇▇▇▇▇▇▇▇ or a
Subsidiary (as lessee) leases space on a tower for the location of any
assets described on the attached Exhibit A or the attached Exhibit B.
------- - ------- -
"▇▇▇▇▇▇▇▇ Indentures" means the 9-5/8% Indenture, the 10-1/4%
-------- ----------
Indenture and the 13-1/4% Indenture.
"▇▇▇▇▇▇▇▇ Notes" means the 9-5/8% Notes, the 10-1/4% Notes and the 13-
-------- -----
1/4% Notes.
"▇▇▇▇▇▇▇▇ Preferred Stock" means the Series A Preferred Stock of
-------- --------- -----
▇▇▇▇▇▇▇▇, par value $0.001 per share.
"▇▇▇▇▇▇▇▇-Related Entity" means any Affiliate of ABRY Partners Inc. or
---------------- ------
ABRY Broadcast Partners II, L.P., including ▇▇▇▇▇▇▇▇ and each of its
Subsidiaries, prior to the Effective Time.
"▇▇▇▇▇▇▇▇ Right" means any security or right issued by ▇▇▇▇▇▇▇▇ which
-------- -----
is not a ▇▇▇▇▇▇▇▇ Share, which is outstanding immediately prior to the
Effective Time and which is directly or indirectly convertible into or
exercisable or exchangeable for any capital stock of
78
▇▇▇▇▇▇▇▇ at such time.
"▇▇▇▇▇▇▇▇ Senior Debt Arrangements" means the Credit Agreement dated
-------- ------ -----------------
as of January 4, 1996 among ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Broadcasting, the various
Agents and co-Agents referred to therein, and the several Lenders from time
to time parties thereto, together with all "Loan Documents" and other
documents and instruments relating to the "Obligations" referred to
therein, in each case as in effect from time to time.
"Sullivan Share" means any share of capital stock of Sullivan which is
-------- -----
outstanding immediately prior to the Effective Time.
"Sullivan Share Equivalent" means any Sullivan Right or Sullivan
-------- ----- ----------
Share.
"Sullivan Three" means Sullivan Broadcasting Company III, Inc., a
-------- -----
Delaware corporation.
"Sullivan Three LMA" means a local marketing or time brokerage
-------- ---------
agreement to be entered into at the time of the Closing pursuant to which
Sinclair or a Subsidiary of Sinclair will have the right to sell all or
substantially all of the advertising time on the Sullivan Three Stations
and having such other terms and conditions as Sinclair may propose and
which are reasonably acceptable to Sullivan Three.
"Sullivan Three Stations" means broadcast television station WRGT-TV,
-------- --------------
Dayton, Ohio; broadcast television station WVAH-TV, Charleston, West
Virginia; broadcast television station WTAT-TV, Charleston, South Carolina;
broadcast television station WFXV-TV, Utica, New York; low-power television
station WPNY-LP, Rome, New York; and Station KOKH; in each case together
with all associated translator stations (if any) owned by Sullivan or any
of its Subsidiaries immediately prior to the Spin-Offs.
"Sullivan Two" means Sullivan Broadcasting Company II, Inc., a
-------- ---
Delaware corporation.
"Sullivan Two LMA" means a local marketing or time brokerage agreement
-------- --- ---
to be entered into at the time of the Closing pursuant to which Sinclair or
a Subsidiary of Sinclair will have the right to sell all or substantially
all of the advertising time on the Sullivan Two Stations and having such
other terms and conditions as Sinclair may propose and which are reasonably
acceptable to Sullivan Two.
"Sullivan Two Stations" means the Stations which are not Sullivan
-------- --- --------
Three Stations.
"Tax" (and, with correlative meaning, "Taxes", "Taxable" and "Taxing")
---
means any (A) federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profits, environmental (including
under Section 59A of the Tax Code), customs, duties, real property, real
property gains,
79
personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax
of any kind whatsoever, including any interest, penalties or additions to
tax or additional amounts in respect of the foregoing; (B) liability of any
corporation for the payment of any amounts of the type described in clause
(A) arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included in any Tax Return relating thereto);
and (C) liability for the payment of any amounts of the type described in
clause (A) or (B) as a result of any express or implied obligation to
indemnify or otherwise assume or succeed to the liability of any other
Person.
"Tax Code" means the Internal Revenue Code of 1986, as amended
--- ----
(including, where applicable, the Internal Revenue Code of 1954, as
amended).
"10-1/4% Indenture" means the Indenture dated as of December 21, 1995
------- ---------
among Sullivan Broadcasting, its Subsidiaries and The State Street Bank and
Trust Company, as trustee, as in effect from time to time.
"10-1/4% Notes" means the 10-1/4% Senior Subordinated Notes due 2005
------- -----
of Sullivan Broadcasting issued pursuant to the 10-1/4%Indenture, as such
Notes are in effect from time to time.
"13-1/4% Indenture" means the Indenture dated as of December 21, 1995
------- ---------
among Sullivan and the Bank of New York, as trustee, as in effect from time
to time.
"13-1/4% Notes" means the 13-1/4% Senior Accrual Debentures due 2006
------- -----
of Sullivan issued pursuant to the 13-1/4% Indenture, as such Debentures
are in effect from time to time.
"Time Sale Contracts" means all orders, agreements and other Contracts
---- ---- ---------
existing on the date of this Agreement, or entered into in the ordinary
course of business of any Stations, or as otherwise permitted by this
Agreement, between the date of this Agreement and the Closing, for the sale
of advertising time (other than any Trades) on any Station; provided that
any so-called barter Program Contract will be deemed to constitute a
"Program Contract," and not a "Time Sale Contract," for purposes of this
Agreement.
"Trade" means any trade, barter or similar arrangement for the sale of
-----
advertising time other than for cash (other than any film or program barter
arrangements and radio barter arrangements) on any Station; provided that
any so-called barter Program Contract will be deemed to constitute a
"Program Contract," and not a "Trade," for purposes of this Agreement.
"Trade-Out Payables" means all obligations of Sullivan or any of its
--------- --------
Subsidiaries to provide advertising time arising under any Trade
arrangement, whenever made.
"Trade-Out Receivables" means all current assets of Sullivan or any of
--------- -----------
its Subsidiaries which are goods or services receivable by Sullivan or any
of its Subsidiaries
80
arising under any Trade arrangement, whenever made, and all other accounts
receivable of Sullivan or any of its Subsidiaries which at the option of
the obligor thereof may be satisfied or discharged other than in money.
"Transaction Documents" means this Agreement and all agreements
----------- ---------
between or among any or all of the Sullivan-Related Entities and the
Sinclair-Related Entities relating thereto, in each case as in effect from
time to time.
81
LIST OF SCHEDULES
Schedule 4C Financial Statements
Schedule 4D Certain Developments
Schedule 4E FCC Matters
Schedule 4F Certain Asset-Related Matters
Schedule 4G Ownership and Other Matters
Schedule 4I Insurance
Schedule 4J Contracts
Schedule 4K Employees
Schedule 4L Litigation
Schedule 4N Conflicts
Schedule 4O Subsidiaries, Organization and Qualification
Schedule 4P Tax Matters
Schedule 4T Employee Benefit Matters
Schedule 5E Sinclair's FCC-Related Disclosures
LIST OF EXHIBITS
Exhibit A Sullivan Two Spin-Off Assets
Exhibit B Sullivan Three Spin-Off Assets
Exhibit C Opinions of Sullivan's Counsel
Exhibit D Opinions of Sinclair's and the Merger Sub's Counsel
Exhibit E Form of Earnest Money Letter of Credit
82