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Exhibit 10.3
OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into as of the 29th day of
August, 1997, by and between The Hearst Corporation ("Hearst"), a Delaware
corporation, and Argyle Television, Inc. ("Argyle"), a Delaware corporation.
WHEREAS, Hearst and Argyle have entered into an Amended and
Restated Agreement and Plan of Merger dated as of March 26, 1997 (the "Merger
Agreement") pursuant to which certain Hearst subsidiaries will, subject to the
terms and conditions of the Merger Agreement, merge with and into Argyle; and
WHEREAS, Argyle will be the surviving corporation under
the Merger Agreement and will be renamed Hearst-Argyle Television,
Inc. ("HAT"); and
WHEREAS, this Option Agreement is entered into in accordance
with Section 9.01(i) of the Merger Agreement and in further consideration
thereof;
NOW, THEREFORE, Hearst and Argyle hereby agree as follows:
1. Hearst, or a subsidiary, is the licensee of
Television Stations WWWB-TV, Lakeland, Florida ("WWWB-TV") and WPBF-TV,
Tequesta, Florida ("WPBF-TV") and Hearst brokers time and provides programming
and other services to Television Station KCWB-TV, Kansas City, Missouri
("KCWB-TV") pursuant to a Program Service and Time Brokerage Agreement more
particularly described hereinafter. WWWB-TV, WPBF-TV and KCWB-TV are sometimes
collectively referred to herein as the "Option Stations". During the period
commencing eighteen (18) months following the Effective Time (as defined in the
Merger Agreement) and terminating thirty-six (36) months following the Effective
Time (the "Option Period"), HAT shall have the following options, exercisable
upon written notice to Hearst:
(a) The option to purchase WWWB-TV. The form of
the transaction shall be either the purchase of those assets (including the
applicable Federal Communications Commission ("FCC") licenses) then used solely
by WWWB-TV to conduct its operations and business or the purchase of the capital
stock of WWWB-TV, Inc., as determined by Hearst. The purchase price shall be the
Fair Market Value (as defined below) of such assets or capital stock, as the
case may be, as of the option exercise date.
(b) With respect to KCWB-TV, (i) if Hearst has
not exercised its option to purchase KCWB-TV, the option to have Hearst assign
to HAT the Option Agreement dated December 7, 1995 (the "1995 Option Agreement")
by and between Hearst and CamEl, L.L.C.
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and Xxxxx X. and Xxxxx X. Xxxxxxx, and subject to applicable contractual
consents, if any, the Programming Services and Time Brokerage Agreement dated
August 24, 1995 between Hearst and T.V. 32, Inc. (the "TBA"), and (ii) if Hearst
has exercised its option to purchase KCWB-TV, the option to purchase those
assets (including the applicable FCC licenses) then used solely to conduct the
operations and business of KCWB-TV. The purchase price shall be the Fair Market
Value (as defined below) of either the 1995 Option Agreement and the TBA in the
case of (i) above, or the assets of KCWB-TV in the case of (ii) above, as of the
option exercise date, provided that, in no event shall the purchase price be
less than the aggregate amount of the Accumulated Costs, as such term is defined
in the 1995 Option Agreement, plus interest thereon at the annual average rate
of prime as declared from time to time by Chase Bank (or its successor) plus one
percent (1%) compounded semi-annually.
If HAT exercises an option, Hearst and HAT agree they shall
each use their respective commercially reasonable efforts to cause the closing
of the sale to HAT pursuant to this Section 1 to occur as soon as practicable
after HAT has delivered a notice to Hearst of HAT's intent to exercise its
option and all other necessary and reasonable requirements for the sale are met,
including but not limited to obtaining all necessary governmental and
third-party approvals required for the consummation of such transaction. The
closing of such sale to HAT shall take place at the offices of Hearst specified
in Section 5(b) below, or such other place as the parties may agree upon. At
such closing, (i) Hearst shall, or it shall cause the applicable seller to,
deliver to HAT either the stock certificates, in the case of a sale of stock, or
all necessary conveyancing documents, in the case of a sale of assets, and such
other conveyancing instruments and other documents as shall be reasonably
requested by HAT and (ii) HAT shall deliver to Hearst or the applicable seller,
as the case may be, the purchase price for the stock or assets to be sold by
either wire transfer of immediately available funds to a bank account designated
to such party, or, at Hearst's election, stock of HAT (with the number of shares
to be determined by market value at the time of closing).
2. As used in this Agreement the term "Fair Market Value"
shall mean the cash price that a willing buyer would pay a willing seller, both
in reasonable possession of the relevant facts with neither acting under
compulsion to buy or sell or under time constraints, in an arm's-length
transaction in an asset sale (or a stock sale, as the case may be with respect
to WWWB-TV) for the going concern of the applicable station, which for these
purposes should be deemed to be as it would exist if operated by the buyer in a
like manner as then being operated by Hearst (and, in the case of KCWB-TV,
without the existence of the TBA). Any determination of Fair Market Value
hereunder shall be agreed to by the parties, provided that if any party so
elects, such determination shall be conclusively established by independent
appraisal in the manner
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contemplated below by giving the other party written notice of appraisal.
3. The exercise of HAT's options hereunder shall be by
action of HAT's directors elected by the holders of HAT's Series A Common Stock.
Additionally, HAT may withdraw the exercise of such option within twenty (20)
days following the receipt of an appraisal, as described hereinafter. The
appraiser shall be independent and selected by mutual agreement of HAT and
Hearst. If HAT and Hearst cannot within ten (10) days agree as to the selection
of the appraiser, then each of them shall select an appraiser and the two
appraisers shall select a third appraiser within an additional ten (10) days.
The appraisal shall take into account both the structure of the proposed
transaction and the tax basis of the property (assets or stock) to be acquired
by HAT. If three appraisers are used, the appraised value shall be the average
of the three appraisals. If the option is exercised and not withdrawn, the fees
for the appraisal shall be paid as follows: (i) if a single appraiser is used,
equally by HAT and Hearst; and (ii) if three appraisers are used, each party
pays the fees of its appraiser and HAT and Hearst shall pay the fees of the
third appraiser equally. If the option is exercised and withdrawn, then HAT
shall pay the fees of all appraisers and all options and rights of first refusal
with respect to such station shall terminate.
4. Notwithstanding any provision of this Agreement to
the contrary, Hearst shall have the right to sell, assign or otherwise transfer
any or all of the Option Stations (or their assets or stock) or WPBF-TV to a
wholly-owned subsidiary of Hearst or to a third party unrelated to Hearst prior
to the commencement of or during the Option Period, subject in the case of a
sale, assignment or transfer to a third party unrelated to Hearst to a right of
first refusal to HAT as follows:
If Hearst receives a bona fide written offer (the
"Bona Fide Offer") submitted by a third person to acquire the
assets or stock of any of the Option Stations or WPBF-TV,
Hearst will first offer to sell same to HAT at such price and
on such terms and conditions as are contained or included in
the written offer so submitted by such third person. HAT, by
action of its independent directors, will have thirty (30)
days from the date of its receipt of the aforesaid offer from
Hearst (which offer must be accompanied by a copy of the
written offer from the third person) to commit to purchase
such stock or assets, at the same price and on the same terms
and conditions. Should HAT fail to commit to purchase under
this section within the aforesaid thirty (30) day period,
Hearst may sell the applicable Option Station or WPBF-TV to
the offering third person in accordance with the third
person's written offer. Should HAT fail to commit to so
purchase the Option Station, then its right
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of first refusal hereunder with respect hereto shall terminate
and, in the case of either of the Option Stations, HAT's
option with respect thereto pursuant to Section 1 shall also
terminate. In the event that HAT exercises its right of first
refusal, then the purchase price, and all other terms and
conditions for the purchase by HAT shall be the same as those
set forth in the Bona Fide Offer, except that, if any portion
of the proposed purchase price in the Bona Fide Offer includes
non-cash consideration, then HAT shall pay cash consideration
equal to the fair market value of such non-cash consideration,
as determined in accordance with the appraisal procedures as
defined in Section 3 above.
5. Notices. All notices, requests and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally or by facsimile transmission or mailed (first
class postage prepaid) to the parties at the following addresses or facsimile
numbers:
(a) If to Hearst:
The Hearst Corporation
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
(b) If to HAT:
Hearst-Argyle Television, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
Any party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other parties hereto.
6. Assignment. Neither party shall assign or otherwise
transfer this Agreement or any of their respective rights and obligations to any
other party without the prior written consent of the other party hereto, and any
assignment or transfer in violation of the foregoing shall be null and void ab
initio, provided however, that the parties acknowledge that this Agreement shall
be binding upon and inure to the benefit of HAT.
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7. Entire Agreement; Amendments. This Agreement contains
the entire understanding and agreement between the parties hereto with respect
to the subject matter hereof, supersedes and replaces all prior agreements and
understandings (oral or written), and cannot be modified or amended except by an
instrument in writing signed by all parties hereto or their respective
successors or assigns.
8. Governing Law. This Agreement shall bind the parties
and their successors and assigns, and shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
wholly entered into and performed therein, without giving effect to provisions
regarding conflicts of laws.
9. Counterparts. This Agreement may be executed in
separate counterparts, each of which so executed and delivered
shall constitute an original, but all such counterparts shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, each party has caused this Agreement to be
duly executed as of the date first written above.
THE HEARST CORPORATION
/s/ Xxxxxxxx X. Xxxxxxxxx
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By: Xxxxxxxx X. Xxxxxxxxx
Name: Vice President
ARGYLE TELEVISION, INC.
/s/ Xxxxx X. Xxxxx
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By: Xxxxx X. Xxxxx
Name: Chief Financial Officer
Assistant Secretary &
Treasurer
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