EXHIBIT 10.3
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (the "Agreement") is made as of this 22nd
day of June, 1998, by and among Gray Communications Systems, Inc. ("Gray"),
WALB-TV, Inc. ("WALB"), WALB Licensee Corp. ("WALB Licensee"), Cosmos
Broadcasting Corporation ("Cosmos"), Busse Broadcasting Corporation ("Busse")
and WEAU License, Inc., or its successor ("WEAU").
WITNESSETH:
WHEREAS, WALB and WALB Licensee each respectively desires to
exchange for other property of like-kind and qualifying use within the meaning
of Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code")
and the Regulations promulgated thereunder, ownership in and title to (a) the
non-license assets as described in the WALB Asset Purchase Agreement (as defined
below), referred to herein as the "WALB Assets" (with respect to WALB) and (b)
the license assets as described in the WALB Asset Purchase Agreement referred to
herein as the "WALB License" (with respect to WALB Licensee);
WHEREAS, WALB and WALB Licensee have entered into an asset purchase
agreement, dated as of June 22, 1998, with Cosmos whereby WALB and WALB Licensee
agree to sell and Cosmos agrees to purchase the WALB Assets and the WALB License
(the "WALB Asset Purchase Agreement");
WHEREAS, Cosmos has agreed to acquire the WALB Assets and the WALB
License in exchange for ownership in and title to (a) the non-license assets of
like-kind and qualifying use within the meaning of Section 1031 of the Code and
the Regulations promulgated thereunder, as identified by WALB and WALB Licensee
and as described in the WEAU Asset Purchase Agreement (as defined below),
referred to herein as the "WEAU Assets" (with respect to Busse) and (b) the
license assets as described in the WEAU Asset Purchase Agreement, referred to
herein as the "WEAU License" (with respect to WEAU), plus cash as herein
provided;
WHEREAS, in connection with the acquisition of the WEAU Assets,
Cosmos has entered into an asset purchase agreement, dated as of June 22, 1998,
with Busse and WEAU whereby Busse and WEAU agree to sell and Cosmos agrees to
purchase the WEAU Assets and the WEAU License (the "WEAU Asset Purchase
Agreement");
WHEREAS, Gray, WALB and WALB Licensee have requested that Cosmos
enter into the WEAU Asset Purchase Agreement in order to effect the exchange
contemplated herein;
WHEREAS, Cosmos is not willing to enter into the WEAU Asset Purchase
Agreement, this Agreement or the documents relating thereto or hereto unless,
Gray, WALB
and WALB Licensee provide Cosmos with a full and complete indemnity against any
and all claims arising from, or relating to, the execution, delivery and
performance by Cosmos (other than Cosmos' obligation to pay the cash purchase
price to Busse and WEAU) of the WEAU Asset Purchase Agreement; and
WHEREAS, it is the intention of the parties hereto that Cosmos shall
direct Busse and WEAU to directly transfer and convey all right, title and
interest in the WEAU Assets and the WEAU License to WALB and WALB Licensee,
respectively, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
ARTICLE I
1.1 WEAU Asset Purchase Agreement. Cosmos hereby agrees, pursuant to
the WEAU Asset Purchase Agreement, to direct Busse and WEAU to transfer and
convey all right, title and interest in the WEAU Assets and the WEAU License to
WALB and WALB Licensee, respectively, in exchange for the aggregate cash
payments of $66 million made by Cosmos to Busse and WEAU, as provided for in the
WEAU Asset Purchase Agreement. In addition to the cash payments to Busse and
WEAU, which payments will be equal to the value of the transferred WEAU Assets
and the WEAU License, respectively, and total $66 million, (a) Cosmos agrees to
pay to WALB a cash payment equal to the amount of the excess of the value of the
WALB Assets over the value of the WEAU Assets, each as determined pursuant to
Section 2.3 below, and (b) Cosmos agrees to pay to WALB Licensee a cash payment
equal to the amount of the excess of the value of the WALB License over the
value of the WEAU License, each as determined pursuant to Section 2.3 below;
provided that the net aggregate cash payments made by Cosmos to WALB and WALB
Licensee shall be equal to $12 million and the net aggregate cash payments made
by Cosmos to all parties hereto shall be equal to $78 million, each as adjusted
pursuant to Section 1.04 of the WALB Asset Purchase Agreement. Each of WALB and
WALB Licensee hereby agrees to exchange the WALB Assets and the WALB License,
respectively, for the WEAU Assets and the WEAU License, respectively, and to
receive the cash payments pursuant to the terms and conditions of this
Agreement.
ARTICLE II
2.1 Exchange Consideration. The consideration for the transfer of
the WALB Assets and the WALB License to Cosmos shall be the exchange by Cosmos
of the WEAU Assets to WALB and the WEAU License to WALB Licensee, plus the net
aggregate cash payments of $12 million referred to in Section 1.1.
2.2 Closing. (a) Cosmos' obligation to close under the WEAU Asset
Purchase Agreement is subject to the simultaneous consummation of the closing
under the WALB Asset Purchase Agreement, and the parties acknowledge and agree
that Cosmos shall
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not be deemed to be in violation of the WEAU Asset Purchase Agreement to the
extent that any of Gray, WALB or WALB Licensee fails to perform any of its
obligations contemplated pursuant to the terms of this Agreement. At the closing
under the WEAU Asset Purchase Agreement, Cosmos shall assign, and Gray, WALB and
WALB Licensee shall accept, all of Cosmos' remaining rights, liabilities and
obligations under the WEAU Asset Purchase Agreement. Upon the earlier of (i) the
consummation of the closing under the WEAU Asset Purchase Agreement, (ii) the
termination of the WEAU Asset Purchase Agreement pursuant to Article IX thereof,
or (iii) the termination of the WALB Asset Purchase Agreement pursuant to
Article IX thereof, all of the parties hereto acknowledge and agree that Cosmos
shall be fully released from any and all liabilities and obligations under the
WEAU Asset Purchase Agreement and the documents relating thereto.
(b) The closing shall occur and shall be effective at such time as
agreed to by the parties (the "Closing Date") and shall take place at the
offices of Cadwalader, Wickersham & Taft in New York or at such other time and
place as the parties may agree. On the Closing Date, Cosmos will pay (a) a cash
amount equal to the fair market value of the WEAU Assets, as determined pursuant
to Section 2.3 below, to Busse, or to the Indenture Trustee for and at the
written request of Busse and (b) a cash amount equal to the fair market value of
the WEAU License, as determined pursuant to Section 2.3 below, to WEAU, or the
Indenture Trustee for and at the written request of Busse, by wiring federal or
other immediately available funds to the appropriate bank accounts as instructed
by Busse or the Indenture Trustee. Upon consummation of the exchanges
contemplated herein, Cosmos shall make the cash payments that are part of the
exchange consideration, as set forth in Section 2.1 above, by wiring federal or
other immediately available funds to the appropriate bank accounts as instructed
by the party, or parties to receive the cash payments; provided, however, that
the aggregate net cash payments made by Cosmos to all parties hereto shall be
equal to $78 million, as adjusted pursuant to Section 1.04 of the WALB Asset
Purchase Agreement; and provided further that such cash payments made by Cosmos
shall be reduced by any cash payments deposited into an escrow account as set
forth in the WALB Asset Purchase Agreement to the extent paid to WALB or WALB
Licensee. Prior to the consummation of the exchanges contemplated hereby and
receipt of the WEAU Assets and WEAU License by WALB and WALB Licensee, no cash
consideration shall be received, pledged, borrowed by, or otherwise made
available to or for the benefit of WALB, WALB Licensee or Gray unless this
Exchange Agreement shall have been terminated in accordance with Article V
hereof.
2.3 Asset Valuation and Exchange Groups. The values of the various
WEAU Assets, the WEAU License, the WALB Assets and the WALB License have been
allocated among the assets in accordance with a schedule mutually prepared by
the parties and attached hereto as Schedule 2.3. If any party undertakes to
change such schedule, such party must obtain the consent of the other parties,
which will not be unreasonably withheld.
2.4 Direct Deeding. For purposes of this Agreement, Busse agrees to
deliver and convey the WEAU Assets directly to WALB and WEAU agrees to deliver
the WEAU License directly to WALB Licensee, at the direction of Cosmos.
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ARTICLE III
3.1 Indemnification. (a) Gray, WALB and WALB Licensee hereby jointly
and severally indemnify, defend and hold harmless Cosmos and its respective
officers, directors, shareholders, employees, agents and affiliates from,
against and with respect to any and all losses, damages, claims, judgments,
obligations, liabilities, costs and expenses (including, without limitation,
reasonable attorneys' fees and costs and expenses incurred in investigating,
preparing, defending against or prosecuting any litigation, claim, proceeding or
demand), of any kind or character, including environmental or tax liabilities or
claims, arising out of or in connection with the entering into and performance
of the WEAU Asset Purchase Agreement and this Agreement and any documents made
pursuant thereto or hereto and the transactions contemplated thereunder and
hereunder. This indemnity will survive the closing of the exchanges contemplated
herein and any termination of this Agreement pursuant to Section 5.1; provided,
however, that this indemnification shall not apply to Cosmos' obligation to
deliver the cash payment purchase price to Busse and WEAU and to perform its
obligations under this Agreement. Notwithstanding anything to the contrary in
the foregoing, Gray, WALB, WALB Licensee and Cosmos hereby agree that this
Article III has no application to the entering into or the performance of the
WALB Asset Purchase Agreement or the documents made pursuant thereto and that
the indemnification obligations (and limitations thereto) under the WALB Asset
Purchase Agreement have no application to this Agreement.
(b) Gray hereby indemnifies, defends and holds harmless Busse, WEAU
and their respective officers, directors, shareholders, employees, agents and
affiliates from, against and with respect to any and all losses, damages,
claims, judgments, obligations, liabilities, costs and expenses (including,
without limitation, reasonable attorneys' fees and costs and expenses incurred
in investigating, preparing, defending against or prosecuting any litigation,
claim, proceeding or demand), of any kind or character, including environmental
or tax liabilities or claims, arising out of or in connection with the entering
into and performance of the WEAU Asset Purchase Agreement and this Agreement and
any documents made pursuant thereto or hereto and the transactions contemplated
thereunder and hereunder. This indemnity will survive the closing of the
exchanges contemplated herein and any termination of this Agreement pursuant to
Section 5.1; provided, however, that this indemnification shall not apply to (i)
Busse's failure to perform its obligation under the Amended and Restated Stock
Purchase Agreement, dated as of June 22, 1998, among Busse, Gray and the Busse
stockholders and (ii) Busse's and WEAU's failure to perform their respective
obligations under the WEAU Asset Purchase Agreement and under this Agreement.
ARTICLE IV
4.1. Expenses. (a) Except as provided below, regardless of whether
the transactions contemplated by this Agreement are consummated, Gray shall be
responsible for all of the expenses and fees incurred by each of Gray and Busse,
or their affiliates, in connection with the transactions contemplated hereby.
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(b) Gray and Busse shall each pay one-half of the costs and filing
fees associated with the pre-merger notification and reports required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"),
pursuant to the Amended and Restated Stock Purchase Agreement.
(c) On the Closing Date under the WALB Asset Purchase Agreement,
Gray shall pay $20,000 to Cosmos as reimbursement for certain expenses and fees
incurred by Cosmos. Upon such payment, the indemnification obligations under
Article III hereof exclude any indemnification by Gray, WALB or WALB Licensee
for any expenses incurred by Cosmos in connection with the review, preparation
and negotiation of the WEAU Asset Purchase Agreement, this Agreement and the
documents made pursuant thereto and hereto and in connection with participating
in and facilitating the closing contemplated by the WEAU Asset Purchase
Agreement and this Agreement.
ARTICLE V
5.1 Causes for Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing Date: (i) by the mutual written consent of the parties hereto, or (ii)
by either Gray or Cosmos in the event that either the WEAU Asset Purchase
Agreement or the WALB Asset Purchase Agreement shall have been terminated;
provided, however, that it is understood and agreed that the WALB Asset Purchase
Agreement may not be terminated except as specifically provided therein.
Furthermore, notwithstanding anything herein to the contrary, upon the
termination of this Agreement either Busse or Cosmos may terminate the WEAU
Asset Purchase Agreement whereupon such WEAU Asset Purchase Agreement shall be
void and of no further force and effect.
5.2 Notice of Termination. Notice of termination of this Agreement
as provided for in this Article V shall be given by the party so terminating to
the other parties hereto in accordance with the provisions of Section 6.1.
5.3 Effect of Termination. (a) In the event of a termination of this
Agreement pursuant to Section 5.1 hereof, this Agreement shall become void and
of no further force and effect, and Gray shall pay the costs and expenses
incurred by the parties, as set forth in Article IV above, unless such
termination was caused by a default by Cosmos of its obligations under the WALB
Asset Purchase Agreement or the WEAU Asset Purchase Agreement, in which case
Cosmos shall be responsible for its own expenses and costs relating to the
transactions contemplated herein. In addition, Gray shall remain responsible to
pay any costs arising under Article III above.
(b) It is agreed that time is of the essence and the performance and
satisfaction of the WEAU Asset Purchase Agreement and the WALB Asset Purchase
Agreement and each of the conditions set forth therein are material for purposes
of this Agreement.
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ARTICLE VI
6.1 Notices. Any and all notices, consents, approvals or other
communications required or permitted to be given pursuant to the provisions of
this Agreement shall be given in writing and shall be sent certified or
registered mail (return receipt requested), overnight courier, or telecopier to
the parties hereto as follows:
If to Gray, WALB or WALB Licensee:
Gray Communications Systems, Inc.
1201 New York Avenue, NW
Suite 1000
Washington, DC 20005-3917
Telecopier: (202) 962-8300
Attention: Robert A. Beizer, Esq.
With a copy to:
The Ward Quaal Company
401 N. Michigan Avenue
Suite 3140
Chicago, IL 60611
Telecopier: (312) 644-3733
Attention: Mr. Ward L. Quaal
and a copy to:
Alston & Bird
1201 West Peachtree Street
Atlanta, GA 30309-3424
Telecopier: (404) 881-4777
Attention: Stephen A. Opler, Esq.
If to Cosmos:
Cosmos Broadcasting Corporation
The Liberty Corporation
2000 Wade Hampton Boulevard
Greenville, SC 29615
Telecopier: (864) 609-3176
Attention: Martha G. Williams, Esq.
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With a copy to:
Dow, Lohnes & Alberston
1200 New Hampshire Avenue, NW
Suite 800
Washington, DC 20036
Telecopier: (202) 776-2222
Attention: Michael Hines, Esq.
If to Busse or WEAU:
Busse Broadcasting Corporation
141 East Michigan Avenue
Suite 300
Kalamazoo, MI 49007
Telecopier: (616) 388-6089
Attention: Mr. James. C. Ryan
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601-9703
Telecopier: (312) 558-5700
Attention: Steven J. Gavin, Esq.
and a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Telecopier: (212) 504-6666
Attention: Jonathan M. Wainwright, Esq.
6.2 Governing Law. This Agreement shall be governed by and construed
under the laws of New York, without regard to conflict of law principles
thereof.
6.3 Further Assurances. Each of the parties hereto shall hereafter
execute and deliver such further instruments and do such further acts as may be
required or necessary to carry out the intent and purposes of this Agreement and
which are not otherwise inconsistent with the terms of this Agreement.
6.4 Third Party Beneficiary. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any creditor of the
parties hereto or for the benefit of or enforceable by any third party.
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6.5 Superseding Effect. In the event of a conflict between the terms
of this Agreement, the WEAU Asset Purchase Agreement and/or the WALB Asset
Purchase Agreement, unless otherwise specifically addressed, the terms of this
Agreement shall govern.
6.6 Gray Guaranty. Gray hereby unconditionally guarantees the
performance of WALB and WALB Licensee of their obligations hereunder and under
documents relating hereto.
6.7 Counterparts. This Agreement may be executed in two or more
identical counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have set their hand as of the
date first above written.
GRAY COMMUNICATIONS SYSTEMS, INC.
By: /s/ Robert A. Beizer
Robert A. Beizer
Vice President
WALB-TV, INC.
By:/s/ Ward Quaal
Ward Quaal
President
WALB LICENSEE CORP.
By:/s/ Ward Quaal
Ward Quaal
President
COSMOS BROADCASTING CORPORATION
By:/s/ James M. Keelor
Name: James M. Keelor
Title: President
BUSSE BROADCASTING CORPORATION
By:/s/ James C. Ryan
James C. Ryan
Treasurer
WEAU LICENSE, INC.
By:/s/ James C. Ryan
James C. Ryan
Vice President
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SCHEDULE 2.3
[ALLOCATION OF VALUATION OF WEAU AND WALB ASSETS]