GROUP I
OPTION AGREEMENT
BY AND AMONG
RIVER CITY BROADCASTING, L.P.
AND
RIVER CITY LICENSE PARTNERSHIP,
AS SELLERS,
AND
SINCLAIR BROADCAST GROUP, INC.,
AS OPTION HOLDER
DATED AS OF May 31, 1996
TABLE OF CONTENTS
PAGE
ARTICLE 1
OPTION TO ACQUIRE LICENSE ASSETS
1.1 Options...............................................................3
1.1.A. Option to Acquire License Assets......................................4
1.2 Excluded Assets.......................................................6
1.3 Liabilities...........................................................7
1.4 Option Exercise.......................................................9
1.5 Terms of Option. ....................................................9
ARTICLE 2
PAYMENTS AND CLOSING
2.1 Grant Price and Option Closing Price.................................10
2.1.A Payment for Option Grant.............................................10
2.1.B Payment Upon Option Closing and Option Extension Fees
.....................................................................10
2.2 Option Grant and Closing.............................................14
2.3 Deliveries at Option Grant...........................................14
2.4 Deliveries at Closing................................................16
2.5 Adjustments..........................................................19
2.6 Effect of Certain Laws or Proceedings................................21
2.7 Representations and Warranties of Sellers............................23
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Organization.........................................................24
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3.2 Approval/Authority...................................................24
3.3 No Conflicts.........................................................24
3.4 Brokers..............................................................25
3.5 FCC Authorizations...................................................25
3.6 Condition of Assets..................................................26
3.7 Title................................................................26
3.8 Call Letters, Trademarks, Etc........................................26
3.9 Insurance............................................................27
3.10 Contracts............................................................27
3.11 Employees............................................................28
3.12 Litigation...........................................................28
3.13 Compliance with Laws.................................................29
3.14 Complete Disclosure..................................................29
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF OPTION HOLDER
4.1 Incorporation........................................................29
4.2 Corporate Action.....................................................30
4.3 No Conflicts.........................................................30
4.4 Brokers..............................................................30
4.5 Litigation...........................................................30
ARTICLE 5
COVENANTS OF SELLERS PENDING THE CLOSING
5.1 Maintenance of Business until Closing................................31
5.2 Goodwill/Compliance with Agreements..................................35
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5.3 Reports; Access to Facilities, Files and Records.....................35
5.4 Notice of Proceedings................................................36
5.5 Confidential Information.............................................36
5.6 Consummation of Option Closing.......................................37
5.7 Notice of Certain Developments.......................................37
5.8 Covenants of Sellers After Option Exercise...........................37
5.9 Hart-Scott-Rodino....................................................38
5.10 Compliance with Group I TBA..........................................38
5.11 New Mexico Stations..................................................39
ARTICLE 6
COVENANTS OF OPTION HOLDER PENDING THE CLOSING
6.1 Confidential Information.............................................39
6.2 Consummation of Agreement............................................40
6.3 Notice of Proceedings................................................40
6.4 Covenants of Option Holder After Option Exercise.....................40
6.5 Insurance............................................................41
6.6 Notice of Material Impact............................................41
6.7 Hart-Scott-Rodino....................................................42
6.8 Compliance with Group I TBA..........................................42
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF SELLERS
7.1 Representations, Warranties, Covenants...............................42
7.2 Proceedings..........................................................43
7.3 Opinion of Counsel...................................................44
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7.4 FCC Authorization....................................................44
7.5 Hart-Scott-Rodino....................................................44
7.6 Termination of Certain Agreements....................................44
7.7 Group I TBA..........................................................44
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF OPTION HOLDER
8.1 Representations, Warranties, and Covenants...........................45
8.2 Proceedings..........................................................46
8.3 Opinion of Counsel...................................................46
8.4 FCC Authorizations...................................................47
8.5 Hart-Scott-Rodino....................................................47
8.6 Termination of Certain Agreements....................................47
8.7 Group I TBA..........................................................47
ARTICLE 9
INDEMNIFICATION
9.1 Survival.............................................................47
9.2 Indemnification of Option Holder.....................................48
9.3 Indemnification of Sellers...........................................48
9.4 Limitation of Liability..............................................48
9.5 Bulk Sales Indemnity.................................................50
9.6 Notice of Claims.....................................................50
9.7 Defense of Third Party Claims........................................50
9.8 Indemnity as Sole Remedy.............................................51
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9.9 Arbitration..........................................................51
ARTICLE 10
EMPLOYEE MATTERS
10.1 Employee Matters.....................................................53
ARTICLE 11
TERMINATION/MISCELLANEOUS
11.1 Termination of Options...............................................56
11.1.A Group I Options......................................................56
11.1.B Notice and Cure......................................................56
11.2 Effect of Termination and Other Limitations..........................57
11.3 Expenses.............................................................58
11.4 Assignments..........................................................58
11.5 Further Assurances...................................................59
11.6 Notices..............................................................59
11.7 Captions.............................................................60
11.8 Law Governing........................................................60
11.9 Consent to Jurisdiction, Etc.........................................60
11.10 Waiver of Provisions.................................................61
11.11 Counterparts.........................................................61
11.12 Entire Agreement/Amendments..........................................61
11.13 Access to Books and Records..........................................61
11.14 Waiver of Final Grant by FCC.........................................62
11.15 Recitals, Headings...................................................62
11.16 Severability.........................................................62
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11.17 Public Announcements and Press Releases..............................63
11.18 Board of Directors and Committees....................................63
11.19 List of Definitions..................................................64
11.20 No Third Party Beneficiaries.........................................66
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Exhibits
--------
Exhibit 2.5(b) Post-Closing Escrow Agreement
Exhibit 7.3(i) Opinion of Counsel to Option Holder
Exhibit 7.3(ii) Opinion of Counsel to Option Holder
FCC
Exhibit 8.3(i) Opinion of Counsel to Sellers
Exhibit 8.3(ii) Opinion of Counsel to Sellers (FCC)
Exhibit 9.4 Indemnification Escrow Agreement
Schedules
---------
Schedule 1.1.A(a) FCC Authorizations
Schedule 1.1.A(b) Tangible Personal Property
Schedule 1.1.A(c) Real Property
Schedule 1.1.A(d) Other Contracts
Schedule 1.1.A(e) Trademarks, Etc.
Schedule 1.1.B(a) Columbus Tangible Personal Property
Schedule 1.1.B(b) Columbus Real Property
Schedule 1.1.B(c) Columbus Other Contracts
Schedule 1.1.B(d) Columbus Trademarks, Etc.
Schedule 1.1.B(e) Columbus Programming Copyrights
Schedule 1.1.B(j) NewVenco Other Assets
Schedule 1.2(f) Excluded Contracts
Schedule 1.2(i) Interests in Certain Subsidiaries
Schedule 1.3 Liabilities
Schedule 2.1.A Allocation of Option Grant Price among
Stations
Schedule 2.1.B(a) Allocation of Option Closing Price among
Stations
Schedule 2.1.B(b) Columbus Station Excess Cash Flow
Schedule 3.1 Qualifications
Schedule 3.3 No Conflicts
Schedule 3.5 FCC Authorizations
Schedule 3.11 Certain Employee Matters
Schedule 3.12 Litigation
Schedule 5.1 Maintenance of Business
Schedule 9.2 Indemnification of Option Holder
Schedule 10.1 Employee Matters
Schedule 11.1.D Notice and Cure
GROUP I OPTION AGREEMENT
------------------------
THIS OPTION AGREEMENT (this "Agreement") is dated as of May 31, 1996
(the "Option Grant Date"), and is by and among River City Broadcasting, L.P., a
limited partnership duly formed under the laws of the State of Delaware ("RCB"),
River City License Partnership, a general partnership duly formed under the laws
of the State of Missouri ("Licensee") (RCB and Licensee sometimes collectively
referred to herein as "Sellers" and individually as a "Seller"), and Sinclair
Broadcast Group, Inc., a corporation duly organized under the laws of the State
of Maryland ("Option Holder").
RECITALS
--------
WHEREAS, Licensee is the licensee of (i) Television Stations KOVR(TV),
Stockton, California, WTTV(TV), Bloomington, Indiana, WTTK(TV), Kokomo, Indiana,
KDSM-TV, Des Moines, Iowa, KDNL-TV, St. Louis, Missouri, WLOS-TV, Asheville,
North Carolina, WFBC(TV), Anderson, South Carolina and KABB-TV, San Antonio,
Texas (collectively referred to herein as the "Group I TV Stations"); and (ii)
Radio Stations KBLA(AM), Santa Monica, California, WVRV(FM), East St. Louis,
Illinois, WJCE-FM, Russellville, Kentucky, KMEZ-FM, Belle Chasse, Louisiana,
WSMB(AM), New Orleans, Louisiana, WLMG-FM, New Orleans, Louisiana, WWL(AM), New
Orleans, Louisiana, KPNT(FM), Sainte Genevieve, Missouri, WBEN(AM), Buffalo, New
York, WMJQ-FM, Buffalo, New York, WWKB(AM), Buffalo, New York, WKSE-FM, Niagara
Falls, New York, WGBI(AM), Scranton, Pennsylvania, WGGY(FM), Scranton,
Pennsylvania, WILK-AM, Wilkes Barre, Pennsylvania, WKRZ-FM, Wilkes Barre,
Pennsylvania, WOGY-FM, Germantown, Tennessee, WJCE(AM), Memphis, Tennessee,
WRVR-FM, Memphis, Tennessee, WLAC(AM), Nashville, Tennessee and WLAC-FM,
Nashville, Tennessee (collectively referred to herein as the "Radio Stations,"
and collectively as the "Stations" when referred to herein with the TV Stations
and any television or radio station with respect to which RCB or Licensee
becomes a licensee (as described in Schedule 2.2(a)(1) to the Asset Purchase
Agreement as defined below, or with the consent of Option Holder) prior to the
Asset Purchase Agreement Closing Date (the "After-Acquired Stations")), pursuant
to certain authorizations (the "FCC Authorizations") issued by the Federal
Communications Commission (the "FCC")(the Group I TV Stations, the Radio
Stations and any After-Acquired Stations being collectively referred to herein
as "Group I Stations" or the "Stations"); and
WHEREAS, RCB owns all of the issued and outstanding capital stock (the
"Sandia Stock") of Sandia Peak Broadcasters, Inc., a Delaware corporation
("Sandia"), a 40% general partnership
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interest (the "Twin Peaks Partnership Interest") in Twin Peaks Radio, a New
Mexico general partnership ("Twin Peaks"); a 1% general partnership interest
(the "Twin Peaks License Partnership Interest") in Twin Peaks Radio License
Partnership, a Missouri general partnership, with the remaining 60% general
partnership interest in Twin Peaks being owned by Sandia and the remaining 99%
general partnership interest in Twin Peaks License Partnership being owned by
Twin Peaks; and Twin Peaks License Partnership is the licensee of Radio Stations
KZSS(AM), Albuquerque, New Mexico, KZRR(FM), Albuquerque, New Mexico and
KLSK(FM), Santa Fe, New Mexico (collectively referred to herein as the "New
Mexico Stations"), pursuant to certain FCC Authorizations, and Twin Peaks owns
certain assets used or useful in connection with the operation of the New Mexico
Stations (the Sandia Stock, the Twin Peaks Partnership Interest and the Twin
Peaks License Partnership Interest being sometimes collectively referred to
herein as the "RCB Twin Peaks Equity Interests") and for purposes of the
representations and warranties, indemnification provisions and nomenclature of
the Options, the New Mexico Stations being deemed to be "Group I Stations" and
the assets of the New Mexico Stations that are of the same type as those
identified in Section 1.1.A hereof being deemed to be "License Assets";
provided, however, to the extent RCB sells the New Mexico Stations or the RCB
Twin Peaks Equity Interest (the "Twin Peaks Sale") prior to the Option Grant
Date or prior to the date Option Holder has consummated the acquisition of the
RCB Twin Peaks Equity Interest, no representations or warranties shall be made
hereunder with respect to the New Mexico Stations or the RCB Twin Peaks Equity
Interest as contemplated hereunder, and Option Holder acknowledges and agrees
that it waives its right to acquire the RCB Twin Peaks Equity Interest and any
Option with respect thereto shall immediately terminate, and RCB shall have no
obligation to sell and Option Holder shall have no obligation to purchase, the
RCB Twin Peaks Equity Interest; and
WHEREAS, RCB owns certain Other Assets (as defined herein); and
WHEREAS, RCB has entered with Option Holder into an Amended and
Restated Asset Purchase Agreement, dated as of April 10, 1996 and as amended and
restated as of May 31, 1996 (as amended, the "Asset Purchase Agreement"),
pursuant to which Option Holder is purchasing on the date hereof certain assets
and rights of RCB, as provided in the Asset Purchase Agreement; and
WHEREAS, on the date hereof (the "Asset Purchase Agreement Closing
Date") in connection with the closing of the Asset Purchase Agreement (the
"Asset Purchase Closing"), Sellers and Option Holder have entered into a Time
Brokerage Agreement
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relating to the Group I Stations but not including the New Mexico Stations (the
"Group I TBA") pursuant to which Option Holder will provide certain television
and radio programming to Sellers for the Group I Stations, all on the terms and
conditions contained in the Group I TBA; and
WHEREAS, RCB and Licensee desire to grant an option to the Option
Holder to acquire the License Assets (as defined in Section 1.1.A herein), and
Option Holder desires to acquire an option to acquire the License Assets, all on
the terms described herein; and
WHEREAS, with respect to each Station, on the Option Closing Date (as
defined in Section 2.2(b) herein) applicable to such Station, Sellers will
transfer and assign to Option Holder all of the License Assets with respect to
such Station;
WHEREAS, on the Asset Purchase Agreement Closing Date in connection
with the Asset Purchase Agreement Closing, Sellers and Option Holder are
entering into a Columbus Option Agreement (the "Columbus Option Agreement")
relating to Television Station WSYX(TV), Columbus, Ohio (the "Columbus Station")
pursuant to which Option Holder will acquire the option to acquire the License
Assets (as defined in the Columbus Option Agreement) and the Columbus Station
Assets (as defined in the Columbus Option Agreement); although certain of the
License Assets (as defined in the Columbus Option Agreement) and the Columbus
Station Assets are listed on the Schedules hereto, none of the assets relating
to the Columbus Station will be conveyed hereunder and no representations,
warranties, covenants or other agreements are made or shall be deemed to be made
hereunder with respect thereto.
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending legally to be bound, agree as
follows:
ARTICLE 1
---------
OPTION TO ACQUIRE LICENSE ASSETS
--------------------------------
1.1 Options. Upon and subject to the terms and conditions stated in
this Agreement, Sellers hereby as of the date hereof grant to Option Holder
separate options (i.e., one option per Station and one option for the RCB Twin
Peaks Equity Interest) to acquire concurrently in their entirety at one Closing
or separately at one or more Closings, all of Sellers' rights, title and
interest in, to and under the License Assets used or held by
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Sellers with respect to the Group I Stations, including (subject to RCB's right
to consummate the Twin Peaks Sale) the RCB Twin Peaks Equity Interest (the
"Group I Options" or the "Options").
1.1.A. Option to Acquire License Assets. Subject to the terms and
conditions stated in this Agreement, on the Option Closing Date applicable to
such Stations which are being acquired on such Option Closing Date, Sellers
shall convey, transfer, assign and deliver to Option Holder, and Option Holder
shall acquire from Sellers, all of Sellers' rights, title and interest in, to
and under all License Assets used or held for use by Sellers with respect to
such Stations, including the RCB Twin Peaks Equity Interest. As used in this
Agreement, "License Assets" used or held for use with respect to any Station
means all of Sellers' rights in, to and under the following, on the Option
Closing Date for such Station:
(a) FCC Authorizations. All FCC Authorizations issued to
Licensee with respect to the Station, including, without limitation, those shown
on Schedule 1.1.A(a) to this Agreement, and all applications therefor, together
with any renewals, extensions or modifications thereof and additions thereto.
(b) Tangible Personal Property. All equipment, vehicles,
furniture, transmitters, antennae, engineering equipment, office materials and
supplies, spare parts and other tangible personal property of every kind and
description owned as of the date of this Agreement by Sellers and used in
connection with the business and operations of the Station, including, without
limitation, those shown on Schedule 1.1.A(b) to this Agreement, and any
additions, improvements, replacements and alterations thereto made between the
date of this Agreement and the Option Closing Date for the Station, but
excluding all such property which is consumed, retired or disposed of by Sellers
in the ordinary course of their business between the date of this Agreement and
the Option Closing Date for the Station or as otherwise permitted by this
Agreement.
(c) Real Property. (i) All real property owned by Sellers
listed on Schedule 1.1.A(c) relating to the Station (the "Real Property"), (ii)
all buildings, structures, towers, improvements, transmitting towers and other
fixtures thereon (the "Real Property Improvements"), owned by Seller and used in
the business and operations of the Station; (iii) all other leaseholds and other
interests in real property held by Sellers relating to the Station (the
"Leasehold Interests") listed and so designated on Schedule 1.1.A(c); and (iv)
real property, and all buildings, structures and improvements thereon and
leasehold
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interests that are acquired by Sellers between the date hereof and the Option
Closing Date for the Station.
(d) Other Contracts. All contracts relating to any Station,
other than the Group I TBA, to which either Seller is a party (in addition to
and not included in those set forth in Sections 1.1.A(b) and 1.1.A(c) hereof)
and the Consent Contracts, as defined in, and contemplated under, Section 1.3(c)
of the Asset Purchase Agreement (collectively, "Other Contracts"), including all
agreements, equipment leases and other leases listed on Schedules 1.1.A(d) and
3.11 (as may be entered into, amended, renewed or extended pursuant to Section
5.1) to this Agreement, together with all such contracts that will have been
entered into in the ordinary course of business of the Station between the date
of this Agreement and the Option Closing Date for the Station and all other such
Contracts that will have been entered into between the date of this Agreement
and the Option Closing Date for the Station the making of which by Sellers is
permitted by this Agreement, to the extent existing as of the Option Closing
Date for the Station. As used in this Agreement, "Contract" means, with respect
to any Station, any agreement, lease, arrangement, commitment or understanding,
written or oral, expressed or implied, to which the Station or Sellers with
respect to the Station are a party or are bound.
(e) Trademarks, Etc. All trademarks, service marks, patents,
trade names, jingles, slogans and logotypes owned and used by Sellers in
connection with the business and operations of the Station as of the date
hereof, including, without limitation, Sellers' rights to use the call letters
of the Station and any related names and phrases and those shown on Schedule
1.1.A(e) to this Agreement and those acquired between the date hereof and the
Option Closing Date for the Station.
(f) FCC Records. All FCC logs and other records that relate
to the operations of the Station.
(g) Files and Records. All files and other records of
Sellers relating solely to the business and operations of the Station other than
account books of original entry and other than such files and records that are
maintained at the corporate offices of Sellers or RCB's general partner for tax
accounting purposes.
(h) RCB Twin Peaks Equity Interests. With respect to the New
Mexico Stations, all of the RCB Twin Peaks Equity Interests.
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(i) Goodwill. All of Sellers' goodwill in and going concern
value associated with the Stations.
(j) Other Assets. All other assets of Sellers relating to
the business and operations of the Station not expressly excluded in Section 1.2
hereof.
1.2 Excluded Assets. There shall be excluded from the License Assets
relating to any Station and retained by Sellers, to the extent in existence on
the Option Closing Date for such Station, the following assets (the "Excluded
Assets"):
(a) Cash. All cash, cash equivalents and cash items of any
kind whatsoever, certificates of deposit, money market instruments, bank
balances and rights in and to bank accounts, Treasury bills and marketable
securities and other securities of either Seller.
(b) Personal Property Disposed Of. All tangible personal
property disposed of or consumed in the ordinary course of the business of any
Station between the date of this Agreement and the Closing relating to such
Station.
(c) Insurance, Bonds, Etc. All contracts of insurance and
all insurance plans and the assets thereof and all bonds, letters of credit or
similar items and any cash surrender value in regard thereto.
(d) Claims. Any and all claims of Sellers with respect to
transactions occurring prior to the occurrence of the last Option Closing Date
hereunder, including, without limitation, rights and interests of Sellers in and
to any claims for tax refunds (including, but not limited to, federal, state or
local franchise, income or other taxes) and all causes of action and claims of
Sellers under contracts and with respect to other transactions with respect to
events occurring prior to such last Option Closing Date and all claims for other
refunds of monies paid to any governmental agency and all claims for copyright
royalties for broadcast prior to the Option Closing Date.
(e) Pension Assets, Etc. Except as otherwise provided under
Section 10.1, pension, profit sharing, retirement, bonus, stock purchase,
savings plans and trusts, 401(k) plans, health insurance plans (including any
insurance contracts or policies related thereto), and the assets thereof and any
rights thereto, and all other plans, agreements or understandings to provide
employee benefits of any kind for employees of Sellers.
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(f) Certain Contracts. The agreements listed on Schedule
1.2(f) hereof (the "Excluded Contracts").
(g) Certain Books and Records. Sellers' partnership records
and other books and records that pertain to internal partnership matters of
Sellers and Sellers' account books of original entry with respect to any
Station, and all books, records, accounts, checks, payment records, tax records
(including payroll, unemployment, real estate and other tax records) and other
similar books, records and information of Sellers relating to Sellers' operation
of the business of each Station prior to the Closing relating to such Station,
with the proviso that Option Holder shall be allowed to maintain copies of all
such records relating to the Stations or the License Assets and/or upon a
written request for same shall be allowed further access to all excluded records
to the extent retained by Sellers at all reasonable times during the term of
this Agreement for a period of the (3) years after the Option Closing Date
relating thereto.
(h) Certain Prepaid Expenses. The prepaid expenses of
Sellers with respect to items that are not subject to adjustment under Section
2.5.
(i) Interests in Certain Subsidiaries. All of Sellers'
interests in the subsidiaries described in Schedule 1.2(i).
(j) River City Name. All rights to and goodwill in the name
"River City Broadcasting" and any logo, variation or derivation thereof.
1.3 Liabilities. (a) Liens. For each Station, the License Assets used
or held for use by Sellers with respect to such Station shall be sold and
conveyed to Option Holder, as of the Option Closing Date for such Station, free
and clear of all liens, security interests and encumbrances except (i) all
matters of record including, without limitation, those matters disclosed on
Schedule 1.3 hereto as "continuing" and, including, without limitation, the
rights of lessors with respect to any leasehold interests in real property or
operating leases for personal property; (ii)(1) liens or encumbrances on the
Real Property, Real Property Improvements, Leasehold Interests currently of
record; and (2) other liens or encumbrances on the Real Property, Real Property
Improvements and Leasehold Interests included in the License Assets that with
respect to (ii)(2) hereof do not materially affect the value or the current or
continued use and enjoyment (to the extent such continued use and enjoyment
conforms with current use and enjoyment) thereof in the operation of the
Stations; (iii) liens for taxes not yet due and payable;
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and (iv) the Assumed Liabilities (as hereinafter defined) and "Assumed
Liabilities" as defined in the Asset Purchase Agreement (all of the foregoing in
clauses (i) through (iv) are sometimes collectively referred to herein
collectively as "Permitted Encumbrances" but shall be deemed to exclude any
judgment liens, mortgages, capital leases or security interests or trust
arrangements providing for similar effect (including, without limitation,
purchase money mortgages and purchase money security interests granted by
Sellers in favor of any third party securing obligations for borrowed money)).
(b) Assumption of Liabilities. (i) Option Holder agrees that, on the
Option Closing Date relating to any Station, Option Holder shall assume,
undertake and agree to pay, satisfy, perform, discharge and be liable for, with
respect to such Station, and Sellers shall not thereafter be liable for (1) any
liabilities and obligations of Sellers that Option Holder has not previously
assumed and as the same shall exist on the Option Closing Date that arise on or
after the Option Closing Date, including all such liabilities and obligations
arising out of and related to the ownership and operation of such Station that
Option Holder has not previously assumed, including the License Assets
(including under the contracts assigned pursuant to Sections 1.1.A(c) and
1.1.A(d) with respect to such Station and any contracts that are entered into
after the date hereof with respect to such Station and those liabilities and
obligations referred to in Section 10.1 hereof); (2) any liability or obligation
arising out of the business or operations of any Station or any of the License
Assets, arising on or after the Option Closing Date for such Station; (3) any
Assumed Liabilities, including under any contracts assumed by Option Holder
hereunder, with respect to such Group I Station; (4) any other liabilities or
obligations incurred or assumed by Option Holder with respect to any of the
License Assets with respect to such Station; (5) any liability or obligation to
any Station Employee for such Station; and (6) any duty, obligation or liability
relating to any pension, 401(k) or other similar plan, agreement or arrangement
provided by Option Holder to any Station Employee for such Station.
To the extent, if any, any Seller makes a payment to Option Holder as a
result of any adjustment pursuant to Section 2.5 hereof, Option Holder shall
then assume and be obligated to pay such obligations and liabilities for which
such adjustment was made pursuant to Section 2.5.
(c) Consents to Contracts. Option Holder agrees that on the
Option Closing Date for such Station, Option Holder will assume the contracts
included in the License Assets relating to
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such Group I Station (together with any Consent Contracts, as defined in and
pursuant to Section 1.3 of the Asset Purchase Agreement), regardless of whether
consent has been obtained in connection therewith. The liabilities and
obligations in connection with all such contracts shall also constitute "Assumed
Liabilities" for purposes of this Agreement.
1.4 Option Exercise. In order to exercise an Option, Option Holder must
deliver to Sellers written notice (an "Exercise Notice") of Option Holder's
intention to so exercise such Option and designating whether all or any one of
the Group I Options is being exercised (and designating which Stations are to be
acquired thereunder). The date upon which any Exercise Notice is given with
respect to an Option shall be referred to as the "Exercise Date" for such
Option. Option Holder may withdraw any Exercise Notice at any time prior to the
related Option Closing Date by written notice to that effect to Sellers. Upon
withdrawal of any Exercise Notice, Option Holder shall reimburse Sellers for all
reasonable out-of-pocket expenses, including, without limitation, reasonable
attorneys' fees, incurred by Sellers in connection with its compliance with
Section 5.8(a) and Section 5.8(b) with respect to such Exercise Notice. Nothing
contained in this Section 1.4 is intended to prohibit the Option Holder from
subsequently exercising an Option during the Exercise Period defined in Section
1.5 hereof after any such withdrawal nor shall any withdrawal of any Exercise
Notice extend the terms of the Option or affect the payments referred to in
Section 1.5 below. The Group I Options may be exercised concurrently in one step
or separately in two or more steps with respect to the Group I Stations.
1.5 Terms of Option. Option Holder shall have the right to exercise the
Group I Options from the date hereof to and including April 10, 2006 (the
"Exercise Period"). Upon the failure of Option Holder to deliver the Exercise
Notice for any unexercised Group I Option during the Exercise Period as provided
herein, such Group I Option shall expire. Notwithstanding anything to the
contrary herein, the Closing on an Option may take place after the expiration of
the Exercise Period so long as Option Holder has (i) delivered the Exercise
Notice for such Option to Sellers in accordance with Section 1.4 prior to the
expiration of the then current Exercise Period, but in no event shall the final
Closing of any Group I Option take place later than April 10, 2008.
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ARTICLE 2
---------
PAYMENTS AND CLOSING
--------------------
2.1 Grant Price and Option Closing Price.
2.1.A Payment for Option Grant. In consideration of Sellers' grant
of the Options, Option Holder shall pay to Sellers Two Hundred Thirty-Two
Thousand Dollars ($232,000) (the "Group I Option Grant Price" or the "Option
Grant Price"), which shall be allocated among the Stations in accordance with
Schedule 2.1.A. The Group I Option Grant Price shall be allocated between the
Sellers as determined by Seller and paid by Option Holder to Sellers by wire
transfer of immediately available funds to such bank account(s) as Sellers may
designate on or prior to the Option Grant Date.
2.1.B Payment Upon Option Closing and Option Extension Fees.
(a) In consideration of Sellers' performance of this Agreement
and the transfer, assignment and delivery of the License Assets of the Group I
Stations, Option Holder will pay to Sellers (as set forth in the next sentence)
with respect to each Group I Station the amount allocable to such Group I
Station in accordance with Schedule 2.1.B(a) (collectively, the "Group I Option
Closing Price" or the "Option Closing Price") on or before the Columbus Option
Payment Date (which term when used herein shall have the meaning assigned to
such term in the Columbus Option Agreement). If on the date of payment of a
Group I Option Closing Price, there is an outstanding balance due from Sellers
under that certain Credit Agreement dated as of May 31, 1996 by and among the
Sellers, The Chase Manhattan Bank, N.A., as agent and other lenders thereunder
(as the same may be amended, modified or supplemented and including any
successor credit agreement or similar document evidencing any refinancing or
refunding of obligations under such Credit Agreement, collectively, the "RCB
Credit Agreement") (such outstanding balance, the "Unpaid Amount"), Option
Holder shall pay for the benefit of Sellers, directly to the lenders under the
Credit Agreement (the "Lenders"), an amount equal to the lesser of (i) the
Unpaid Amount, and (ii) an amount equal to the product of (A) the excess of one
(1) over the Highest Capital Tax Rate (as defined herein), and (B) the Group I
Option Closing Price. The "Highest Capital Tax Rate" means the greater of (a)
the combined marginal federal, state, and local income tax rate applicable to
the capital gains of an individual residing in New York City as of the end of
the fiscal year in which Closing of the Group I Option occurs, or (b) the
combined marginal federal, state, and
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local income tax rate applicable to the capital gains of a corporation located
in New York City as of the end of the fiscal year in which Closing of the Group
I Option occurs. At least three (3) business days prior to payment hereunder
Option Holder shall give Sellers notice of the date on which Option Holder is
making a payment, and at least one (1) business day prior to the payment of the
Group I Option Closing Price, Sellers will provide to Option Holder a
certificate setting forth whether there is any Unpaid Amount, and, if so,
Sellers' calculation of the amount of the Group I Option Closing Price (which
shall be made in good faith and shall be conclusive absent manifest error) that
should be paid to Lender in connection therewith. Any portion of the Group I
Option Closing Price not paid directly to the Lender shall be paid directly to
Sellers.
Option Holder shall pay (or be deemed to have paid) the Group I Option
Closing Price as follows:
(i) With respect to a Group I Option the Closing of
which occurs prior to the Columbus Option Payment Date (as defined in the
Columbus Option Agreement), Option Holder shall pay the Option Closing Price for
such Group I Option at any time on or prior to the Columbus Option Payment Date;
and
(ii) With respect to a Group I Option the Closing of
which does not occur on or prior to the Columbus Option Payment Date:
(A) if such Columbus Option Payment Date is
the date of the Closing of the Columbus Option, Option Holder shall pay the
Option Closing Price for such Group I Option on the Columbus Option Payment
Date;
(B) if such Columbus Option Payment Date is
the date described in Section 2.1.B(a)(ii) of the Columbus Option Agreement,
Option Holder shall be deemed to have paid the Option Closing Price for such
Group I Option on such Columbus Option Payment Date; and
(C) if such Columbus Option Payment Date is
the date described in Section 2.1.B(a)(iii) of the Columbus Option Agreement,
Option Holder shall be deemed to have paid the Option Closing Price for such
Group I Option on such Columbus Option Payment Date.
As used herein, at any time the "Group I Unpaid Options" shall mean:
(i) any Group I Option the Closing of which has occurred and with respect to
which Option Holder has not yet paid
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in full the Option Closing Price relating thereto, and (ii) any Group I Option
the Closing of which has not occurred.
(b) Until the Columbus Option Payment Date, Option Holder shall be
required to pay to Sellers, on December 31, 1996, and on each March 31, June 30,
September 30 and December 31 thereafter and on the Columbus Option Payment Date,
an extension fee with respect to each Group I Unpaid Option (each, an "Option
Extension Fee" and collectively, the "Option Extension Fees"). The Option
Extension Fees shall accrue on each Group I Unpaid Option on the basis of a
365-day year based on the actual number of days elapsed in the period during
which the Option Extension Fees accrue. The Option Extension Fees shall be paid
as follows:
(i) on December 31, 1996 (or the Columbus Option Payment
Date, if earlier), Option Holder shall pay to Sellers an Option Extension Fee
with respect to each Group I Unpaid Option in an amount equal to (A) the product
of (Y) eight percent (8%) and (Z) the amount of the Option Closing Price
attributable to such Unpaid Option minus, in the case of a Group I Unpaid Option
that has been assigned pursuant to Section 11.4 hereof, the Option Assignment
Price for such Group I Unpaid Option, multiplied by (B) a fraction, the
numerator of which is the number of days elapsed from the Option Grant Date to
December 31, 1996 (or the Columbus Option Payment Date, if earlier) and the
denominator of which is 365;
(ii) thereafter, on each March 31, June 30, September 30 and
December 31, and on the Columbus Option Payment Date, Option Holder shall pay to
Sellers an Option Extension Fee calculated as follows:
(A) with respect to each Group I Unpaid
Option, for the period beginning on January 1, 1997 and ending on the first
anniversary of the Option Grant Date, an amount equal to (A) the product of (Y)
eight percent (8%) and (Z) the amount of the Option Closing Price attributable
to such Group I Unpaid Option minus, in the case of a Group I Unpaid Option that
has been assigned pursuant to Section 11.4 hereof, the Option Assignment Price
for such Group I Unpaid Option, multiplied by (B) a fraction, the numerator of
which is equal to the number of days elapsed since the due date of the previous
payment of an Option Extension Fee and the denominator of which is 365;
(B) with respect to each Group I Unpaid
Option, for the period beginning on the first day after the first anniversary of
the Option Grant Date and ending on the second anniversary of the Option Grant
Date, an amount equal to (A) the product of (Y) fifteen percent (15%) and (Z)
the amount of the
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Option Closing Price attributable to such Group I Unpaid Option minus, in the
case of a Group I Unpaid Option that has been assigned pursuant to Section 11.4
hereof, the Option Assignment Price for such Group I Unpaid Option, multiplied
by (B) a fraction, the numerator of which is equal to the number of days elapsed
since the later of (I) the due date of the previous payment of an Option
Extension Fee and (II) the first anniversary of the Option Grant Date, and the
denominator of which is 365; and
(C) with respect to each Group I Unpaid
Option, for the period beginning on the first day after the second anniversary
of the Option Grant Date and ending on the Columbus Option Payment Date, an
amount equal to (A) the product of (Y) twenty-five percent (25%) and (Z) the
amount of the Option Closing Price attributable to such Group I Unpaid Option
minus, in the case of a Group I Unpaid Option that has been assigned pursuant to
Section 11.4 hereof, the Option Assignment Price for such Group I Unpaid Option,
multiplied by (B) a fraction, the numerator of which is equal to the number of
days elapsed since the later of (I) the due date of the previous payment of an
Option Extension Fee and (II) the second anniversary of the Option Grant Date,
and the denominator of which is 365.
(c) The Option Holder shall assume the Assumed Liabilities and other
obligations and liabilities to be assumed by Option Holder hereunder with
respect to a Group I Station on the Option Closing Date for such Station.
(d) Notwithstanding any other provision contained herein, except and
subject to Section 11.1.B, (i) the Group I Options shall expire on April 10,
2006 and (ii) notwithstanding the expiration or termination of a Group I Option,
such terminated Group I Option shall continue to be a Group I Unpaid Option, and
Option Holder shall continue to be liable for the payment of the Option Closing
Price and Extension Fees attributable to such terminated Option pursuant to this
Section 2.1.B until the Columbus Option Payment Date (iii) it is understood and
agreed by Option Holder that in no event shall any Option Extension Fee be
refundable to Option Holder hereunder; and (iv) if the Columbus Option is
terminated, Option Holder shall continue to pay the Option Extension Fees
required by Section 2.1.B until Option Holder pays, or is deemed to have paid,
the Group I Option Closing Price on the Columbus Option Payment Date.
(e) The Option Closing Price payable for each Station and Extension
Fees attributable to such Station shall be allocated between the Sellers in such
manner as determined by the
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Sellers and shall be paid by Option Holder to Sellers by wire transfer of
immediately available federal funds in United States dollars to such bank
account(s) as Sellers may designate; provided, however, that payments of One
Hundred Dollars ($100.00) or less may be made by check.
2.2 Option Grant and Closing.
(a) Option Grant. The grant of the Group I Options (the "Option
Grant") shall become effective on the Option Grant Date upon the execution of
this Agreement by all parties and the receipt of the Option Grant Price referred
to in Section 2.1(a)(i).
(b) Closing. The closing of the purchase and sale with respect to
a Group I Station upon the exercise of the Group I Option relating to such
Station (a "Closing") shall be held in the offices of Dow, Lohnes & Albertson,
1200 New Hampshire Avenue, N.W., Suite 800, Washington, D.C. 20036, at 10:00
a.m., local time, on a regular business day specified by Option Holder by
written notice to Sellers not less than twenty (20) business days in advance of
such specified business day, or at such other place and/or such other day as
Sellers and Option Holder may agree in writing, provided that, in no event shall
any Closing take place after April 10, 2008 (hereinafter referred to with
respect to such Option as a "Group I Option Closing Date" or an "Option Closing
Date").
2.3 Deliveries at Option Grant.
(a) Deliveries by Sellers. On the Option Grant Date, Sellers have
delivered to Option Holder such customary documentation reasonably satisfactory
to Option Holder and its counsel in order to effect the transaction contemplated
by this Agreement, including, without limitation, the following:
(i) a certified copy of the resolutions or proceedings of
Sellers authorizing Sellers' consummation of the transactions contemplated by
this Agreement;
(ii) a certificate as to the existence and good standing of
RCB issued by the Secretary of State of Delaware not more than ten (10) days
before this Option Grant Date, certifying as to the incorporation and/or
organization of RCB in Delaware and, certificates issued by an appropriate
governmental authority of RCB to do business in the jurisdictions listed in
Schedule 3.1, to the extent such certificates are available, dated not more than
ten (10) days before the Option Grant Date;
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(iii) a receipt for the Option Grant Price;
(iv) the opinion of Sellers' counsel in the form attached as
Exhibit 8.3 to the Asset Purchase Agreement, dated as of this Option Grant Date;
(v) certificates of insurance showing Option Holder named as
additional insured as contemplated in Section 5.1; and
(vi) such other documents as Option Holder may reasonably
request.
(b) Deliveries by Option Holder. On the Option Grant Date, Option
Holder have delivered to Sellers the Option Grant Price and such instruments and
other customary documentation reasonably satisfactory to Sellers and their
counsel in order to effect the transactions contemplated by this Agreement,
including, without limitation, the following:
(i) a certified copy of resolutions or proceedings of Option
Holder authorizing the consummation of the transactions contemplated by this
Agreement;
(ii) a certificate issued by the Maryland Department of
Assessments and Taxation dated not more than ten (10) days before this Option
Grant Date certifying as to the incorporation and good standing and/or
qualification of Option Holder in Maryland and, to the extent available, a
certificate of the appropriate governmental authorities as to the qualification
of Option Holder, or an appropriate wholly-owned operating subsidiary of Option
Holder, to transact business in each jurisdiction in which the Stations
presently transact business from the Secretary of State or analogous entity of
each such jurisdiction, dated not more than ten (10) days before the Option
Grant Date;
(iii) opinions of Option Holder's counsel and special
counsel in the forms attached as Exhibits 7.3(a) and 7.3(b), respectively, to
the Asset Purchase Agreement, each dated as of this Option Grant Date;
(iv) certificates of insurance contemplated in Section 6.5;
and
(v) such further documents as Sellers may reasonably
request.
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2.4 Deliveries at Closing. All actions at each Closing shall be deemed
to occur simultaneously, and no document or payment shall be deemed to be
delivered or made until all documents and payments are delivered or made to the
reasonable satisfaction of Option Holder, Sellers and their respective counsel.
(a) Deliveries by Sellers.
(i) At each Closing, Sellers shall deliver to Option Holder
such instruments of conveyance and other customary documentation as shall in
form and substance be reasonably satisfactory to Option Holder and its counsel,
including, without limitation, the following:
(a) one or more bills of sale conveying the personal
property and all leases, contracts, and other intangible assets included in the
License Assets for the Station that is the subject of such Closing;
(b) one or more assignments conveying the FCC
Authorizations included in the License Assets for the Station that is the
subject of such Closing;
(c) any mortgage discharges or releases of liens that
are necessary in order to transfer (i) the License Assets for the Station that
is the subject of such Closing as contemplated by Section 1.3;
(d) a receipt for the Option Closing Price for the
Station that is the subject of such Closing and for the Extension Fee applicable
to such Group I Option that has accrued since the due date of the previous
payment of Option Extension Fees for such Option (unless, with respect to the
Closing of a Group I Option prior to the Columbus Option Closing Date, Option
Holder defers the payment of such Option Closing Price until the Columbus Option
Closing Date);
(e) all consents received by Sellers through the
Option Closing Date to the assignment to or assumption by Option Holder of
licenses, contracts and leases included in the License Assets for the Station
that is the subject of such Closing;
(f) the Terminations as required by Section 8.6
hereof;
(g) documents of conveyance evidencing transfer of
the Real Property included in the License Assets for the Station that is the
subject of such Closing;
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(h) in the case of the Closing of the Twin Peaks
Equity Interests, a stock certificate of Sandia representing the Sandia Stock
(together with a blank stock power for the Sandia Stock);
(i) to the extent (1) such assets were not conveyed
under the Asset Purchase Agreement, (2) made available by NewVenco, Inc. and
Television Alliance Group, Inc. and (3) consent is obtained to the transfer
thereof, (a) all stock certificates of NewVenco, Inc. and Television Alliance
Group, Inc. representing all of RCB's interest in the Other Assets (as such term
is defined in the Asset Purchase Agreement) (together with stock powers endorsed
in blank for such stock certificates of NewVenco, Inc. and Television Alliance
Group, Inc., respectively) or (b) a stock certificate of NewVenco, Inc. and
Television Alliance Group, Inc. representing Buyer's interest in the Other
Assets;
(j) to the extent (1) such assets were not conveyed
under the Asset Purchase Agreement and (2) consent is obtained to the transfer
thereof, a stock certificate of Transtower, Inc. representing all of Seller's
interest in Transtower, Inc. (together with a stock power endorsed in blank for
such stock of Transtower, Inc.); and
(k) the list of Qualified Beneficiaries entitled to
Continuation Coverage as of such Closing Date, as contemplated under Section
10.1(b).
(ii) At each Closing, and upon the written request of Option
Holder at least ten (10) business days prior to such Closing, Sellers shall
deliver to Option Holder, to the extent requested by Option Holder, the
following:
(a) a certified copy of the resolutions or
proceedings of each Seller authorizing the transactions contemplated at such
Closing by this Agreement;
(b) a certificate of Sellers as required by Section
8.1(c) hereof;
(c) the opinion of counsel required by Section 8.3
hereof;
(d) a certificate as to the existence and good
standing of RCB issued by the Secretary of State of the State of Delaware dated
not more than ten (10) days before the Option Closing Date and a certificate of
the appropriate governmental authorities as to RCB's qualification to transact
business in
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Delaware and, certificates issued by the appropriate governmental authority of
the jurisdiction in which the Station that is the subject of such Closing to the
extent RCB then transacts business in such jurisdiction and to the extent such
certificates are available, dated not more than ten (10) days before the Option
Closing Date;
(e) such other documents as Option Holder shall
reasonably request.
(b) Deliveries by Option Holder.
(i) At each Closing, Option Holder shall deliver to Sellers
and to Lender to the extent set forth in Section 2.1.B(a) above, the Group I
Option Closing Price applicable to such Closing and to Sellers such instruments
of assumption and other customary documentation as shall in form and substance
be reasonably satisfactory to Sellers and their counsel, including, without
limitation, the following:
(a) the Group I Option Closing Price for the Station
that is the subject of such Closing and the Extension Fee applicable to such
Group I Option that has accrued since the due date of the previous payment of
Option Extension Fees for such Option (unless, with respect to the Closing of a
Group I Option prior to the Columbus Option Payment Date, Option Holder defers
the payment of such Option Closing Price until the Columbus Option Payment
Date); provided that such amounts shall be delivered in the manner set forth in
Section 2.1.B hereof;
(b) an assumption of liabilities pursuant to which
Option Holder will assume the Assumed Liabilities relating to the Station that
is the subject of such Closing;
(c) the Terminations as required by Section 7.6; and
(d) in the case of the Closing of the RCB Twin Peaks
Equity Interests, a receipt for the stock certificate issued to Option Holder
representing the Sandia Stock;
(ii) At each Closing, and upon the written request of Sellers
at least ten (10) business days prior to such Closing, Option Holder shall
deliver to Sellers, to the extent requested by Sellers, the following:
(a) a certified copy of the resolutions or
proceedings of Option Holder authorizing the transactions contemplated by this
Agreement;
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(b) a certificate of Option Holder as required by
Section 7.1(c) hereof;
(c) a certificate as to the existence and good
standing of Option Holder issued by the Maryland Department of Assessments and
Taxation dated not more than ten (10) days before the Option Closing Date and a
certificate of the appropriate governmental authorities as to the qualification
of Option Holder or an appropriate wholly-owned operating subsidiary of Option
Holder to transact business in each jurisdiction in which the Station that is
the subject of such Closing to the extent RCB then transacts business in such
jurisdiction and to the extent such certificates are available from the
Secretary of State or analogous entity of such jurisdiction dated not more than
10 days before the Option Closing Date;
(d) the opinion of counsel required by Section 7.3
hereof;
(e) such other documents as Sellers shall reasonably
request.
2.5 Adjustments.
(a) Group I TBA. The parties agree to finalize any payments
due under the Group I TBA relating to the Station through 11:59 p.m. on the day
preceding the Option Closing Date for such Station (the "Adjustment Date").
(b) (i) Pre-Closing Certificate. For the purpose of finalizing
the amounts required pursuant to Section 2.5(a)(i), Sellers shall deliver to
Option Holder, and Option Holder shall deliver to Sellers, not less than five
(5) days prior to the applicable Option Closing Date, a certificate (the
"Pre-Closing Certificate"), to be signed at such Closing by an appropriate
official of such parties after due inquiry by such official, but without any
personal liability to any such official, each of which shall specify Sellers'
and Option Holder's good faith determinations of the dollar amount under Section
2.5(a)(i), including, without limitation, appropriate documentation supporting
determinations and calculations under Section 2.5(a).
(ii) Pre-Closing Dispute; Escrow. If Sellers or
Option Holder, acting in good faith, do not agree with any amount set forth in
the other parties' Pre-Closing Certificate, then on or prior to the second
business day prior to such Option Closing Date, such party (the "Disputing
Party") may deliver to the other a written report (the "Estimate Report")
setting forth in reasonable detail the Disputing Party's good faith reasonable
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estimate(s) of the amount(s) with which the Disputing Party disagrees. Any
estimated amount which is set forth in the Pre- Closing Certificate and as to
which the Disputing Party does not deliver its own estimate on or prior to such
second business day will be the "estimated amount" of the adjustments under
Section 2.5(a)(i) (the "Adjustment Amount"), on the applicable Option Closing
Date. In the case of any such estimated amount as to which the Disputing Party
delivers its own estimate, the parties will endeavor in good faith to agree
prior to the Closing on the appropriate amount of such estimate, and any amount
so agreed upon by them in writing prior to the Closing will be the "estimated
amount" of the Adjustment Amount on the applicable Option Closing Date. In the
case of any such estimated amount as to which the Disputing Party delivers its
own estimate and Sellers and Option Holder do not so agree, the estimate set
forth in the Sellers' Pre-Closing Certificate will be the "estimated amount" of
the Adjustment Amount, on the Option Closing Date, and at the Closing the
difference (if any) between the amount of the Option Closing Price that would be
determined using the amount set forth in the Sellers' Pre-Closing Certificate
(as adjusted in accordance with Section 2.5(a)(ii)) and the amount of the Option
Closing Price determined using the estimated Adjustment Amount set forth in the
Estimate Report (such amount, the "Post-Closing Estimate Fund Deposit") will be
transferred by Option Holder to Magna Trust Company, St. Louis, Missouri or such
other bank as mutually agreed to by the parties (the "Escrow Agent"), to be held
by the Escrow Agent pursuant to the Post-Closing Escrow Agreement substantially
in the form of Exhibit 2.5(b) (with such changes as the Escrow Agent may
request), and pending final determination of the disputed amount(s) in question
pursuant to this Section 2.5(b) as set forth below, as a fund in escrow (the
"Post-Closing Estimate Fund") to provide security for the payment of any
additional amount which may be payable by Option Holder or pursuant to Section
2.1.
(iii) Adjustment at Closing. At such Closing, the
Option Closing Price shall be decreased to the extent Sellers owe Option Holder
funds or increased to the extent Option Holder owes Sellers funds, based upon
the amount set forth, in the Sellers' Pre-Closing Certificate (as adjusted in
accordance with Section 2.5(a)(ii)).
(iv) Post-Closing Dispute. If any such dispute cannot
be resolved by Option Holder and Sellers or their respective independent public
accountants within one hundred and eighty (180) days after the Option Closing
Date, the disputed matters shall be referred to a mutually satisfactory
independent public accounting firm of national stature which has not been
employed by any party hereto for the two (2) years preceding the
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date of such referral; such firm to be selected by the independent public
accountants of Sellers and Option Holder. The determination of such firm shall
be conclusive and binding on each party and not subject to dispute or review.
One-half of the fees of such firm shall be paid by Sellers, and one-half shall
be paid by Option Holder.
(v) Disbursement of Post-Closing Estimate Fund. If
any funds are transferred to the Escrow Agent to be held in the Post-Closing
Estimate Fund, then any amount which becomes payable to Option Holder or Sellers
pursuant to Section 2.5(b), together with interest accrued on such amount, will
be paid to Option Holder or Sellers from the Post-Closing Estimate Fund, to the
extent of the funds therein. If no funds are transferred to the Escrow Agent to
be held in the Post-Closing Estimate Fund or the entire amount so transferred
has theretofore been paid pursuant to this paragraph of Section 2.5(b), then any
remaining amount payable to Sellers pursuant to Section 2.5(b) will be paid by
Option Holder and any remaining amount payable to Option Holder pursuant to
Section 2.5(b) will be paid by Sellers. Any amount payable by Sellers or Option
Holder pursuant to Section 2.5(b) (other than to the extent that funds are
available from the Post-Closing Estimate Escrow to pay such amount) will bear
interest at the prime or reference rate of interest announced by Chemical Bank
as in effect from time to time, from the third business day after the adjusted
Option Closing Price is determined in accordance with Section 2.5(b) through and
including the date upon which such amount and all such interest are paid in
full.
2.6 Effect of Certain Laws or Proceedings. The parties hereto
acknowledge and agree that notwithstanding anything in this Agreement or any
other documents related hereto to the contrary (including, without limitation,
any representations or warranties made by Sellers, covenants of the Sellers made
herein, any condition precedent to the obligations of Option Holder set forth in
this Agreement, or any provisions relating to indemnification to be made by
Sellers hereunder), matters relating to, in connection with or resulting or
arising from: (a) the effect, for purposes of any laws, statutes, ordinances,
rules, regulations, orders or other actions whenever promulgated or enacted,
including communications or communications-related laws, statutes, ordinances,
rules, regulations, orders or other actions, whenever promulgated or enacted,
and any licenses, permits or authorizations issued by any governmental authority
(including, without limitation, the FCC) (collectively, "Laws") or any contract
or agreement to be conveyed to or assumed, directly or indirectly, by Option
Holder pursuant hereto or under the Asset Purchase Agreement (collectively, the
"Conveyed
- 22 -
Contracts"), of (1) the transfer of the Station Assets, as defined in and
pursuant to the terms of the Asset Purchase Agreement, to Option Holder and the
transfer by Sellers of the License Assets hereunder and the Columbus Station
Assets and the License Assets (as such terms are defined in the Columbus Option
Agreement); (2) the grant by Sellers of the Options and the Columbus Option (as
defined in the Columbus Option Agreement); (3) the execution, delivery and
performance of any of the Transaction Documents; or (4) the consummation of the
other transactions contemplated hereby, by the Columbus Option Agreement or by
the Asset Purchase Agreement; (b) any conflict with, violation of, termination
of or breach or default under any Laws or Conveyed Contracts as a result of the
consummation of any of the transactions contemplated hereby, by the Columbus
Option Agreement or by the Asset Purchase Agreement (including, without
limitation, the Transaction Documents); or (c) any claims, actions, suits or
other proceedings of any nature whatsoever ("Proceedings"), by any person or
entity (including, without limitation, any governmental entity) by or before any
court, administrative agency or otherwise, alleging a conflict, violation of,
breach or default under, termination of or other inconsistency with Laws or
Conveyed Contracts as a result of the consummation of any of the transactions
contemplated hereby, by the Columbus Option Agreement or by the Asset Purchase
Agreement (including, without limitation, the Transaction Documents), shall not:
(i) cause or constitute, directly or indirectly, a breach by
either Seller of any of its representations, warranties, covenants or
agreements set forth in this Agreement or any other document related
hereto (and such representations, warranties, covenants and agreements
shall hereby be deemed to be modified appropriately to reflect and
permit the impact and existence of such Laws, Conveyed Contracts and
Proceedings and to permit any action by Seller to comply with or
attempt in good faith to comply with such Laws, Conveyed Contracts and
Proceedings);
(ii) otherwise cause or constitute, directly or indirectly, a
default or breach by Sellers under this Agreement or any other
documents related hereto;
(iii) result in the failure of any condition precedent to the
obligations of Option Holder under this Agreement or any other
document related hereto to be satisfied;
(iv) otherwise excuse Option Holder's performance of its
obligations under this Agreement or any other document related hereto;
or
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(v) give rise to any claim for indemnification or other
compensation by Option Holder or any adjustment of the Option Closing
Price;
provided that the foregoing clauses (i) through (v) shall not apply to (1) any
claim brought by a partner of Sellers alleging a violation of any Seller's
partnership agreement or any claim brought by any partner, officer, director,
agent or Affiliate of Sellers; (2) any breach by Sellers of their covenants set
forth in this Agreement; or (3) any action instituted by the Federal Trade
Commission or the Department of Justice relating to the HSR Act, in each case
which shall be governed by other applicable provisions of this Agreement.
2.7 Representations and Warranties of Sellers. The parties hereto
acknowledge and agree that notwithstanding anything in this Agreement or any
other documents related hereto to the contrary, and without expanding any
obligations of Sellers hereunder, Sellers shall have no liability hereunder (for
indemnification or otherwise) for the breach of any representation or warranty
hereunder relating to events occurring after the date hereof unless such breach
was caused by a negligent, grossly negligent or intentional wrongful action
taken by Sellers.
2.8. Effect of RCB Credit Agreement. Notwithstanding anything to the
contrary in this Agreement, including, without limitation, Article 5 hereof, to
the extent that (i) Sellers take any action that Sellers are required to take or
that Sellers deem necessary to take, or fail to take any action that Sellers are
prohibited from taking, under the terms of the RCB Credit Agreement or any
document related thereto (including the security documents related thereto) but
which in any event would cause Sellers to be in breach of, or in default under,
this Agreement or (ii) Lender takes any action under that RCB Credit Agreement
or any document related thereto (including the security documents related
thereto), the result of which would cause Sellers to be in breach of, or in
default under, this Agreement, such action or inaction shall be deemed to be
permitted hereunder; Sellers and Lender shall be permitted to take such action
or Sellers shall be permitted to not take such action, and Sellers shall have no
liability whatsoever to Option Holder in connection therewith. Option Holder and
RCB agree that notwithstanding anything to the contrary in the Cure Rights
Agreement dated as of May 31, 1996 by and among Option Holder, certain
subsidiaries of Option Holder, The Chase Manhattan Bank, N.A. and Sellers or in
the RCB Credit Agreement (and documents related thereto), none of the rights and
obligations of Option Holder hereunder shall be affected thereby.
- 24 -
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Subject to the exceptions set forth in Section 8.1(a) hereof, Sellers
represent and warrant to Option Holder as follows:
3.1 Organization. RCB is a limited partnership duly formed, validly
existing and in good standing under the law of the State of Delaware. Licensee
is a general partnership duly formed and validly existing under the laws of the
State of Missouri. Each Seller has the requisite partnership power and authority
to carry on the business of the Stations now being conducted by it, to own and
operate the License Assets owned and operated by it, and to enter into and
consummate the transactions contemplated by this Agreement. RCB is qualified to
conduct the business of the Stations now being conducted by it in each
jurisdiction listed on Schedule 3.1.
3.2 Approval/Authority. All requisite partnership actions and
proceedings necessary to be taken by or on the part of each Seller in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and necessary to make the same effective have
been, or with respect to each Closing will be, duly and validly taken. This
Agreement has been duly and validly authorized, executed and delivered by each
Seller and constitutes its valid and binding agreement, enforceable in
accordance with and subject to its terms, except as enforceability may be
limited by laws affecting the enforcement of creditors' rights or contractual
obligations generally and by the application of general principles of equity.
3.3 No Conflicts. Except as set forth on Schedule 3.3, on this Option
Grant Date (after giving effect to all approvals and consents which have been
obtained), neither the execution and delivery by Sellers of this Agreement, nor
the consummation by either Seller of the transactions contemplated hereby 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 law or regulation to which either
Seller is subject, or of RCB's agreement of limited partnership or Licensee's
agreement of general partnership, as the case may be, or any contract, agreement
or instrument that is required by the terms hereof to be listed on the Schedules
hereto to which either Seller is a party or by which either Seller is bound.
- 25 -
3.4 Brokers. Except for the fees payable to Communications Equity
Associates referenced in Section 3.14 of the Asset Purchase Agreement, there is
no broker or finder or other person or entity who would have any valid claim
against Sellers for a commission or broker's fee in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or understanding of or action taken by any Seller or any Affiliate of Seller.
3.5 FCC Authorizations. Licensee is the holder of the FCC
Authorizations relating to the Group I Stations listed in Schedule 1.1.A(a) to
this Agreement. Such FCC Authorizations constitute all of the licenses and
authorizations required under the Communications Act of 1934, as amended (the
"Communications Act") or the current rules and regulations and published
policies of the FCC for and/or used in the operation of the Stations as now
operated by Sellers. The material FCC Authorizations are in full force and
effect and will not be subject to or scheduled for renewal until the dates set
forth in Schedule 1.1.A(a). Except as set forth on Schedule 3.5, there is not
pending, or to the actual knowledge of Sellers, 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 except as set forth on
Schedule 3.5, there is not now pending, or to the actual knowledge of Sellers,
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 Sellers with respect to any of the Stations,
except to the extent that the result of such action, investigation, order,
notice or complaint would not be attributable to (i) factors affecting the
television or radio industries generally, (ii) general national, regional or
local economic or financial conditions, (iii) governmental or legislative laws,
rules or regulations, (iv) any affiliation agreement or the lack thereof or the
non-transfer to Option Holder thereof or (v) actions taken by Option Holder or
any Affiliate of Option Holder). To Sellers' actual knowledge, each Station is
operating in compliance in all material respects with the FCC Authorizations,
the Communications Act and the current rules and regulations of the FCC. For
purposes of this Agreement, "Affiliate" means with respect to a party, any
Person, directly or indirectly, controlling or controlled by such party, or any
Person under direct or indirect common control with such party (as such terms
are interpreted from time to time pursuant to the Securities Act of 1933, as
amended); "Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not
- 26 -
legal entities, and governments and agencies and political subdivisions thereof;
and "actual knowledge" with respect to Sellers means the conscious awareness of
facts of Sellers' Station general managers and the officers of the general
partner of Sellers after reasonable inquiry by such Station general managers and
such officers with respect to the matters related to herein as to which the
Sellers are stating their knowledge.
3.6 Condition of Assets. The material tangible assets included in
the License Assets are, in all material respects, in good and technically sound
operating condition to permit the owner thereof to operate the Stations (in the
manner in which the Stations are operated by the Sellers) in compliance with the
terms of the FCC Authorizations, the Communications Act and current FCC rules
and regulations.
3.7 Title.
(a) Schedule 1.1.A(c) contains a description of the material
real property leases (the "Leases") to which either Seller is a party as a
tenant (or subtenant) or landlord with respect to the License Assets as of the
date of this Agreement to be used under the Group I TBA. To the actual knowledge
of Sellers, Sellers or either of them, as the case may be, are not in material
default under any of the Leases.
(b) Except for this Option, the Permitted Encumbrances, as
set forth on Schedule 1.3 and as otherwise provided herein, Sellers have on this
Option Grant Date good, insurable and marketable (only, with respect to
insurability and marketability, as to tangible property constituting Real
Property) and indefeasible title to the tangible assets included in the License
Assets owned by them and good and marketable title to the Real Property, and all
such assets and Real Property are free and clear of all liens and encumbrances
except for Permitted Encumbrances.
(c) On the Option Grant Date, except for Permitted
Encumbrances, Sellers shall cause the FCC Authorizations to be free and clear of
all liens, security interests and encumbrances of any kind whatsoever and shall
cause the FCC Authorizations to remain free and clear of all such liens,
security interests and encumbrances from the Option Grant Date through the
Option Closing Date.
3.8 Call Letters, Trademarks, Etc. Except as set forth on Schedule
1.1.A(e), Sellers possess, and on the Option Closing Date shall possess,
adequate rights, licenses or other authority to use all call letters, trademarks
and trade names necessary to
- 27 -
conduct the business of the Stations as presently conducted by Sellers except
where the failure to so possess would not cause a material adverse change in
financial condition or business of any TV Station, individually, or the Radio
Stations, taken as a whole (provided that the foregoing shall not include any
material adverse change attributable to (i) factors affecting the television or
radio industries generally, (ii) general national, regional or local economic or
financial conditions, (iii) governmental or legislative laws, rules or
regulations, (iv) any affiliation agreement or the lack thereof or the
non-transfer to Option Holder thereof or (v) actions taken by Option Holder or
any Affiliate of Option Holder) (a "Station Material Adverse Change"). Except as
set forth on Schedule 1.1.A(e), Sellers have not received any 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. Sellers
represent and warrant that, except as set forth on Schedule 1.1.A(e) hereto,
none of the trademarks listed thereon have been registered.
3.9 Insurance. The Stations and the License Assets are, as of the
Option Grant Date, insured by Sellers against loss or damage by fire and other
hazards and risks of the character usually insured against by persons operating
similar properties and business under policies issued by insurers of recognized
responsibility.
3.10 Contracts. Schedules 1.1.A(c), 1.1.A(d) and 3.11 to this Agreement
contain a list of the following contracts as to which any Station or either
Seller with respect to any Station is a party, and which have been excluded from
transfer under the Asset Purchase Agreement, as of the Option Grant Date, other
than the Excluded Contracts:
(a) contracts evidencing time sales to advertisers or advertising
agencies that are "trade" or "barter" transactions that require the furnishing
of advertising time on a Station at any time after the Option Grant Date and
that individually involve annual payments of more than $250,000;
(b) sales agency or advertising representation contracts ending
more than one year after the date of this Agreement;
(c) employment contracts that individually involve annual base
salaries of more than $100,000;
- 28 -
(d) material licenses or agreements under which either Seller is
authorized to broadcast on any Station filmed or taped programming supplied by
others;
(e)leases of personal property which have a term, including
renewal options exercisable by any other party thereto, ending more than one
year after the date of this Agreement and which involve annual payments of more
than $50,000 or $250,000 in the aggregate;
(f) material contracts not made in the ordinary and usual course
of business; and
(g) any other contracts which are material to the business and
operation of any Station and involve annual payments of more than $100,000
individually.
Notwithstanding anything to the contrary in the foregoing, it is
understood and agreed that Sellers are not required to list contracts entered
into in the ordinary course of business for the sale or sponsorship of
advertising time on any Station for cash at such Station's prevailing rate with
not more than one year remaining in any of their terms.
3.11 Employees. Sellers have heretofore delivered to Option Holder a
list of all employees of the Sellers as of the Option Grant Date and their
respective salaries and dates of hire. Except as described on such list or on
Schedule 3.11, after giving effect to the consummation of the Asset Purchase
Agreement Closing Sellers have no written contracts of employment with any
employee. Except as described on Schedule 3.11 after giving effect to the
consummation of the Asset Purchase Agreement Closing, neither Seller is a party
to or subject to any collective bargaining agreements with respect to any
Station nor, except as described in Schedule 3.11 after giving effect to the
consummation of the Asset Purchase Agreement Closing, does either Seller have
any other contracts with any labor union or other labor organization with
respect to any Station. Except as described on Schedule 3.11 after giving effect
to the consummation of the Asset Purchase Agreement Closing, Sellers are not a
party to any pending or, to their actual knowledge, threatened labor dispute
affecting any Station that would cause a Station Material Adverse Change.
3.12 Litigation. Except as set forth on Schedule 3.12 hereto: (i)
Sellers, with respect to the Stations, have not been 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,
- 29 -
agency or instrumentality which has caused or could reasonably be expected to
cause a Station Material Adverse Change; (ii) neither Seller is a party to any
pending or, to Sellers' actual knowledge, threatened litigation affecting any of
the License Assets that would cause a Station Material Adverse Change. There are
no attachments, executions or assignments for the benefit of creditors or
voluntary or involuntary proceedings in bankruptcy pending against or
contemplated by Sellers, and to Sellers' actual knowledge, no such actions have
been threatened against Sellers or any Station or any subsidiary of Seller. On
the date hereof, except for ongoing or planned FCC rulemakings affecting the
television or radio industry generally, there is no litigation or proceeding
pending or, to Sellers' actual knowledge, threatened against or affecting
Sellers that would affect Sellers' ability to carry out the transactions
contemplated by this Agreement or restrain, enjoin, prohibit or render illegal
the consummation of the transactions contemplated by this Agreement.
3.13 Compliance with Laws. Except as set forth on Schedule 3.5,
Sellers, with respect to the Stations, are to their actual knowledge, in
compliance, except where the failure to so comply would not cause a Station
Material Adverse Change, with all applicable laws, regulations and orders, and
the present uses by Sellers of the License Assets do not, to Sellers' actual
knowledge, violate any such laws, regulations or orders, except to the extent
that any such violation would not result in a Station Material Adverse Change.
3.14 Complete Disclosure. The representations and warranties in this
Article 3 do not include any untrue statements of material fact or omit to state
a material fact required to be stated therein necessary to make the statements
not misleading in light of the circumstances under which they were made.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF OPTION HOLDER
-----------------------------------------------
Option Holder represents and warrants to Sellers as follows:
4.1 Incorporation. Option Holder is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland,
and Option Holder or an appropriate wholly-owned subsidiary of Option Holder
shall be qualified to transact business in the States of California, Illinois,
Indiana, Iowa, Louisiana, Missouri, New York, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, Texas and any other
- 30 -
state in which a Station is doing business as of the respective Option Closing
Date of the acquisition of License Assets in such jurisdiction, and each of
Option Holder has the corporate power and authority to enter into and consummate
the transactions contemplated by this Agreement.
4.2 Corporate Action. All corporate actions and proceedings necessary
to be taken by or on the part of Option Holder in connection with the execution
and delivery of this Agreement and the respective consummation of the
transactions contemplated hereby and necessary to make the same effective have
been duly and validly taken. This Agreement has been duly and validly
authorized, executed and delivered by Option Holder, and constitutes its valid
and binding agreement, enforceable in accordance with and subject to its terms
except as enforceability may be limited by laws affecting the enforcement of
creditors' rights or contractual obligations generally and by the application of
general principles of equity.
4.3 No Conflicts. Neither the execution and delivery by Option Holder
of this Agreement, nor the consummation by Option Holder of the transactions
contemplated hereby, would constitute or, with the giving of notice or the
passage of time or both, would constitute a material violation of or would
conflict with or result in any material breach of or any material default under
any of the terms, conditions or provisions of any law or regulation to which
Option Holder is subject, or the articles of incorporation or bylaws of Option
Holder, or any contract, agreement or instrument to which Option Holder is a
party or by which it is or will be bound.
4.4 Brokers. Except for the fees payable to Smith Barney Inc. as
referenced in Section 4.4 of the Asset Purchase Agreement, there is no broker or
finder or other person who would have any valid claim against any of the parties
to this Agreement for a commission or brokerage in connection with this
Agreement or the transactions contemplated hereby as a result of any agreement
or understanding of or action taken by Option Holder.
4.5 Litigation. There is no litigation, proceeding or investigation of
any nature pending or, to the best of Option Holder's actual knowledge,
threatened against or affecting Option Holder that would affect Option Holder's
ability fully to carry out the transactions contemplated by this Agreement or
which has or could reasonably expected to restrain, enjoin, prohibit or render
illegal the consummation of the transactions contemplated by this Agreement.
There are no attachments, executions or assignments for the benefit of creditors
or voluntary or involuntary proceedings in bankruptcy pending against or
- 31 -
contemplated by Option Holder, and no such actions have been threatened against
Option Holder. For purposes of this Agreement "actual knowledge" with respect to
Option Holder means the conscious awareness of facts of the officers of Option
Holder after reasonable inquiry by such officers with respect to the matters
referred to herein as to which Option Holder is stating its knowledge.
ARTICLE 5
---------
COVENANTS OF SELLERS PENDING THE CLOSING
----------------------------------------
Sellers covenant and agree, from the date hereof to and including the
Option Closing Date for a Station and thereafter where so indicated (but not
after the final Option Closing Date hereunder or the earlier termination of the
Options hereunder), that they will act as follows with respect to such Station:
5.1 Maintenance of Business until Closing. Until the Option Closing
Date applicable to a particular Station, each Seller shall, with respect to the
License Assets relating to such Station, continue to conduct its business and
operations and keep its books of account, records and files in a manner
consistent with the Group I TBA. Until the Option Closing Date applicable with
respect to the particular Station, subject to the provisions of the Group I TBA,
Sellers shall operate the Stations in all material respects in accordance with
the terms of the FCC Authorizations and in compliance in all material respects
with all applicable laws and FCC rules, regulations and published policies.
Sellers will promptly execute and file any necessary applications for the
renewal of the FCC Authorizations.
Sellers will maintain in full force and effect through the Option
Closing Date for each Station property damage, liability and other insurance
with respect to the License Assets used or held for use by Sellers with respect
to such Station consistent with Sellers' present practices as set forth in
Section 3.9, and between the Option Grant Date and the Option Closing Date with
respect to a Station, Option Holder shall be named as an additional insured as
its interests may appear on the insurance policies carried by Sellers with
respect to the License Assets in connection with such Station thereunder.
Except as consistent with the Group I TBA, nothing contained in this
Agreement shall give Option Holder any right to control the programming,
operations or any other matter relating to any Station prior to the Option
Closing Date for such Station, and Sellers shall have complete control of the
programming,
- 32 -
operations and all other matters relating to each Station up to the Option
Closing Date for such Station.
Prior to the Option Closing Date for a Station, except as set forth on
Schedule 5.1 or as otherwise may be consistent with the Group I TBA and the
third from the last paragraph of this Section 5.1, Sellers will not, without the
prior written consent of Option Holder (to the extent the following restrictions
are permitted by the FCC and all applicable law):
(a) enter into (i) any written contract of employment or any
collective bargaining agreement that will be binding on Option Holder or (ii)
permit any increases in the compensation of any of the Station's employees,
except in the case of (i) and (ii), to the extent consistent with the Group I
TBA or past practices or as required by law or existing contract, in which case
such contracts and agreements shall be assumed by Option Holder and treated as
Assumed Liabilities hereunder; provided, however, that Sellers may pay bonuses
to any of their employees so long as such bonuses do not create a binding
obligation upon Option Holder after the applicable Option Closing Date;
(b) apply to the FCC for any construction permit that would
materially restrict the Station's present operations or make any material change
in the Station's buildings or leasehold improvements;
(c) (i) create or permit any lien or encumbrance, other than
the Permitted Encumbrances, on the License Assets; or (ii) make capital
expenditures or commitments for additions to property, plant or equipment
constituting capital assets on behalf of any Station outside the ordinary course
of business or consistent with the Group I TBA; provided, however, that Seller
shall consult with Option Holder to the extent Seller seeks to make significant
capital expenditures prior to making such capital expenditures;
(d) violate, breach or default under, in any material respect,
or take or fail to take any action that (with or without notice or lapse of time
or both) would constitute a material violation or breach of, or default under,
any term or provision of any material contract or license of any Station, other
than as a result of this Agreement, the Option Agreement, the Group I TBA and
the transactions contemplated hereby and thereby;
(e) incur, purchase, cancel, prepay or otherwise provide for a
complete or partial discharge in advance of a scheduled payment date with
respect to, or waive any right of Sellers under, any liability of or owing to
Sellers in connection
- 33 -
with any Station, other than (i) in the ordinary course of business consistent
with past practice, (ii) as contemplated pursuant to this Agreement or the Group
I TBA, (iii) the pay-off of any debt of Seller on or prior to the Closing or
(iv) in an aggregate amount (when combined with amounts under Section 5.1(e)(iv)
of the Columbus Option Agreement) not to exceed $1,000,000; provided, however,
that notwithstanding the foregoing, except as otherwise contemplated under the
third from the last paragraph of this Section 5.1, Sellers will not incur or
suffer to exist any additional indebtedness (whether in connection with any
Station or otherwise, but excluding trade accounts payable (other than for
borrowed money) arising, and accrued expenses incurred, in the ordinary course
of business so long as such trade accounts payable are payable within 90 days of
the date the respective goods are delivered or the respective services are
rendered).
(f) engage with any Person in any business combination, except
as otherwise contemplated hereunder;
(g) engage in any transaction with respect to any Station with
any officer, director, or Affiliate of Sellers (or any Affiliate thereof),
either outside the ordinary course of business consistent with past practice or
other than on an arm's- length basis;
(h) enter into any contract, agreement or commitment to do or
engage in any of the foregoing;
(i) except as otherwise expressly provided for herein, sell,
lease, transfer or agree to sell, lease or transfer any Option or any License
Assets; or
(j) enter into and record any easements or restrictive
covenants that would materially adversely affect the value or the current or
continued use and enjoyment (to the extent such continued use and enjoyment
conforms with current use and enjoyment) of the property to which they relate
without the consent of Option Holder, which consent will not be unreasonably
withheld;
Notwithstanding anything in this Agreement to the contrary, Sellers
shall be entitled to (i) renew or extend the term of any contract listed on
Schedules 1.1.A(c), 1.1.A(d), 1.1.A(i)(1) or 3.11 which, by its terms, expires
or will expire prior to April 10, 2006 and, in connection therewith, agree not
to increase the amounts payable thereunder during any such renewal term except
in accordance with the applicable Station's usual practices or the Group I TBA
relating to the Station and (ii) take any action
- 34 -
specified in subsections (c), (d), (e), (f), (h) and (i) and enter into a local
management agreement in connection with the Twin Peaks Sale at the time of entry
into any agreement of sale for the New Mexico Stations or the RCB Twin Peaks
Equity Interest.
Notwithstanding anything in this Agreement to the contrary, if Option
Holder, including any assignee under the Group I TBA, has defaulted or breached
in any material respect its economic obligations or liabilities hereunder or
under the Group I TBA, prior to a sale by Sellers of the Group I Station
relating thereto as set forth below, Sellers shall give Option Holder and Option
Holder's lenders ("Option Holder's Lenders") under its then existing senior
credit facility (the name and notice information regarding which Option Holder
shall provide to Sellers) notice of the breach by Sellers, and Option Holder
shall be given fifteen (15) days from the date of receipt of such notice to cure
such breach and Option Holder's Lenders shall be given ninety (90) days from the
date of receipt of such notice to cure such breach. During such cure period,
Sellers shall be permitted to borrow an aggregate amount, which when combined
with amounts borrowed under the last paragraph of Section 5.1 of the Columbus
Option Agreement, does not exceed Three Million Dollars ($3,000,000) the
proceeds of which shall be used to continue to operate such Stations. After the
applicable cure periods with respect to such breach relating to a Group I
Station have expired without such breach having been cured within such periods,
Sellers shall, without being in violation of any of the covenants set forth
herein, and without being subject to the restrictions set forth in such
covenants, take such actions as Sellers in good faith deem necessary or
desirable in connection with the operations of such Group I Stations, including
without limitation, that Sellers may terminate the Group I TBA with respect to
such Group I Station and/or may sell the Group I Station with respect to which
Option Holder or any permitted assignee under the Group I TBA, is in breach, and
upon the sale of such Group I Station, Sellers shall, upon receipt thereof, pay
to Option Holder any amount received as payment for such Group I Station minus
(1) any non-recurring reasonable out-of-pocket costs incurred by Sellers in
connection with such sale, other than any sales commission paid by Sellers in
connection therewith, (2) any amounts owed by Option Holder to Sellers,
including, without limitation, in connection with any economic breach by Option
Holder hereunder or by Option Holder, or any permitted assignee under the Group
I TBA, and all Option Extension Fees that are due but have not yet been paid
through the date of the closing of such sale, (3) the total amount of all
federal, state and local taxes incurred by Sellers in connection with such sale
and (4) a commission based on the total amount
- 35 -
paid for such Group I Station (such total amount, the "Sale Price") using the
Standard Formula. For purposes of this Agreement, "Standard Formula" means (a)
five percent (5%) on the first one million dollars ($1,000,000.00) of the Sale
Price; (b) four percent (4%) on the next one million dollars ($1,000,000.00) of
the Sale Price; (c) three percent (3%) on the next one million dollars
($1,000,000.00) of the Sale Price; (d) two percent (2%) on the next one million
dollars ($1,000,000.00) of the Sale Price; and (e) one percent (1%) on any
excess over four million dollars ($4,000,000.00) of the Sale Price. Option
Holder's Group I Option with respect thereto shall terminate upon such sale.
Option Holder hereby appoints each Seller as its attorney-in-fact for
Option Holder with full authority in the place and stead of Option Holder and in
the name of Option Holder, in Sellers' discretion to take any action to execute
any instrument Sellers may deem necessary and advisable to accomplish such sale.
Sellers agree to act in a commercially reasonable manner in connection with the
sale of such Group I Station, and Option Holder shall cooperate with Sellers in
connection therewith. Option Holder's rights hereunder shall be subject to any
such actions as may be taken by Sellers pursuant hereto.
TO THE EXTENT SELLERS HAVE ACTED IN A COMMERCIALLY REASONABLE MANNER IN
CONNECTION WITH THE SALE OF A GROUP I STATION, NO CLAIM MAY BE MADE BY OPTION
HOLDER AGAINST SELLERS OR ITS PARTNERS, AFFILIATES, DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR
IS BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING
OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP
ESTABLISHED BY THE FOREGOING PARAGRAPH, OR ANY ACT, OMISSION OR EVENT OCCURRING
IN CONNECTION THEREWITH; AND OPTION HOLDER HEREBY WAIVES, RELEASES AND AGREES
NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND
WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
5.2 Goodwill/Compliance with Agreements. Sellers shall diligently make
all commercially reasonable efforts to preserve the License Assets and the
business organization of the Stations and preserve the goodwill of the Stations'
suppliers, customers and others having business relations with the Stations in a
manner consistent with the Group I TBA.
5.3 Reports; Access to Facilities, Files and Records. From time to time
during the Exercise Period at the request of Option Holder, Sellers shall give
or cause to be given to the officers,
- 36 -
employees, agents and representatives of Option Holder (a) access (in the
presence of any representative designated by Sellers), upon reasonable prior
notice, during normal business hours, to the License Assets and to all books and
records relating thereto, and (b) all such other information in Sellers'
possession concerning the affairs of the Stations as Option Holder may
reasonably request, provided that the foregoing does not unreasonably disrupt or
interfere with the business and operations of Sellers or the Stations.
5.4 Notice of Proceedings. Sellers will promptly notify Option Holder
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 this
Agreement or the transactions contemplated hereunder, or upon receiving any
notice from any governmental department, court, agency or commission of its
intention to institute an investigation into or to institute a suit or
proceeding to restrain or enjoin the consummation of this Agreement or such
transactions, or to nullify or render ineffective this Agreement or such
transactions if consummated.
5.5 Confidential Information. Sellers shall not use or disclose to any
third parties (except as may be necessary for the consummation of the
transactions contemplated hereby, or as required by law, including, without
limitation, in connection with legal proceedings relating to this Agreement and
the transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to Option
Holder, including delivery of a copy of the subpoena or request, if applicable)
this Agreement or any information received from Option Holder or its agents in
the course of investigating, negotiating and performing the transactions
contemplated by this Agreement; provided, however, that Sellers may disclose
such information to Sellers' respective officers, partners, employees, lenders,
advisors, attorneys and accountants who need to know such information in
connection with the consummation of the transactions contemplated by the
Agreement and who are informed by Sellers of the confidential nature of such
information. Nothing shall be deemed confidential information that: (a) is known
to either Seller at the time of the disclosure of such information to such
Seller; (b) becomes publicly known or available other than as a result of
disclosure by or through either Seller; (c) is rightfully received by Sellers
from a third party; or (d) is independently developed by either Seller. In the
event this Agreement is terminated and the transactions contemplated hereby
abandoned, Sellers will return to the Option Holder all copies of documents,
work papers and
- 37 -
other written confidential material obtained by Sellers in connection with the
transactions contemplated hereby.
5.6 Consummation of Option Closing. Subject to the express terms and
conditions of this Agreement, and without expanding such terms and conditions,
Sellers shall diligently make and cooperate with Option Holder in making all
commercially reasonable efforts in connection with any steps to be taken as part
of its respective obligations under this Agreement, and each of Sellers shall
diligently make and cooperate with Option Holder in making all commercially
reasonable efforts to fulfill and perform all conditions and obligations on
their part to be fulfilled and performed under this Agreement and to cause all
terms and conditions set forth herein to be fulfilled and to cause the
transactions contemplated by this Agreement in connection with the Option
Exercise and Closing to be fully carried out.
5.7 Notice of Certain Developments. Sellers shall give prompt written
notice to Option Holder if prior to the Option Closing Date: (a) License Assets
shall have suffered damage on account of fire, explosion or other cause of any
nature that is sufficient to prevent operation of any Station in any material
respect for more than twenty-four (24) consecutive hours, or (b) the regular
broadcast transmission of any Station in the normal and usual manner in which it
heretofore has been operating is interrupted in any material manner for a period
of more than twenty-four (24) consecutive hours.
5.8 Covenants of Sellers After Option Exercise. Sellers covenant and
agree that, after their receipt of any Exercise Notice for the exercise of an
Option relating to a particular Station, until either the Closing for such
exercised Option occurs or such Exercise Notice is withdrawn pursuant to Section
1.4:
(a) Application for Commission Consent and Defense of Claims.
Within ten (10) days after receipt by Sellers of such Exercise Notice with
respect to a Station, Sellers will complete Sellers' portion of applications to
the FCC requesting its written consent to the assignment of the FCC
Authorizations for such Station (and any extension or renewals thereof and any
necessary waiver required under the terms of 47 C.F.R. ss. 73.3555(b) with
respect thereto) to Option Holder, and upon receipt of Option Holder's portions
of such applications, will promptly file such applications with the FCC jointly
with Option Holder. Sellers will diligently take and cooperate in the taking of
all commercially reasonable steps that are necessary, proper or desirable to
expedite the preparation of such applications and
- 38 -
their prosecution to a grant. Sellers will promptly provide Option Holder with a
copy of any pleading, order or other document served on them relating to such
applications. Sellers shall take, and cooperate with Option Holder in taking,
all commercially reasonable steps to oppose any petition for reconsideration,
application for review, or request for judicial review of, or any other protest
filed with respect to, the issuance of the FCC consents contemplated by this
Section 5.8(a).
(b) Consents. Sellers will diligently make and cooperate with
Option Holder in making all commercially reasonable efforts (without being
required to make any payment) to obtain or cause to be obtained prior to the
Option Closing Date consents to the assignment to or assumption by Option Holder
of all material licenses, leases and other contracts included in the License
Assets used or held for use by Sellers with respect to such Station that require
the consent of any third party by reason of the transactions provided for in
this Agreement.
(c) Consummation of Agreement. Subject to the terms and conditions
of this Agreement, and without expanding such terms and conditions, Sellers
shall diligently make and cooperate with Option Holder in making all
commercially reasonable efforts to fulfill and perform all conditions and
obligations on their part to be fulfilled and performed under this Agreement and
to cause the transactions contemplated by this Agreement to be fully carried
out.
5.9 Hart-Scott-Rodino. To the extent required by law, Sellers, as
promptly as practicable, shall prepare and jointly file with Option Holder all
documents with the Federal Trade Commission and the United States Department of
Justice, as are required to comply with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), and shall promptly furnish all
materials thereafter requested by any of the regulatory agencies having
jurisdiction over such filings. In such event, the parties shall cooperate fully
and shall use their commercially reasonable efforts to expedite compliance with
the HSR Act. Any filing fees (including by Sellers and Option Holder with
respect to the transaction) under the HSR Act shall be borne one-half (1/2) by
Sellers and one-half (1/2) by Option Holder.
5.10 Compliance with Group I TBA. For so long as the Group I TBA is in
effect with respect to a Station, Sellers shall comply in all material respects
with all terms, provisions, covenants and agreements to be complied with by
Sellers under the Group I TBA with respect to such Station.
- 39 -
5.11 New Mexico Stations. To the extent RCB sells the New Mexico
Stations or the RCB Twin Peaks Equity Interest after the Option Grant Date and
prior to the purchase by Option Holder of the RCB Twin Peaks Equity Interest
hereunder, RCB shall pay to Option Holder the amount paid to RCB in connection
therewith, minus (1) the non-recurring out-of-pocket costs incurred by RCB in
respect of consummation of such sale, (2) the total amount of all federal, state
and local taxes (other than income taxes) incurred in connection with such sale,
(3) the total amount of all federal, state and local income taxes incurred by
Sandia in connection with such sale, and (4) the Option Closing Price for the
RCB Twin Peaks Equity Interest. In connection with any such sale, RCB shall
provide a certificate to Option Holder as to the amount of the adjustment or the
amount to be paid by RCB hereunder together with appropriate documentation
supporting RCB's calculations.
ARTICLE 6
---------
COVENANTS OF OPTION HOLDER PENDING THE CLOSING
----------------------------------------------
Option Holder covenants and agrees that from and after the date hereof
through and including the final Option Closing Date that it will act as follows
with respect to each Station:
6.1 Confidential Information. Option Holder shall not use or disclose
to third parties (except as may be necessary for the consummation of the
transactions contemplated hereby, or as required by law, including, without
limitation, in connection with legal proceedings relating to this Agreement and
the transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to Sellers,
including delivery of a copy of the subpoena or request, if applicable) this
Agreement or any information (including, without limitation, financial
information and information regarding program contracts and revenue) received
from Sellers or their agents in the course of investigating, negotiating and
performing the transactions contemplated by this Agreement; provided, however,
that the Option Holder may disclose such information to Option Holder's
officers, directors, employees, lenders, advisors, attorneys and accountants who
need to know such information in connection with the consummation of the
transactions contemplated by this Agreement and who are informed by Option
Holder of the confidential nature of such information. Nothing shall be deemed
to be confidential information that: (a) is known to Option Holder at the time
of its disclosure to it; (b) becomes publicly known or available
- 40 -
other than as a result of disclosure by or through Option Holder; (c) is
rightfully received by Option Holder from a third party; or (d) is independently
developed by Option Holder. In the event this Agreement is terminated and the
purchase and sale contemplated hereby abandoned, Option Holder will return to
the appropriate Seller all copies of documents, work papers and other written
confidential material obtained by Option Holder in connection with the
transactions contemplated hereby.
6.2 Consummation of Agreement. Subject to the provisions of Section
11.1 of this Agreement, and subject to the express terms and conditions of this
Agreement, and without expanding such terms and conditions, Option Holder shall
diligently make and cooperate with Sellers in making all commercially reasonable
efforts in connection with any steps to be taken as part of their obligations
under this Agreement, and Option Holder shall diligently make and cooperate with
Sellers in making all commercially 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 transactions contemplated by this Agreement to be
fully carried out. Option Holder agrees to diligently cooperate with Sellers in
connection with obtaining consents to the assignment to, or assumption by,
Option Holder of licenses, leases and other contracts included in the License
Assets, and to execute such assumption instruments as may be required in
connection with obtaining such consents on monetary terms no less favorable to
Option Holder than those Sellers under such licenses, leases and other contracts
on the date of such assumption.
6.3 Notice of Proceedings. Option Holder will promptly notify Sellers
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 this
Agreement or the transactions contemplated hereunder, 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 this Agreement or such transactions,
or to nullify or render ineffective this Agreement or such transactions if
consummated.
6.4 Covenants of Option Holder After Option Exercise. Option Holder
covenants and agrees that after Option Holder gives any Exercise Notice for the
exercise of an Option relating to a particular Station, and until either the
Closing occurs or such Exercise Notice is withdrawn or deemed to be withdrawn
pursuant to Section 1.4:
- 41 -
(a) Application For Commission Consent. Within ten (10) days after
delivery to Sellers of such Exercise Notice with respect to a Station, Option
Holder will complete Option Holder's portion of applications to the FCC
requesting its written consent to the assignment of the FCC Authorizations for
such Station (and any extension or renewals thereof and any necessary waiver
required under the terms of 47 C.F.R. ss. 73.3555(b) with respect thereto) to
Option Holder, and upon receipt of Sellers' portion of such applications
pursuant to Section 5.8(a), hereof will promptly file such applications with the
FCC jointly with Sellers. Option Holder will diligently take and cooperate in
the taking of all commercially reasonable steps that are necessary, proper or
desirable to expedite the preparation of all such applications and their
prosecution to a grant. Option Holder will promptly provide Sellers with the
copy of any pleading, order or other documents served on Option Holder relating
to such applications. Option Holder shall take, and cooperate with Sellers in
taking, all commercially reasonable steps to oppose any petition for
reconsideration, application for review, or request for judicial review of, or
any other protest filed with respect to, the FCC consents contemplated by this
Section 6.4(a).
(b) Consents for Closing. Option Holder will diligently make and
cooperate in making all reasonable efforts jointly with Sellers to obtain or
cause to be obtained for the Closing prior to the Option Closing Date all
necessary consents relating to the License Assets used or held for use by
Sellers with respect to such Station and to execute such assumption instruments
as may be required in connection with obtaining such consents. Without
limitation of the foregoing, Option Holder covenants and agrees that it shall
provide on request, to any third party from whom such consent is sought, such
financial or other information as such third party may reasonably request in
order for such third party to grant such consent.
6.5 Insurance. On the Option Grant Date and at all times thereafter
until the Option Closing Date with respect to a Station, Option Holder shall
cause all parties currently named as "additional insured" on RCB's and
Licensee's policies (a list of which has been previously provided to Option
Holder) to be named as additional insured parties as their interests may appear,
under all insurance policies carried by Option Holder with respect to the
applicable Station.
6.6 Notice of Material Impact. Option Holder will promptly notify the
Sellers in writing of any significant developments that have, or could
reasonably be expected to have, a material adverse impact on the condition
(financial or otherwise) of the business or any material asset of Option Holder.
- 42 -
6.7 Hart-Scott-Rodino. To the extent required by law, Option Holder, as
promptly as practicable, shall prepare and jointly file with Sellers all
documents with the Federal Trade Commission and the United States Department of
Justice as are required to comply with the HSR Act, and shall promptly furnish
all materials thereafter requested by any of the regulatory agencies having
jurisdiction over such filings. In such event, the parties shall cooperate fully
and shall use their commercially reasonable efforts to expedite compliance with
the HSR Act. Any related filing fees under the HSR Act shall be paid in
accordance with Section 5.9 hereof.
6.8 Compliance with Group I TBA. For so long as the Group I TBA is in
effect with respect to a Station, Option Holder shall comply in all material
respects with all terms, provisions, covenants and agreements to be complied
with by Option Holder under the Group I TBA with respect to such Station.
ARTICLE 7
---------
CONDITIONS TO THE OBLIGATIONS OF SELLERS
----------------------------------------
In the case of a closing of a Group I Option on the Columbus Option
Closing Date, all of the conditions set forth below (other than Sections 7.1(a)
and 7.1(c)) apply with respect to the Group I Stations that are the subject of
such Group I Option; and in the case of a closing of a Group I Option other than
on the Columbus Option Closing Date, all of the conditions set forth below
(other than Section 7.1) apply with respect to all of the Group I Stations that
are the subject of such Group I Option. The obligations of Sellers to consummate
the transactions contemplated by this Agreement with respect to a duly exercised
Option from this Option Grant Date to the Option Closing Date are, at their
option, subject to the fulfillment of the following conditions prior to or at
the applicable Option Closing Date:
7.1 Representations, Warranties, Covenants.
(a) The representations and warranties of Option Holder contained
in this Agreement shall have been true and accurate in all material respects as
of the date when made and shall be true and accurate in all material respects as
of the Option Closing Date except to the extent any such representation or
warranty is expressly stated only as of a specified earlier date or dates, in
which case such representation or warranty shall be true and accurate in all
material respects as of such earlier date or dates and except to the extent
changes are permitted or contemplated pursuant to this Agreement;
- 43 -
(b) Option Holder shall have performed and complied in all material
respects with the covenants and agreements required by this Agreement and the
Group I TBA to be performed or complied with by them prior to or at the Option
Closing Date (including the delivery by Option Holder of the Option Closing
Price due with respect to the Option then being closed, the Option Closing Price
of all Unpaid Options to the extent payable hereunder, and the Extension Fees
applicable to such Option and such Unpaid Options that have accrued since the
due date of the previous payment of Option Extension Fees for such Options to
the extent payable hereunder); and
(c) If requested by Sellers in accordance with Section 2.4(b)(ii),
Option Holder shall have delivered to Sellers a certificate of an officer of
Option Holder dated as of the Option Closing Date certifying to the fulfillment
of the conditions set forth in Section 7.1.
7.2 Proceedings.
(a) As of the Option Closing Date, no action or proceeding shall
have been instituted and be pending before any court or governmental body to
materially restrain or prohibit, or to obtain material damages in respect of,
the consummation of this Agreement that may reasonably be expected to result in
a 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 Sellers of such
material damages; and as of the Option Closing Date, none of the parties to this
Agreement shall have received written notice (other than a letter of inquiry)
from any governmental body of its intention to institute any action or
proceeding to materially restrain or enjoin or nullify, or to obtain material
changes in respect of, this Agreement or the transactions contemplated hereby
that may reasonably be expected to result in a 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
the recovery against Sellers of substantial damages; provided, however, that the
foregoing (a) and (b) shall not be deemed to fall within the provisions hereof,
qualify as a condition hereunder to the extent such action or proceeding is (1)
brought or caused to be brought by (i) any partner, officer, director, agent,
Affiliate or creditor of Sellers, or any other party claiming by, through or
against Sellers that is not related to Option Holder, (ii) any third party or
agent of such party to any Contract relating to any consent required to convey
any such Contract, or (iii) any party or agent of such party, who is currently a
party to such
- 44 -
affiliation agreement with Sellers, or any Affiliate of Sellers or in any way
relating to any television or radio network affiliation agreement of any Seller,
any Affiliate of any Seller, Option Holder or any Affiliate of Option Holder; or
(2) a Proceeding referred to in Section 2.6 hereof.
7.3 Opinion of Counsel. If requested by Sellers in accordance with
Section 2.4(b)(ii), Sellers shall have received an opinion of Option Holder's
counsel dated as of the Option Closing Date in substantially the form attached
to this Agreement as Exhibit 7.3(i) and an opinion of Option Holder's special
communications counsel, dated as of the Option Closing Date in substantially the
form attached to this Agreement as Exhibit 7.3(ii).
7.4 FCC Authorization. As of the Option Closing Date, all FCC consents
and approvals contemplated by this Agreement with respect to the Station shall
have been granted.
7.5 Hart-Scott-Rodino. To the extent required by law, the waiting
period under the HSR Act shall have expired or be terminated and there shall not
be pending any action instituted by the Federal Trade Commission or the
Department of Justice under the HSR Act, and there shall not be outstanding any
order of a court restraining the transactions contemplated hereby.
7.6 Termination of Certain Agreements. The Sellers shall have received
from Option Holder the termination of (i) the Leases and Subleases (as such
terms are defined in the Asset Purchase Agreement) entered into by Option Holder
and RCB with respect to the Station and (ii) the Group I TBA as it relates to
the Station (together, the "Terminations").
7.7 Group I TBA. Option Holder or any permitted assignee shall have
paid all outstanding amounts due and owing, and performed in all material
respects all covenants and agreements to be performed by it or any permitted
assignee under the Group I TBA, on or before the Option Closing Date, including,
without limitation, the amount due in respect of any breach of its, or any
permitted assignee's, economic obligations or liabilities under the Group I TBA.
ARTICLE 8
---------
CONDITIONS TO THE OBLIGATIONS OF OPTION HOLDER
----------------------------------------------
In the case of a closing of a Group I Option, all of the conditions set
forth below apply with respect to all of the Group
- 45 -
I Stations for which such Group I Option was exercised. Subject to Section 2.6
hereof, the obligations of Option Holder to consummate the transactions
contemplated by this Agreement of a duly exercised Option are, at its option,
subject to the fulfillment of the following conditions prior to or at the
applicable Option Closing Date:
8.1 Representations, Warranties, and Covenants.
(a) The representations and warranties of Sellers contained in this
Agreement shall have been true and accurate as of the date when made and shall
be true and accurate as of the Option Closing Date, except to the extent (i) any
such representation or warranty is expressly stated only as of a specified
earlier date or dates, in which case such representation and warranty shall be
true and accurate as of such earlier date or dates except as set forth in (iii)
below of this Section 8.1(a); (ii) changes are permitted as contemplated
pursuant to this Agreement and the Group I TBA, (iii) the consequence of the
matter set forth in such representation and warranty having failed to be true
and accurate as of the date when made, on the Option Closing Date or on such
earlier specified date would not result in a material adverse change in the
financial condition or business of the Group I Stations and the Columbus Station
taken as a whole, or of the License Assets taken as a whole (provided that the
foregoing shall not include any material adverse change attributable to (v)
factors affecting the television or radio industries generally, (w) general
national, regional or local economic or financial conditions, (x) governmental
or legislative laws, rules or regulations, (y) any affiliation agreement or the
lack thereof or the non- transfer to Option Holder thereof, or (z) actions taken
by Option Holder or any Affiliate of Option Holder) (a "Material Adverse
Change").
(b) Each Seller shall have performed and complied in all respects
with covenants and agreements required by this Agreement to be performed or
complied with by it prior to or at such Option Closing Date, including the
delivery to Option Holder of the instruments conveying the License Assets that
are the subject of such Closing to Option Holder except to the extent that the
consequence of the failure of Seller to have so performed or complied would not
result in a Material Adverse Change.
(c) If requested by Option Holder in accordance with Section
2.4(a)(ii), Sellers shall have delivered to Option Holder a certificate of an
officer of the general partner of RCB and of Licensee dated the Option Closing
Date certifying to the
- 46 -
fulfillment of the conditions set forth in Sections 8.1(a) and 8.1(b).
8.2 Proceedings.
(a) As of the Option Closing Date, no action or proceeding shall
have been instituted and be pending before any court or governmental body to
materially restrain or prohibit, or to obtain material damages in respect of,
the consummation of this Agreement that may reasonably be expected to result in
a 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 Option Holder of
such material damages; and (b) as of the Option Closing Date, none of the
parties to this Agreement shall have received written notice (other than a
letter of inquiry) from any governmental body of its intention to institute any
action or proceeding to materially restrain or enjoin or nullify, or to obtain
material damages in respect of, this Agreement or the transactions contemplated
hereby that may reasonably be expected to result in a 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 the recovery against Option Holder of substantial damages;
provided, however, that the foregoing (a) and (b) shall not be deemed to fall
within the provisions hereof or qualify as a condition hereunder to the extent
such action or proceeding is (1) brought or caused to be brought by (i) any
stockholder, bondholder, officer, director, agent, Affiliate or creditor of
Option Holder or any other party claiming by, through or against Option Holder
that is not related to Sellers, (ii) any third party or agent of such party to
any Contract relating to any consent required to convey any such Contract, or
(iii) any party or agent of such party, who is currently a party to any such
affiliation agreement with Option Holder or any Affiliate of Option Holder or in
any way relating to any television or radio network affiliation agreement of any
Seller, any Affiliate of any Seller, Option Holder or any Affiliate of Option
Holder; or (2) a Proceeding referred to in Section 2.6 hereof.
8.3 Opinion of Counsel. If requested by Option Holder, in accordance
with Section 2.4(a)(ii), Option Holder shall have received an opinion of
Seller's counsel dated as of the Option Closing Date in substantially the form
attached to this Agreement as Exhibit 8.3(i), and an opinion of Sellers' special
communications counsel dated as of the Option Closing Date in substantially the
form attached to this Agreement as Exhibit 8.3(ii).
- 47 -
8.4 FCC Authorizations. As of the Option Closing Date, all FCC consents
and approvals as contemplated by this Agreement with respect to the Station
shall have been granted.
8.5 Hart-Scott-Rodino. To the extent required by law, the waiting
period under the HSR Act shall have expired or been terminated and there shall
not be pending any action instituted by the Federal Trade Commission or the
Department of Justice under the HSR Act, and there shall not be outstanding any
order of a court restraining the transactions contemplated hereby.
8.6 Termination of Certain Agreements. The Option Holder shall have
received from RCB the Terminations.
8.7 Group I TBA. Seller shall have performed in all material respects
all economic covenants and agreements to be performed by it under the Group I
TBA, on or before the Option Closing Date.
ARTICLE 9
---------
INDEMNIFICATION
---------------
9.1 Survival. The representations and warranties of Sellers and Option
Holder contained in this Agreement (including the Schedules hereto) or in any
certificate delivered by it pursuant to Sections 2.4, 7.1 and 8.1 of this
Agreement and the covenants of Sellers and Option Holder under this Agreement to
be performed on or before an Option Closing Date (a) that relate to a Station
shall survive the Option Closing Date with respect to such Station until the
earlier of (i) a period of one (1) year after such Option Closing Date, (ii) the
final Option Closing Date or (iii) the Columbus Option Closing Date, and (b)
that do not relate to the Stations shall survive for one year from the Option
Grant Date. Option Holder's obligation to pay, perform or discharge the Assumed
Liabilities shall survive until such Assumed Liabilities have been paid,
performed or discharged in full. Sellers' obligations with respect to all
obligations and liabilities not assumed by Option Holder pursuant to this
Agreement shall survive until such obligations and liabilities have been paid,
performed or discharged in full. The covenants and agreements contained in this
Article 9 shall continue in full force and effect until fully discharged. Any
other covenants or agreements contained herein or made pursuant hereto which by
their terms are to be performed after the Option Closing Date shall survive
until fully performed and discharged in full, including without limitation all
obligations and liabilities with respect to the Assumed Liabilities and the
Retained Liabilities.
- 48 -
9.2 Indemnification of Option Holder. Sellers agree that, after the
Closing, subject to the limitations in Section 9.4 below, they shall indemnify
and hold Option Holder and its officers, directors, employees, agents and
Affiliates harmless from and against any and all damages, claims, losses,
expenses, costs, obligations and liabilities, including, without limiting the
generality of the foregoing, liabilities for reasonable attorneys' fees and
expenses ("Loss and Expense") suffered (whether any such claim arises out of a
third party action or is made by Option Holder against Sellers) by Option Holder
resulting from (i) any material breach of a representation or warranty made by
Sellers pursuant to this Agreement; (ii) any material failure by Sellers to
perform or fulfill any of their covenants or agreements set forth in this
Agreement; (iii) any failure by Sellers to pay, perform or discharge any
liabilities or obligations not specifically assumed by Option Holder pursuant to
this Agreement; (iv) any litigation, proceeding or claim by any third party
arising from the business or operations of the License Assets by Sellers prior
to the Option Grant Date, except to the extent arising from obligations or
liabilities that have been disclosed to Option Holder in this Agreement or the
Asset Purchase Agreement or the Schedules hereto (other than those set forth on
Schedule 9.2 relating to the Stations) and except to the extent arising from
obligations or liabilities of or assumed by Option Holder pursuant to this
Agreement and from obligations or liabilities incurred by Option Holder pursuant
to the Group I TBA.
9.3 Indemnification of Sellers. Option Holder agrees that, after the
Closing, it shall indemnify and hold Sellers and their respective officers,
directors, partners, employees, agents and Affiliates harmless from and against
any and all Loss and Expense suffered (whether any such claim arises out of a
third party action or is made by any Seller against Option Holder) by any Seller
resulting from (i) any material breach of representation or warranty made by
Option Holder pursuant to this Agreement; (ii) any material failure by Option
Holder to perform or fulfill any of its covenants or agreements set forth in
this Agreement; (iii) any failure by Option Holder to pay, perform or discharge
any Assumed Liabilities or any other obligations or liabilities of or assumed by
Option Holder under this Agreement (including, without limitation, those set
forth in Section 10.1 hereof); or (iv) any litigation, proceeding or claim
arising from the business or operations of any of the Stations on or after the
Option Grant Date.
9.4 Limitation of Liability. (i) Notwithstanding any other provision of
this Agreement, after a Closing, neither Sellers nor Option Holder shall
indemnify or otherwise be liable to the
- 49 -
other, unless (a) the party seeking indemnification has complied with the terms
of, including the time limits set forth in, Section 9.6 and (b) the aggregate
amount of Option Holder's Loss and Expense hereunder when combined with any Loss
and Expense under the Columbus Option Agreement (in the case of Sellers'
indemnification of Option Holder) or Sellers' Loss and Expense hereunder when
combined with any Loss and Expense under the Columbus Option Agreement (in the
case of Option Holder's indemnification of Sellers) exceeds $500,000, in which
event the indemnified party shall be entitled to recover its aggregate Loss and
Expense inclusive of $500,000 threshold; provided that such limitation shall not
apply to any indemnification obligation of Option Holder pursuant to Section
9.3(ii), (iii) or (iv) hereunder or under the Columbus Option Agreement or
Sellers pursuant to Section 9.2(ii), (iii) or (iv) hereunder or under the
Columbus Option Agreement. Notwithstanding any provision contained herein, in no
event shall Sellers be liable for any amount, which, when combined with any
other amount for which Sellers previously have been liable under Section 9.2
hereof and any amount for which RCB is liable, or previously has been liable,
under Section 9.2 of the Asset Purchase Agreement and any amount for which
Sellers are liable, or previously have been liable, under Section 9.2 of the
Columbus Option Agreement, is in excess of $50,000,000.
(ii) Notwithstanding anything in this Agreement to the
contrary, it is understood and agreed that any amounts owed to Option Holder by
Sellers for such Loss and Expense as determined in accordance with this Article
9 hereof, Article 9 of the Columbus Option Agreement and Article 9 of the Asset
Purchase Agreement shall be made solely and exclusively in the form of a
deduction from the Columbus Option Closing Price (such term when used herein
shall have the meaning assigned to such term in the Columbus Option Agreement)
that has not yet been paid to Sellers under the Columbus Option Agreement and
that once the Columbus Option Closing Price has been paid in full or portion
thereof placed in the Indemnification Fund (as defined in the Columbus Option
Agreement) to Sellers or if the Columbus Option is terminated under the Columbus
Option Agreement, Option Holder shall have no further recourse against Sellers,
and no other payment by Sellers shall be required, hereunder, except for any
pending claims against the amount of the Option Closing Price placed in the
Indemnification Fund (as defined in the Columbus Option Agreement).
(iii) Anything in this Agreement or any applicable law to the
contrary notwithstanding, neither Sellers (except to the extent expressly
provided for in Section 9.4(ii)) nor any partner, director, officer, employee,
agent or Affiliate of any
- 50 -
Seller (including any shareholder, director, officer, employee, agent or
Affiliate of the general partners of any Seller) shall have any personal
liability to Option Holder as a result of the breach of any representation,
warranty, covenant or agreement of Sellers contained herein or otherwise and
shall have no personal obligation to indemnify Option Holder for any of Option
Holder's Losses or Expenses.
9.5 Bulk Sales Indemnity. Option Holder hereby waives compliance with
the provisions of any applicable bulk transfer laws. Subject to the limitations
set forth in Section 9.4 above, Sellers further agree to indemnify and hold
Option Holder harmless from and indemnify Option Holder against any and all Loss
and Expense relating to any claims made by creditors with respect to
non-compliance with any bulk transfer law, except to the extent that such claims
result from the Assumed Liabilities and other obligations or liabilities to be
paid or discharged by Option Holder as a result of this Agreement, the Columbus
Option Agreement and the Group I TBA and/or Option Holder's failure to pay the
same when due.
9.6 Notice of Claims. If either Option Holder, on the one hand, or
Sellers on the other hand, believes in good faith that it has suffered or
incurred any Loss and Expense, such Seller shall notify the Option Holder in
writing and, in any event, within one year from the Option Closing Date with
respect to the related Station, describing such Loss and Expense, the factual
basis for such claim, the amount thereof, estimated in good faith, and the
method of computation of such Loss and Expense, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such Loss and Expense shall have occurred. If any action at law
or suit in equity is instituted by a third party with respect to which any of
the parties intends to claim any liability or expense as Loss and Expense under
this Article 9, such party shall within twenty (20) days after receiving written
notice thereof (or sooner to the extent the indemnifying party would not have
time to adequately take the actions contemplated under Section 9.7) notify the
indemnifying party of such action or suit.
9.7 Defense of Third Party Claims. The indemnifying party under this
Article 9 shall have the right to conduct and control through counsel of its own
choosing the defense of any third party claim, action or suit (and the
indemnified party shall cooperate fully with the indemnifying party), but the
indemnified party may, at its election, participate in the defense of any such
claim, action or suit at its sole cost and expense provided that, if the
indemnifying party shall fail to defend any such claim, action or suit, then the
indemnified party may defend
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through counsel of its own choosing such claim, action or suit, and (so long as
it gives the indemnifying party at least fifteen (15) days' notice of the terms
of the proposed settlement thereof and permits the indemnifying party to then
undertake the defense thereof) settle such claim, action or suit, and to recover
from the indemnifying party the amount of such settlement or of any judgment and
the costs and expenses of such defense. The indemnifying party shall not
compromise or settle any third party claim, action or suit without the prior
written consent of the indemnified party, which consent will not be unreasonably
withheld or delayed.
9.8 Indemnity as Sole Remedy. After the Option Closing Date,
indemnification pursuant to this Article 9 shall be the sole and exclusive
remedy of any party to this Agreement for any breach of a representation,
warranty or covenant made or obligation undertaken by any other party, or for
any Loss or Expense arising out of or relating to the items listed in Sections
9.2 and 9.3 or otherwise related to the transactions contemplated hereby, other
than in respect of the Asset Purchase Agreement (subject to Section 9.4), the
Columbus Option Agreement (subject to Section 9.4 thereof), the Registration
Rights Agreement, the Group I TBA, the Employment Agreement, the Consulting
Agreement, the Baker Stock Option Agreement, the Corporate Employee Stock Option
Agreement, the Station Employee Stock Option Agreement, the Amended Employee
Letter Agreement, the Voting Agreement, the ISO Amendment, the LTIP, the Amended
Charter or the Articles Supplementary (as such documents are described in the
Asset Purchase Agreement and, collectively, the "Transaction Documents"), which
shall be governed by their terms, whether such claim may be asserted as a breach
of contract, tort or otherwise.
9.9 Arbitration. To the fullest extent not prohibited by law, any
controversy, claim or dispute arising out of or relating to Article 9 of this
Agreement, including the determination of the scope or applicability of this
agreement to arbitrate, shall be settled by final and binding arbitration in
accordance with the rules then in effect of the American Arbitration Association
("AAA"), as modified or supplemented under this Section, and subject to the
Federal Arbitration Act, 9 U.S.C. ss.ss. 1-16. The decision of the arbitrators
shall be final and binding provided that, where a remedy for breach is
prescribed hereunder or limitations on remedies are prescribed, the arbitrators
shall be bound by such restrictions, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
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If any series of claims arising out of the same or related transactions
shall involve claims which are arbitrable under the preceding paragraph and
claims which are not, the arbitrable claims shall first be finally determined
before suit may be instituted upon the others and the parties will take such
action as may be necessary to toll any statutes of limitations, or defenses
based upon the passage of time, that are applicable to such non-arbitrable
claims during the period in which the arbitrable claims are being determined.
In the event of any controversy, claim or dispute that is subject to
arbitration under this Section 9.9, any party thereto may commence arbitration
hereunder by delivering notice to the other party or parties thereto. The
arbitration panel shall consist of three arbitrators, appointed in accordance
with the procedures set forth in this paragraph. Within ten (10) business days
of delivery of the notice of commencement of arbitration referred to above,
Sellers, on the one hand, and Option Holder, on the other hand, shall each
appoint one arbitrator, and the two arbitrators so appointed shall within ten
(10) business days of their appointment mutually agree upon and appoint one
additional arbitrator (or, if such arbitrators cannot agree on an additional
arbitrator, the additional arbitrator shall be appointed by the AAA as provided
under its rules) provided, that persons eligible to be selected as arbitrators
shall be limited to attorneys at law who (i) are on the AAA's Large, Complex
Case Panel, (ii) have practiced law for at least 15 years as an attorney
specializing in either general commercial litigation or general corporate and
commercial matters and (iii) are experienced in matters involving the
broadcasting industry.
The arbitration hearing shall commence no later than thirty (30)
business days after the completion of the selection of the arbitrators.
Consistent with the intent of the parties hereto that the arbitration be
conducted as expeditiously as possible, the parties agree that (i) discovery
shall be limited to the production of such documents and the taking of such
depositions as the arbitrators determine are reasonably necessary to the
resolution of the controversy, claim or dispute and (ii) the arbitrators shall
limit the presentation of evidence by each side in such arbitration to not more
than ten (10) full days (or the equivalent thereof) or such shorter period as
the arbitrators shall determine to be necessary in order to resolve the
controversy, claim or dispute. The arbitrators shall be instructed to render a
decision within ten (10) business days of the close of the arbitration hearing.
If arbitration has not been completed within ninety (90) days of the
commencement of such arbitration, any party to the arbitration may initiate
litigation upon ten (10) days written notice to the other
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party(ies); provided, however, that if one party has requested the other to
participate in an arbitration and the other has failed to participate, the
requesting party may initiate litigation before the expiration of such
ninety-day period; and provided further, that if any party to the arbitration
fails to meet any of the time limits set forth in this Section 9.9 or set by the
arbitrators in the arbitration, any other party may provide ten (10) days
written notice of its intent to institute litigation with respect to the
controversy, claim or dispute without the need to continue or complete the
arbitration and without awaiting the expiration of such ninety-day period. The
parties hereto further agree that if any of the rules of the AAA are contrary to
or conflict with any of the time periods provided for hereunder, or with any
other aspect of the matters set forth in this Section 9.9, that such rules shall
be modified in all respects necessary to accord with the provisions of this
Section 9.9 (and the arbitrators shall be so instructed by the parties). The
arbitrators shall base their decision on the terms of this Agreement and
applicable law and judicial precedent which a United States District Court
sitting in the District of Maryland (Southern Division) would apply in the event
the dispute were litigated in such court, and shall render their decision in
writing and include in such decision a statement of the findings of fact and
conclusions of law upon which the decision is based. Each party agrees to
cooperate fully with the arbitrator(s) to resolve any controversy, claim or
dispute. The arbitrators shall not be empowered to award punitive damages or
damages in excess of actual damages. The venue for all arbitration proceedings
shall be Rockville, Maryland.
ARTICLE 10
----------
EMPLOYEE MATTERS
----------------
10.1 Employee Matters. The following provisions shall act exclusively
for the benefit of parties to this Agreement and not for the benefit of any
other person or entity:
(a) Effective as of each Option Closing Date, the Option Holder
shall offer employment to each employee of Sellers who is employed at any
Station immediately prior to the Option Closing Date with respect to such
Station (the "Station Employees") on terms and conditions which are
substantially similar in the aggregate to the terms and conditions of employment
of the Option Holder's employees as of the Option Closing Date, including the
provision of retirement and health care benefits, except as any employment
agreement between Option Holder and any Station Employee may otherwise require.
The Option Holder shall assume all contracts of employment of the
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Station Employees and notwithstanding anything in the foregoing to the contrary,
to the extent such employment contract or collective bargaining agreement
assumed hereunder provides for terms and conditions in addition to those
referenced in the preceding sentence, Option Holder shall assume the terms
thereof. Each Station Employee shall receive credit for past service with the
Sellers for all purposes under the Option Holder's benefit plans.
(b) Option Holder shall assume full responsibility and liability
for offering and providing "Continuation Coverage" to any "Qualified
Beneficiary" who is covered by a "Group Health Plan" sponsored or contributed to
by the Sellers or any entity required to be combined with the Sellers (within
the meaning of Sections 414(b), (c), (m) or (o) of the Code) and who has
experienced a "Qualifying Event" or is receiving "Continuation Coverage" arising
with respect to employment at any Station on or prior to the Option Closing Date
with respect to such Station. For purposes of this Section 10.1(b), a Qualified
Beneficiary will be deemed to experience a Qualifying Event or to be receiving
Continuation Coverage "arising with respect to employment" at a Station if such
Qualified Beneficiary is or was an employee of the Station or is or was the
spouse or other covered dependent of such employee. Schedule 10.1 identifies all
Qualified Beneficiaries entitled to Continuation Coverage under any Seller's
Group Health Plan on the date of this Agreement, and Sellers shall deliver at
each Option Closing Date a list of Qualified Beneficiaries entitled to
Continuation Coverage as of such date. "Continuation Coverage," "Qualified
Beneficiary," "Qualifying Event" and "Group Health Plan" all shall have the
meanings given such terms under Section 4980B of the Code and Section 601 et
seq. of ERISA.
(c) Option Holder shall offer health plan coverage to all Station
Employees under the terms and conditions generally applicable to the Option
Holder's employees as of the Option Closing Date. For purposes of providing such
coverage, the Option Holder shall waive all preexisting condition limitations
for all Station Employees covered by any Seller's group health plan as of the
Option Closing Date and shall provide such health care coverage effective as of
the Option Closing Date without the application of any eligibility period for
coverage. In addition, the Option Holder shall credit all employee payments
toward deductible and co-payment obligations limits under the Seller's health
care plans for the plan year which includes the Option Closing Date as if such
payments had been made for similar purposes under the Option Holder's health
care plans during the plan year which includes the Option Closing Date, with
respect to the Station Employees.
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(d) Option Holder shall grant Station Employees credit for and
shall assume and be responsible for any liabilities with respect to sick leave
and personal days accrued but unused by any Station Employees as of the Closing
Date, and, Option Holder shall grant Station Employees credit for and shall be
responsible for any liabilities with respect to any accrued but unused vacation
for such employees as of the Option Closing Date.
(e) Except as otherwise provided in Section 10.1(f), within a
reasonable period of time after each Option Closing Date, RCB shall transfer
from the River City Investment and Retirement Plan ("RCB's 401(k) Plan") to the
Sinclair Broadcast Group, Inc. 401(k) Profit Sharing Plan and Trust ("Option
Holder's 401(k) Plan") an amount, in cash, equal to the aggregate account
balances held in the RCB's 401(k) Plan as of the date of transfer with respect
to all Station Employees. Prior to the date of such transfer, and as
preconditions thereto: (1) the Option Holder shall use commercially reasonable
efforts to deliver to Sellers a copy of the most recently issued Internal
Revenue Service ("IRS") determination letter (or other proof satisfactory to
counsel for the Sellers) that Option Holder's 401(k) Plan is qualified under the
Code, and (2) Sellers shall use commercially reasonable efforts to deliver to
the Option Holder a copy of the most recently issued IRS determination letter
(or other proof satisfactory to counsel for the Option Holder) that RCB's 401(k)
Plan is qualified under the Code. Sellers shall not take any action with respect
to RCB's 401(k) Plan to create a right on behalf of the Station Employees to
distribution of plan assets from RCB's 401(k) Plan prior to such transfer.
Subsequent to the transfer of assets to the Option Holder's 401(k) Plan, neither
the Sellers nor RCB's 401(k) Plan shall retain any liability with respect to
such Station Employees to provide them with benefits in accordance with the
terms of RCB's 401(k) Plan. On or prior to the Option Closing Date, Sellers
shall deliver to Option Holder a list of all Station Employees, indicating
thereon the total amount deferred in pre-tax dollars to RCB's 401(k) Plan by
each of the Station Employees under the terms of Section 402(g) of the Code with
respect to the plan year of RCB's 401(k) Plan in which Closing occurs. Sellers
and the Option Holder agree to cooperate with respect to any government filing,
including, but not limited to, the filing of IRS Forms 5310-A, if necessary, to
effect the transfer of assets contemplated by this Section 10.1.
(f) The Option Holder agrees, effective as of the later of final
Option Closing Date under this Option Agreement, the Columbus Option Closing
Date or the termination of the Columbus Option Agreement, to fully assume
sponsorship of RCB's 401(k) Plan including all obligations of the sponsor to
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contribute to and administer the plan. Sellers and the Option Holder agree to
perform all acts necessary or proper to consummate the assumption of RCB's
401(k) Plan, including but not limited to the making of all proper filings with
the IRS and the Department of Labor and the receipt of all necessary notices or
approvals from governmental agencies.
(g) The Option Holder agrees that the Sellers may inform its
employees that the Option Holder has agreed that the Station Employees will be
offered employment as provided in this Section 10.1; provided, however, that
Option Holder shall have the right to approve any written statement to be made
by Sellers in connection therewith.
ARTICLE 11
----------
TERMINATION/MISCELLANEOUS
-------------------------
11.1 Termination of Options.
11.1.A Group I Options. If not exercised on or prior to April 10, 2006,
in accordance with the terms and conditions specified herein, the applicable
unexercised Group I Option shall expire and terminate. Subject to Section
11.1.B, a Group I Option may be terminated by Sellers at any time on or after
April 10, 2008 if the Option Closing Date has not occurred on or prior to April
10, 2008.
11.1.B Notice and Cure. (a) Notwithstanding anything to the contrary in
the foregoing, to the extent that Option Holder has taken, or failed to take,
any of the actions otherwise contemplated under Section 11.1.A prior to a
termination under such provisions by Sellers, Sellers shall give Option Holder
and Option Holder's Lenders under its then existing senior credit facility (the
name and notice information regarding which Option Holder shall provide to
Sellers) notice thereof, Option Holder shall be given thirty (30) days from the
date of receipt of such notice to cure such action or inaction and the Option
Holder's Lenders shall be given ninety (90) days from the date of receipt of
such notice to cure such action or inaction. After the applicable cure period
with respect to such action or inaction has expired without such action or
inaction having been cured within such periods, Sellers shall have the right to
terminate hereunder.
(b) On the date of this Agreement, Sellers shall have received
from Option Holder, an irrevocable standby letter of credit issued by Option
Holder's Lenders for the account of Sellers in the amount of $1,550,000 which
shall have no
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conditions to drawing other than notice from Sellers that Option Holder or any
permitted assignee under the Group I TBA has defaulted in its obligations under
the Group I TBA relating to a Station, and Sellers shall have the right to draw
down all amounts set forth on Schedule 11.1.D for each Station for which the
Option Closing Date has not yet occurred, and following each draw down by
Sellers, Option Holder shall replenish such letter of credit such that at all
times such letter of credit shall be an amount equal to the aggregate of all
amounts set forth on Schedule 11.1.D for each Station with respect to which the
Option Closing Date has not yet occurred.
11.2 Effect of Termination and Other Limitations. (a) In the event of
termination, as provided in Section 11.1, the obligations of the parties hereto
in respect of the terminated Option shall terminate (but shall remain in effect
as applicable with respect to Options that were not terminated) without any
liability or obligation on the part of Sellers or Option Holder, except that (i)
the provisions of Sections 2.1.B, 3.4, 4.4, 5.5, 6.1, 11.2-11.12, and
11.15-11.19 shall survive, and (ii) to the extent that such termination results
from the willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement, the
non-defaulting parties' rights to pursue all legal or equitable remedies for
breach of contract or otherwise, including the right to specific performance or
damages or both, shall survive and the non-prevailing party in any lawsuit
related to any such pursuit shall pay the attorney's fees of the prevailing
party. Without limiting the generality of the foregoing, neither Option Holder,
on the one hand, nor Sellers, on the other hand, may rely on the failure of any
condition precedent set forth in Articles 7 or 8, as applicable, to be satisfied
if such failure was caused by such party's (or parties') failure to act in good
faith, or a breach of or failure to perform its representations, warranties,
covenants or other obligations in accordance with the terms of this Agreement.
(b) Anything in this Agreement or any applicable law to the contrary
notwithstanding, neither any Seller (except to the extent expressly provided for
in Section 11.2(a)) nor any partner, director, officer, employee, agent or
Affiliate of any Seller (including any shareholder, director, officer, employee,
agent or Affiliate of the general partner of the Seller) shall have any personal
liability to Option Holder as a result of the breach of any representation,
warranty, covenant or agreement of Seller contained herein or otherwise and
shall have no personal obligation to Option Holder for any of Option Holder's
remedies hereunder.
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11.3 Expenses. Subject to the provisions of Sections 3.4 and 4.4, each
party hereto shall bear all of its expenses incurred in connection with the
transactions contemplated by this Agreement, including, without limitation,
accounting and legal fees incurred in connection herewith; provided, however,
that Sellers on the one hand, and Option Holder on the other, shall each pay
one-half of any sales or transfer taxes (including any real property transfer
taxes) arising from transfer of the License Assets and any FCC filing fees.
11.4 Assignments. This Agreement shall not be assigned by any party
hereto without the prior written consent of the other parties except as
specified herein, as follows:
(i) Option Holder or any permitted assignee of Option
Holder may assign its rights and interests hereunder with respect to any Option
provided that (1) Option Holder gives Sellers written notice thereof; (2) such
assignment shall not relieve Sinclair Broadcast Group, Inc. or any assignee
hereof or of any other Option Holder of any of its obligations or liabilities
hereunder; (3) such assignment would not violate any applicable laws, rules,
regulations or policies of any applicable governmental authority; and (4) if
Option Holder assigns an Option pursuant to this subsection (i) and if any
amounts are paid to Option Holder in connection therewith, Option Holder shall,
on the date any such payment is received, pay such amount to Sellers, which
amount shall be referred to as the "Option Assignment Price" for such Option.
(ii) To the extent of any such assignment by Option
Holder in accordance with the terms of this Section 11.4, Sellers shall deliver
any such documents contemplated under Section 2.4(a) to such assignee provided
that once such delivery shall have been made to such assignee, Sellers'
obligations hereunder with respect to such delivery shall be deemed to have been
discharged. It is understood and agreed that nothing herein shall be deemed to
prohibit a transfer of control of any Seller or Licensee or the assignment of
any FCC Authorizations or any of the other License Assets by Sellers provided
that Sellers agree to amend any filings contemplated under Section 5.8(a) to the
extent necessary in connection therewith. Any attempt to assign this Agreement
without the required consent shall be void. It is understood and agreed that
nothing herein shall be deemed to expand the rights granted hereunder to any
permitted assignee, which rights shall be in combination with, and not in
addition to, the rights of Option Holder. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
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11.5 Further Assurances. Subject to the terms and conditions of this
Agreement, from time to time prior to, at and after the Option Grant Date, each
party hereto will use commercially reasonable efforts to take, or cause to be
taken, all such actions and to do or cause to be done, all things, necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the sale contemplated by this Agreement and the consummation of the
other transactions contemplated hereby, including executing and delivering such
documents as the other party being advised by counsel shall reasonably request
in connection with the consummation of this Agreement and the consummation of
the other transactions contemplated hereby, including, without limitation, the
execution and delivery of any and all confirmatory and other instruments, in
addition to those to be delivered on either the Option Grant Date or any Option
Closing Date.
11.6 Notices. All notices, demands and other communications which may
or are required to be given hereunder or with respect hereto shall be in
writing, shall be delivered personally or sent by nationally recognized
overnight delivery service, charges prepaid, or by registered or certified mail,
return-receipt requested, or by facsimile transmission, and shall be deemed to
have been given or made when personally delivered, the next business day after
delivery to such overnight delivery service, when dispatched by facsimile
transmission, five (5) days after deposited in the mail, first class postage
prepaid, addressed as follows:
(a) If to any Seller:
River City Broadcasting, L.P.
1215 Cole Street
St. Louis, Missouri 63106-3897
Attn.: Mr. Barry A. Baker and Mr. Larry D. Marcus
Telecopier: (314) 259-5709
With a copy to:
Dow, Lohnes & Albertson
A Professional Limited Liability Company
1200 New Hampshire Ave., N.W.
Suite 800
Washington, D.C. 20036-6802
Attn.: Leonard J. Baxt, Esq.
Telecopier: (202) 776-2222
Baker & Botts
800 Trammell Crow Center
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2001 Ross Avenue
Dallas, Texas 75201-2916
Attn.: Andrew M. Baker, Esq.
Telecopier: (214) 953-6503
or to such other address as any Seller may from time to time designate.
(b) If to Option Holder:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn.: Mr. David D. Smith
Telecopier: (410) 467-5043
With a copy to:
Thomas & Libowitz, P.A.
The USF&G Tower
100 Light Street
Suite 1100
Baltimore, Maryland 21202-1053
Attn.: Steven A. Thomas, Esq.
Telecopier: (410) 752-2046
or to such other address Option Holder may from time to time designate.
11.7 Captions. The captions of Articles and Sections of this Agreement
are for convenience only, and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.
11.8 Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT REFERENCE
TO ITS PRINCIPLES OF CONFLICT OF LAWS, EXCEPT TO THE EXTENT THAT THE FEDERAL LAW
OF THE UNITED STATES GOVERNS THE TRANSACTIONS CONTEMPLATED HEREBY.
11.9 Consent to Jurisdiction, Etc. EXCEPT AS SET FORTH IN SECTION 9.9
HEREOF, THE PARTIES HERETO HEREBY IRREVOCABLY CONSENT TO THE NONEXCLUSIVE
JURISDICTION AND VENUE OF ANY FEDERAL COURT LOCATED IN THE DISTRICT OF MARYLAND
(SOUTHERN DIVISION) OR TO THE EXTENT SUCH COURTS ARE NOT AVAILABLE, ANY COURT IN
THE STATE OF MARYLAND LOCATED IN THE COUNTY OF MONTGOMERY IN CONNECTION WITH ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. THE PARTIES
HERETO HEREBY WAIVE PERSONAL SERVICE OF ANY PROCESS IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING AND
- 61 -
AGREE THAT THE SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL
ADDRESSED TO OR BY PERSONAL DELIVERY TO THE OTHER PARTY AT SUCH OTHER PARTY'S
ADDRESS SET FORTH PURSUANT TO PARAGRAPH 11.6 HEREOF. IN THE ALTERNATIVE, IN ITS
DISCRETION, ANY OF THE PARTIES HERETO MAY EFFECT SERVICE UPON ANY OTHER PARTY IN
ANY OTHER FORM OR MANNER PERMITTED BY LAW.
11.10 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time or times to require performance of any provision of this Agreement
shall in no manner affect the right at a later date to enforce the same. No
waiver by any party of any condition or the breach of any provision, term,
covenant, representation, or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall 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.
11.11 Counterparts. This Agreement may be executed in two (2) or more
counterparts, and all counterparts so executed shall constitute one (1)
agreement binding on all of the parties hereto, notwithstanding that all the
parties are not signatory to the same counterpart.
11.12 Entire Agreement/Amendments. This Agreement and the Group I TBA
(including the Exhibits and Schedules hereto and thereto) and to the extent
applicable, the Modification Agreement dated May 10, 1996 between RCB and Option
Holder and the letter dated May 10, 1996 from the parties' counsel to the
Department of Justice in connection therewith, and the documents delivered
pursuant to this Agreement or other written agreements among the parties, dated
the date hereof or hereafter, constitute the entire agreement among the parties
pertaining to the subject matter hereof and supersede any and all prior and
contemporaneous agreements, understandings, negotiations, and discussions,
whether oral or written, between them relating to the subject matter hereof. No
amendment or waiver of any provision of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
11.13 Access to Books and Records. Option Holder shall preserve for at
least three (3) years after the Option Closing Date all books and records
included in the License Assets. At the request of Sellers, Option Holder agrees
to give to the officers, partners, employees, agents, accountants and counsel of
Sellers access, upon reasonable prior notice during normal
- 62 -
business hours, to the property, accounts, books, contracts, records, accounts
payable and receivable, records of employees of Sellers (as Sellers may have
been reorganized) and other information concerning the affairs of any Station,
any of the License Assets, except as may be prohibited by law, and to the
employees of Option Holder as Sellers may reasonably request. Sellers shall have
no obligation to retain books and records relating to the License Assets,
subsequent to the Closing relating to such License Assets. To the extent any
such books and records are retained, then for a period not to exceed three (3)
years after the Closing Date, at the request of Option Holder, Sellers agree to
give the officers, employees, accountants and counsel of Option Holder access,
upon reasonable prior notice during normal business hours, to the books, records
and files retained by Sellers with respect to the business and operation of any
Station by Sellers as Option Holder may reasonably request in connection with an
audit of any Station. Each of Option Holder and Sellers shall be permitted at
their own expense to make extracts from or copies of the foregoing books,
records and files of the other party.
11.14 Waiver of Final Grant by FCC. Option Holder and Sellers agree to
proceed to effect a Closing with respect to a Station as provided in Section
2.2(b) hereof, on Initial Grant, as defined below. "Initial Grant" shall be
defined for the purposes of this Agreement as the date of the publication of the
FCC "Public Notice" announcing the grant of the "Assignment Application(s)" for
the FCC licenses for such Station to be transferred hereunder which contains no
conditions materially adverse to Option Holder. The terms "Public Notice" and
"Assignment Application(s)" have the same meaning herein as are generally given
to such terms under existing FCC rules, regulations and procedures.
11.15 Recitals, Headings. The Recitals contained in this Agreement
shall be deemed to be a binding part of this Agreement. The Article and Section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
11.16 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any
- 63 -
party. Upon such determination that any term or other provision is invalid or
unenforceable, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the greatest extent possible.
11.17 Public Announcements and Press Releases. Prior to the later of
the final Option Closing Date, the Columbus Option Closing Date or the
termination of the Columbus Option Agreement, neither Sellers nor Option Holder
shall, except by mutual agreement, make any press release or other public
announcement (written or oral) concerning this Agreement or the transactions
contemplated by this Agreement, except as may be required by any law, rule or
regulation (including, without limitation, filings and reports required to be
made with or pursuant to the rules of the SEC) or any by existing contract,
license, or agreement to which it is a party and provided that the party
required to make such announcement shall provide a draft copy thereof to the
other parties hereto, and consult with such other parties concerning the timing
and content of such announcement, before such announcement is made. No press
releases or other public announcements concerning this Agreement or the
transactions contemplated hereby shall be made by any party hereto without the
prior written consent of the other parties unless the first such party is
legally compelled to do so.
11.18 Board of Directors and Committees. From and after the Asset
Purchase Agreement Closing Date, Option Holder shall cause (i) each of (1) Barry
Baker ("Baker") and (2) Roy F. Coppedge (or such other individual as may be
designated by Boston Ventures Limited Partnership IV and Boston Ventures Limited
Partnership IVA (collectively, "Boston Ventures")) (the "BV Designee") to
receive notice of all meetings of the Board of Directors of Option Holder and to
be permitted to attend such meetings, (ii) Baker to receive notice of all
meetings of any executive and finance committees, and to be permitted to attend
such meetings, and (iii) the BV Designee to receive notice of all meetings of
any compensation and finance committees, and to be permitted to attend such
meetings. In addition, if the Board of Directors or any executive, finance or
compensation committee of Option Holder plans to take actions by written consent
in lieu of a meeting, then Option Holder shall cause Baker (in the case of the
Board of Directors and any executive and finance committees) and the BV Designee
(in the case of the Board of Directors and any finance and compensation
committees) to receive a copy of the form of consent documents relating to such
actions at the same time that such documents are circulated or distributed to
the members of the Board of Directors, executive, finance or
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compensation committees, as applicable. In addition, as soon as permissible
under the rules of the FCC and applicable laws, Option Holder shall cause (i)
each of Baker and the BV Designee to be appointed as members of the Board of
Directors of Option Holder, (ii) Baker to be appointed as a member of any
executive committee and, to the extent established, the finance committee and
(iii) the BV Designee to be appointed as a member of any finance committee, to
the extent established, and the compensation committee. Option Holder's Board of
Directors (which presently consists of seven (7) directors) has duly adopted
resolutions which have fixed the number of members of (x) directors of Option
Holder at nine (9) directors, (y) the executive committee at six (6) members,
and (z) the compensation committee at six (6) members and such resolutions also
have designated Baker and the BV Designee, as applicable, to fill the
directorships on the Option Holder's Board of Directors and memberships on such
committees pursuant to the terms of this Agreement. To the extent that the
Option Holder or the Board of Directors establishes a finance committee, it
shall designate each of Baker and the BV Designee as members of the finance
committee. Baker shall be entitled to be a director of Option Holder and a
member of the executive committee and, to the extent established, the finance
committee for so long as he remains an employee of Option Holder, and BV shall
be entitled to have the BV Designee be a director of Option Holder and a member
of the compensation committee and, to the extent established, the finance
committee until the first to occur of (i) the later of (a) the fifth anniversary
of the Asset Purchase Agreement Closing Date and (b) the expiration of the
initial five-year term of Barry Baker's Employment Agreement with Option Holder
and (ii) such time, after Option Holder has issued the Convertible Preferred
Stock to RCB or to its Partners, as Boston Ventures no longer owns, of record or
beneficially to the extent of its interest as a limited partner of RCB, at least
721,115 shares of Option Holder Common Stock, on an "as converted" basis, as
such number may be adjusted pursuant to stock splits, stock combinations,
reclassifications or recapitalizations of Option Holder occurring after the date
hereof.
11.19 List of Definitions. The following is a list of certain terms
used in this Agreement and a reference to the Section hereof in which such term
is defined:
Terms Section
----- ---------
AAA Section 9.9
Adjustment Amount Section 2.5(b)
Adjustment Date Section 2.5(a)
Affiliate Section 3.5
Agreement Preamble
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Asset Purchase Agreement Recitals
Asset Purchase Agreement Closing Date Recitals
Asset Purchase Closing Recitals
Assumed Liabilities Section 1.3
Baker Section 11.18
Boston Ventures Section 11.18
BV Designee Section 11.18
Closing Section 2.2(b)
Columbus Option Agreement Recitals
Columbus Station Recitals
Columbus Station Excess Cash Flow Section 2.1.B(b)(ii)
Communications Act Section 3.5
Contract Section 1.1.A(d)
Conveyed Contracts Section 2.6
Disputing Party Section 2.5(b)
Escrow Agent Section 2.5(b)
Estimate Report Section 2.5(b)
Excluded Assets Section 1.2
Excluded Contracts Section 1.2(f)
Exercise Date Section 1.4
Exercise Notice Section 1.4
Exercise Period Section 1.5
FCC Recitals
FCC Authorizations Recitals
Group I Options Section 1.1
Group I Option Closing Price Section 2.1.B(a)
Group I Stations Recitals
Group I TBA Recitals
Group I TV Stations Recitals
Group I Unpaid Options Section 2.1.B(a)
Highest Capital Tax Rate Section 2.1.B(a)
HSR Act Section 5.9
Initial Grant Section 11.14
IRS Section 10.1(e)
Laws Section 2.6
Leasehold Interests Section 1.1.A(c)
Leases Section 3.7(a)
Lender Section 2.1.B(a)
Licensee Preamble
License Assets Section 1.1.A
Loss and Expense Section 9.2
Material Adverse Change Section 8.1(a)
New Mexico Stations Recitals
Option Assignment Price Section 11.4(a) (i)
Option Closing Date Section 2.2(b)
Option Closing Price Section 2.1.B(a)
Option Extension Fees Section 2.1.B(b)
Option Grant Section 2.2(a)
Option Grant Date Preamble
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Option Grant Price Section 2.1.A
Option Holder Preamble
Option Holder's 401(k)Plan Section 10.1(e)
Option Holder's Lenders Section 5.1(i)
Other Contracts Section 1.1.A(d)
Permitted Encumbrances Section 1.3
Person Section 3.5
Post-Closing Estimate Fund Section 2.5(b)
Post-Closing Estimate Fund Deposit Section 2.5(b)
Pre-Closing Certificate Section 2.5(b)
Proceedings Section 2.6
Radio Stations Recitals
RCB Preamble
RCB Credit Agreement Section 2.1.B(a)
RCB's 401(k)Plan Section 10.1(e)
RCB Twin Peaks Equity Interests Recitals
Real Property Section 1.1.A(c)
Real Property Improvements Section 1.1.A(c)
Sale Price Section 5.1(i)
Sandia Recitals
Sandia Stock Recitals
Sellers Preamble
Standard Formula Section 5.1(i)
Station Employees Section 10.1(a)
Station Material Adverse Change Section 3.8
Stations Recitals
Terminations Section 7.6
Transaction Documents Section 9.8
Twin Peaks Recitals
Twin Peaks License Partnership Interest Recitals
Twin Peaks Partnership Interest Recitals
Twin Peaks Sale Recitals
Unpaid Amount Section 2.1.B(a)
11.20 No Third Party Beneficiaries. No person other than Option Holder
or Sellers shall have any right to enforce any provision of this Agreement or
have any "third party beneficiary" rights hereunder, other than Option Holder's
Lenders with respect to Section 11.4 hereof and Boston Ventures and Baker with
respect to Section 11.18 hereof and except as expressly provided in a separate
agreement dated as of the date of the Asset Purchase Agreement among Option
Holder, Sellers and Option Holder's Lenders.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized officers, all as of the day and year first
above written.
RIVER CITY BROADCASTING, L.P.
By: Better Communications, Inc., its
General Partner
By: /s/ Larry D. Marcus
-------------------------
Name: Larry D. Marcus
Title: Vice President
RIVER CITY LICENSE PARTNERSHIP
By: River City Broadcasting, L.P.
By: Better Communications, Inc.,
its General Partner
By: /s/ Larry D. Marcus
------------------------
Name: Larry D. Marcus
Title: Vice President
OPTION HOLDER:
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
------------------------
Name: David B. Amy
Title: Chief Financial Officer