ASSET PURCHASE AGREEMENT
BY AND BETWEEN
XXXXXXXX COMMUNICATIONS, INC.
AND
MAX TELEVISION COMPANY
MAX MEDIA PROPERTIES LLC
AND
MAX MEDIA PROPERTIES II LLC
TABLE OF CONTENTS
1. DEFINITIONS................................................................3
2. SALE OF ASSETS/EXCLUDED ASSETS.............................................3
2.1. Sale of Assets.................................................3
2.2. Excluded Assets................................................3
3. PURCHASE PRICE.............................................................6
3.1. Payment........................................................6
3.2. Disbursing Agent...............................................6
4. CLOSING....................................................................6
5. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................7
5.1. RESERVED.......................................................7
5.2. Representations and Warranties as to the Company...............7
a. Organization and Good Standing........................7
b. RESERVED..............................................7
c. No Conflicts..........................................7
d. Financial Statements..................................8
e. Employee Benefit Plans................................9
f. Labor ...............................................11
g. Insurance............................................11
h. Material Contracts..................................12
i. Compliance with Laws.................................12
j. Litigation...........................................12
k. No Brokers...........................................12
l. Consents.............................................12
m. Tax Matters..........................................13
n. RESERVED.............................................15
o. Accounts Receivable..................................15
p. RESERVED.............................................15
q. Representations as to the Company Interests..........15
5.3. Representations and Warranties as to the MMP and the FCC
Licensee Entities............................................15
a. Organization and Good Standing.......................16
b. Capitalization of MMP................................16
c. Organization and Capitalization of the FCC License
Entities............................................16
d. No Conflicts.........................................17
e. Real Property........................................17
f. Personal Property....................................18
g. Financial Statements.................................18
h. FCC..................................................21
i. Intellectual Property................................21
j. Employee Benefit Plans...............................22
k. Labor................................................24
l. Insurance............................................25
m. Material Contracts...................................25
n. Compliance with Laws.................................25
o. Litigation...........................................26
p. Consents.............................................26
q. Environmental........................................26
r. Tax Matters..........................................27
s. Accounts Receivable..................................29
t. Representations as to MMP Interests..................30
5.4. Representations and Warranties as to MTR......................30
a. Organization and Good Standing.......................30
b. Capitalization.......................................30
c. No Conflicts.........................................31
d. Financial Statements.................................31
e. Employee Benefit Plans...............................33
f. Labor................................................33
g. Insurance............................................33
h. Material Contracts...................................33
i. Compliance with Laws.................................33
j. Litigation...........................................33
k. Consents.............................................34
l. Tax Matters..........................................34
m. Dividends............................................36
n. MTR Assets...........................................36
o. Representations as to MTR Interests..................36
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................36
6.1. Organization and Good Standing................................36
6.2. Execution and Effect of Agreement.............................37
6.3. No Conflicts..................................................37
6.4. Consents .....................................................37
6.5. Litigation....................................................37
6.6. No Brokers....................................................37
6.7. Purchaser Qualifications......................................38
7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES............38
7.1. Limitation; Survival..........................................38
8. TAX MATTERS...............................................................38
8.1. Section 338 Election..........................................38
8.2. Tax Returns...................................................39
8.3. Apportionment.................................................40
8.4. Cooperation in Tax Matters....................................40
8.5. Certain Taxes.................................................40
8.6. FIRPTA........................................................40
8.7. Section 754 Election..........................................40
8.8. Closing Date Actions..........................................41
9. ADDITIONAL COVENANTS AND UNDERTAKINGS.....................................41
9.1. Further Assurances and Assistance.............................41
9.2. Access to Information.........................................41
9.3. Conduct of Business Prior to Closing..........................42
9.4. H-S-R Act.....................................................45
9.5. FCC Application...............................................45
(c)FCC Applications to Transfer Certain FCC Licenses.....46
9.6. Books and Records.............................................46
9.7. Employees and Employee Benefits...............................46
9.8. Interruption of Broadcast Transmission........................47
9.9. Interpretation of Certain Provisions..........................48
9.10. Collection of Accounts Receivable.............................48
9.11. Other Acquisitions............................................50
9.12. Payment of Certain Liabilities Prior to Closing...............50
9.13. RESERVED......................................................50
9.14. Value Appreciation Rights and Incentive Fees..................50
10. INDEMNIFICATION..........................................................51
10.1. Indemnification of Purchaser by Sellers.......................51
10.2. Indemnification of Sellers by Purchaser.......................52
10.3. Limitations and Other Provisions Regarding Indemnification
Obligation...................................................52
10.4. Notice of Claim Defense of Action.............................54
10.5 Tax Contests..................................................55
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE..............57
11.1. Conditions Precedent to the Obligation of Purchaser...........57
11.2. Conditions Precedent to the Obligation of Sellers.............58
12. DELIVERIES AT THE CLOSING................................................59
12.1. Deliveries by Sellers.........................................59
12.2. Deliveries by Purchaser.......................................61
13. EXPENSES.................................................................61
14. TERMINATION..............................................................62
14.1 Termination...................................................62
14.2 Procedure and Effect of Termination...........................62
15. NOTICES..................................................................64
16. SELLERS' AGENTS..........................................................65
16.1. Sellers' Agents...............................................65
17. MISCELLANEOUS............................................................66
17.1. Headings......................................................66
17.2. Schedules and Exhibits........................................66
17.3. Execution in Counterparts.....................................66
17.4. Entire Agreement..............................................66
17.5. Governing Law.................................................67
17.6. Modification..................................................67
17.7. Successors and Assigns........................................67
17.8. Waiver........................................................67
17.9. Severability..................................................67
17.10. Announcements.................................................68
17.11. Specific Performance..........................................68
17.12. Fees and Expenses.............................................68
17.13. Third Party Beneficiaries.....................................68
17.14. Interpretation................................................68
ANNEX 1 - DEFINITIONS
ANNEX 2 - SELLERS
EXHIBITS
Exhibit A ......... Deposit Escrow Agreement
Exhibit B ......... Indemnification Escrow Agreement
Exhibit C ......... MMP II Assignment and Assumption Agreement
Exhibit D ......... Time Brokerage Agreements
Exhibit E ......... Opinion of Counsel,
......... Xxxxx & Stant, P.A.
Exhibit F ......... Opinion of Sellers' FCC Counsel
Exhibit G ......... Opinion of Counsel,
......... Xxxxxx & Xxxxxxxx, P.A.
SCHEDULES
5.1a(ii) ......... Encumbrances of Stock
5.1a(vi) ......... Options and Agreements
5.1b ......... Share Brokers
5.1c ......... No Conflicts
5.2b ......... Capitalization
5.2c ......... Conflicts
5.2d ......... Financial Statements
5.2e ......... Employee Benefit Plans
5.2f ......... Labor
5.2g ......... Insurance
5.2h ......... Material Contracts
5.2i ......... Compliance with Laws
5.2j ......... Litigation
5.2k ......... Brokers
5.2l ......... Consents
5.2m(a) ......... Tax Matters
5.2m(c) ......... Tax Basis and Tax Elections
5.2q ......... Company Interest
5.3b ......... Capitalization
5.3d ......... Conflicts
5.3e ......... Real Property
5.3f ......... Personal Property
5.3g ......... Financial Statements
5.3h ......... FCC Licenses
5.3i ......... Intellectual Property
5.3j ......... Employee Benefit Plans
5.3k ......... Labor
5.3k(d) ......... Employee Terminations or Demands
5.3l ......... Insurance
5.3m ......... Material Contracts
5.3n ......... Compliance with Laws
5.3o ......... Litigation
5.3p ......... Consents
5.3q ......... Environmental Matters
5.3r(a) ......... Tax Matters
5.3r(c) ......... Tax Basis and Tax Elections
5.3t ......... Representations as to MMP Interests
5.4b ......... Capitalization
5.4d ......... Financial Matters
5.4h ......... Material Contracts
5.4l(a) ......... Tax Matters
5.4l(c) ......... Tax Basis and Tax Elections
5.4o ......... Representations as to MTR Interests
6.3 ......... Conflicts
6.4 ......... Consents
6.5 ......... Litigation
6.7 ......... Purchaser Qualifications
9.3(c) ......... Planned Asset Dispositions
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this
_____ day of December, 1997, is entered into by and among Xxxxxxxx
Communications, Inc., a Maryland corporation ("Purchaser"), Max Television
Company, a Virginia corporation ("Seller"), and Max Media Properties LLC, a
Virginia limited liability company ("MMP").
RECITALS:
WHEREAS, Seller owns among other things 5,140,500 Class B Membership
Units (out of a total 11,631,431 Membership Units) of MMP, 69% of the equity of
MTR and a 2% limited partnership interests in the Television Licensees (as
defined below) (the "Assets") ; and
WHEREAS, Seller desires to sell, assign and transfer the Assets, and
Purchaser desires to acquire the Assets, all on the terms described herein;
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into a Stock Purchase Agreement (the "MRI Agreement") to
acquire all of the issued and outstanding shares of Max Radio Inc. ("MRI"). MRI
is the owner of 31% of the equity of MTR Holding Corp., a Virginia corporation
("MTR"), 3,069,000 Class A Membership Units (out of a total 11,631,431
Membership Units) of MMP, and a 2% limited partnership interest in Radio License
L.P., a Virginia limited partnership ("RLLP"), the holder of the FCC Licenses of
the Radio Stations (as defined below); and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into a Stock Purchase Agreement (the "Investors Agreement") to
acquire all of the issued and outstanding shares of Max Investors, Inc., a
Virginia corporation ("Investors"). Investors is the owner of 3,133,897 Class C
Membership Units (out of a total 11,631,431 Membership Units) of MMP; and
WHEREAS, the Purchaser has simultaneously with the execution of this
Agreement entered into an Asset Purchase Agreement (the "Management Agreement")
to acquire from Max Management LLC, a Virginia limited liability company
("Management"); 188,034 Class C Membership Units (out of a total of 11,631,431
Membership Units) of MMP and
WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a
total 11,631,431 Membership Units) of MMP; and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of television stations WSYT-TV in the Syracuse, New York market,
WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio
market, WEMT-
TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri and KETK-TV in
the Tyler, Texas market (each a "Television Station" and collectively, the
"Television Stations"); and
WHEREAS, MMP is the owner of the assets (other than the FCC Licenses)
and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina
("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro,
North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG";
together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in
Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM,
inVirginia Beach, Virginia ("WPTE"), and WFOG-FM, inSuffolk, Virginia ("WFOG";
together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio
Station" and collectively, the "Radio Stations"); and
WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky,
pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television
station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement
with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas
pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA
Stations" and for purposes of this Agreement, the LMA Stations, the Radio
Stations and the Television Stations shall be collectively referred to as the
"Stations"); and
WHEREAS, MMP owns a 98% general partnership interest in RLLP; and
WHEREAS, MMP owns a 98% general partnership interest in each of Max
Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max
Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities
LP"), Max Television of Charleston L.P. and Max Television of Tyler L.P. (each a
"Television Licensee" and collectively, the "Television Licensees" and together
with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a
Television Station as indicated on Annex A hereto; and
WHEREAS, the parties desire that, before the Closing and after receipt
of any required approval of the FCC, MMP transfer all partnership interests it
holds in Dayton LP and Tri-Cities LP to Max Media Properties II LLC, a
newly-created Virginia limited liability company ("MMP II") (the "MMP II
Transfers"); and
WHEREAS, the parties desire that, after the MMP II Transfers, but
before the Closing, MMP distribute to MTC all of the membership interests in MMP
II; and
WHEREAS, on the consummation of this Agreement, the MRI Agreement, the
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Investors Agreement and the Management Agreement (collectively, the "Purchase
Agreements"), Purchaser will own, directly or indirectly, all of the 11,631,431
Membership Units of MMP and all general and limited partnership interests in the
FCC Licensee Entities, other than in Dayton LP and Tri-Cities LP (the "MMP II
Licenses"); and
WHEREAS, MMP holds certain assets more fully described below (the
"Excluded Assets") that will not be acquired by Purchaser; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the Assets.
SECTION 1
DEFINITIONS
As used in this Agreement, capitalized terms shall have the meaning
specified in the text hereof or on Annex 1 which is incorporated herein by
reference, which meaning shall be applicable to both the singular and plural
forms of the terms defined.
SECTION 2
SALE OF ASSETS/EXCLUDED ASSETS
2.1. SALE OF ASSETS. Upon and subject to the terms and conditions
stated in this Agreement, on the Closing Date (as hereinafter defined), Seller
hereby agrees to transfer, convey, assign and deliver to Purchaser on the
Closing Date, and Purchaser agrees to acquire, all of Seller's right, title and
interest in the Assets, together with any additions thereto, between the date of
this Agreement and the Closing Date, but excluding those assets described in
Section 2.2, free and clear of any claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever other than as described on Schedule 2.1.
2.2 EXCLUDED ASSETS.
(a) The following assets (collectively, the "Excluded Assets")
may be distributed by MMP to Seller and to the holders of Membership Units in
MMP, and may be distributed by the Company and MTR to their shareholders or its
designee prior to the Closing:
(i) all cash, cash equivalents and cash items of any kind
whatsoever, certificates of deposit, money market instruments, bank balances and
rights in
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and to bank accounts, and Treasury Bills;
(ii) all furniture, fixtures and equipment located at the
principal place of business of MMP, the address of which is 000 Xxxxxx Xxxx,
Xxxxxxxx Xxxxx, Xxxxxxxx 00000 and the leasehold interest therein;
(iii) the Option Agreement with Xxxx and Xxxxx Xxxxxx,
WWBI TV, Inc. dated as of July 11, 1997, as amended and all promissory notes and
agreements related thereto and all related collateral and other documents;
(iv) all notes payable and other amounts due from MCC Air
Inc. and all assets, including real property, promissory notes and agreements
relating solely to the sale and lease of WMQX-AM, Greensboro, NC to
Winston-Salem Radio Corporation and Xxxxxx Broadcasting Corporation;
(v) subject to the terms and conditions of the
Indemnification Escrow Agreement (as defined below), the accounts receivable of
MMP.
(vi) the names "Max Media," "Max Television," "Max Radio"
and "Max Media Properties".
Any distribution of Excluded Assets by MMP will be made pro rata to the holders
of Membership Units in MMP unless otherwise agreed to by Purchaser.
(b) Notwithstanding anything to the contrary in Section 2.2(a)
above, MTR and MMP shall each retain an amount of cash, cash equivalents and
other cash items that are sufficient to cover and pay their respective Closing
Date Liabilities. For purposes of this Agreement, the term "Closing Date
Liabilities" shall mean the liabilities of MTR and MMP (other than for Funded
Debt, liabilities with respect to program contract liabilities accruing after
the Closing Date and liabilities with respect to trade and barter obligations
arising after the Closing Date) whether or not disclosed on any Schedule hereto
(A) as of the Closing Date; (B) for operations prior to the Closing Date; and
(C) for all liabilities of any kind whatsoever under that certain Mutual Release
dated as of January 1, 1997 and that certain Settlement Agreement dated as of
January 17, 1997 (collectively the "Shareholder Settlement Agreements"). Except
as otherwise provided in this Section 2.2(b), the Closing Date Liabilities shall
be determined in accordance with GAAP consistently applied with prior periods,
and shall be consistent with the books and records of MTR and MMP. The amount of
cash, cash equivalents and cash items retained to cover the Closing Date
Liabilities shall not be considered Excluded Assets.
(i) MMP shall deliver to Purchaser at the Closing a
certificate (the "Estimate Certificate") setting forth its good faith estimate
of the Closing Date Liabilities,
4
which shall be used to determine the amount of cash, cash equivalents and other
cash items required to be retained by MTR and MMP pursuant to this Section
2.2(b).
(ii) Within one hundred twenty (120) days of the Closing,
Purchaser shall cause its accountant to prepare and deliver to Seller a
certificate setting forth its calculation of the Closing Date Liabilities (the
"Accountant's Certificate"). The amount of the Closing Date Liabilities as set
forth on the Accountant's Certificate shall be final unless Sellers' Agents
notify Purchaser within thirty (30) days from their receipt of the Accountant's
Certificate that they dispute the Accountant's Certificate. If Sellers' Agents
and Purchaser are unable to agree on the amount of the Closing Date Liabilities
within fifteen (15) days after Sellers' Agents' notice, the parties shall
jointly appoint and engage an independent accountant of national or regional
repute (the "Independent Accountant") to perform an independent evaluation of
the Closing Date Liabilities. The findings of the Independent Accountant as to
the amount of the Closing Date Liabilities shall be final and binding on the
parties hereto.
(iii) Upon the determination of the Closing Date
Liabilities becoming final which is different from the Estimate Certificate
either (A) Purchaser shall be entitled to a payment from the Indemnification
Escrow equal to the amount by which the aggregate amount of the Closing Date
Liabilities exceeds the Closing Date Liabilities shown on the Estimate
Certificate, taking into account any amounts paid from the Indemnification
Escrow under provisions similar to this provision in the MRI Agreement, the
Management Agreement and the Investors Agreement, or (B) Purchaser shall pay to
Disbursing Agent an amount by which the aggregate amount of Closing Date
Liabilities shown on the Estimate Certificate exceeds the Closing Date
Liabilities as finally determined.
(iv) For purposes of determining the amount of the Tax
liabilities of MTR to be included in the Closing Date Liabilities (the "Closing
Date Tax Liabilities"), such Tax liabilities shall include all Tax liabilities
of MTR that are attributable to items of income, gain, loss, deduction and
credit of MMP and the FCC Licensee Entities accruing through and including the
Closing Date, notwithstanding that such items may be reported by MTR, Purchaser,
or Purchaser's Affiliates in Taxable Periods ending after the Closing Date. The
amount of the Tax liabilities attributable to the Tax items of MMP and the FCC
Licensee Entities shall be determined by assuming that the taxable years of MMP
and the FCC Licensee Entities, as well as the taxable years of the Company and
MTR, end as of close of business on the Closing Date and by assuming Purchaser's
compliance with Section 8.8. The Closing Date Tax Liabilities shall not include,
and Purchaser shall have no rights of Indemnification under Section 10 with
respect to, any Tax Liabilities arising from the MMP II Distribution.
5
(v) Notwithstanding anything to the contrary contained in
this Section 2.2, the final determination of the Closing Date Liabilities
hereunder shall not affect Purchaser's indemnification rights pursuant to
Section 10 to the extent the actual Closing Date Liabilities exceed the final
determination thereunder.
SECTION 3
PURCHASE PRICE
3.1 Payment. In consideration for the sale of the Assets, Purchaser
shall pay to Seller the "Purchase Price", payable as follows:
(1) Purchaser has deposited with First Union National Bank, as
Escrow Agent pursuant to the Deposit Escrow Agreement, the Escrow Deposit which
shall be distributed in accordance with the Deposit Escrow Agreement in the form
attached hereto as Exhibit A.
(2) At the Closing, the "Initial Deposit" which shall be held
in Escrow (the "Indemnification Escrow") by Citibank, N.A. as Escrow Agent
pursuant to the Indemnification Escrow Agreement in the form of Exhibit B hereto
(the "Indemnification Escrow Agreement"); and
(3) the balance of the Purchase Price at the Closing, by wire
transfer of federal or other immediately available funds to the accounts
specified by Disbursing Agent pursuant to wire instructions delivered in writing
to Purchaser not later than two (2) Business Days prior to the Closing.
3.2. DISBURSING AGENT. The Disbursing Agent shall disburse the Purchase
Price to Seller in accordance with the Disbursement Agreement.
SECTION 4
CLOSING
The closing of the transaction contemplated by this Agreement (the
"Closing"), subject to fulfillment or waiver of the conditions set forth in
Section 11 hereof, shall be held at the offices of Xxxxx & Stant, P.C., Xxx
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxx 00000, at 10:00 A.M. local
time (but shall be deemed to have occurred at the close of business on such
day), on the later to occur of (a) five Business Days after all applicable
waiting periods under the H-S-R Act shall have expired or terminated, or (b)
five Business Days after the Final Order (the date of Closing being the "Closing
Date"), unless (i)
6
Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser
shall give Sellers reasonable notice of the Closing, or (ii) the parties shall
mutually agree upon a different date or location; provided, however, that in no
event shall the Closing be held prior to March 18, 1998; and provided, further,
that in the event the Closing is postponed past July 15, 1998, due to a
postponement of the Closing under Section 9.8(b) or otherwise, Seller, in its
sole discretion, may postpone the Closing to September 1, 1998. In no event
shall Closing occur later than the Termination Date.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1. RESERVED
5.2. REPRESENTATIONS AND WARRANTIES AS TO SELLER .
Seller hereby represents and warrants to Purchaser as follows:
a. ORGANIZATION AND GOOD STANDING. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia hereto and has full corporate power and authority to
carry on its business as it is now being conducted and to own and use the assets
owned and used by it. The Company is qualified as a foreign corporation and is
in good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect.
Other than stock of MTR, the Company does not own any direct or indirect
subsidiary corporation.
b. RESERVED
c. NO CONFLICTS. Except as described on Schedule 5.2c, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate any provision of the articles
of incorporation or by-laws of Seller, (ii) violate any provision of applicable
law, rule and regulation, which violation would prevent or materially interfere
with Seller's ability to perform hereunder or have a Material Adverse Effect, or
(iii) conflict with or result in a breach of, or give rise to a right of
termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Seller is a party or to which its property is subject, or
constitute a default thereunder, where such conflict, breach, right of
termination, acceleration or default would prevent or materially interfere with
the Seller's ability to perform hereunder or have a Material Adverse
7
Effect.
d. FINANCIAL STATEMENTS. Seller has provided or made available
to Purchaser copies of the Financial Statements. The Financial Statements have
been prepared in accordance with GAAP consistently applied with prior periods.
The Financial Statements present fairly the financial position of the Company as
at and for the periods indicated therein. Except as set forth on Schedule 5.2.d
hereto, since December 31, 1996, there has not been any Material Adverse Effect
on the business, financial condition, operations or results of operations of
Seller taken as a whole. Without limiting the generality of the foregoing, since
December 31, 1996, except as set forth on Schedule 5.2d:
(i) Seller has not sold, leased, transferred, or assigned
Asset;
(ii) Seller has not entered into any material agreement,
contract, lease, or license affecting the Assets;
(iii) Seller has not accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which Seller is a party or by which Seller is bound;
(iv) Seller has not imposed any security interest upon any
of the Assets;
(viii) Seller has not granted any license or sublicense of
any material rights under or with respect to any Asset;
(ix) there has been no change made or authorized in the
charter or bylaws of Seller;
(x) the Assets have not experienced any material damage,
destruction, or loss (whether or not covered by insurance);
(xi) Seller has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Company Plan or
Company Benefit Arrangement);
(xii) Seller has not made or changed any material Tax
election or taken any other action with respect to Taxes inconsistent with past
practices affecting the Assets;
8
(xiii) Seller has not adopted any material change in any
method of accounting or accounting practice, except as contemplated or required
by GAAP; and
(xiv) except as set forth in this Agreement, Seller has
not committed to any of the foregoing.
e. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to
Benefit Plans and Benefit Arrangements:
(a) Schedule 5.2e completely and accurately lists all
Company Plans and Company Benefit Arrangements and specifically identifies any
that are Qualified Plans. Neither Seller nor any ERISA Affiliate has ever
maintained or contributed to any Qualified Plans other than those listed on
Schedule 5.2e. The Qualified Plan has always qualified in form and operation
under Code Section 401(a) and has a currently applicable determination letter
from the Internal Revenue Service, and its trust has always been exempt under
Code Section 501, and nothing has occurred with respect to such plan and trust
that could cause the loss of such qualification or exemption or the imposition
of any liability, lien, penalty, or tax under ERISA or the Code.
(b) Each Company Plan and each Company Benefit Arrangement
has been maintained in accordance with its constituent documents and with all
applicable provisions of the Code, ERISA and other domestic and foreign laws,
including federal, state, and foreign securities laws and all laws respecting
reporting and disclosure. No Company Plan holds employer securities.
(c) Neither Seller nor any ERISA Affiliate (since August 1,
1992) has sponsored, maintained, or had any liability (direct or indirect,
actual or contingent) with respect to any Benefit Plan subject to Title IV of
ERISA. Neither Seller nor any ERISA Affiliate has ever made or been obligated to
make, or reimbursed or been obligated to reimburse another employer for,
contributions to any multiemployer plan (as defined in ERISA Section 3(37)).
Seller has no liability (whether actual, contingent, or otherwise) with respect
to any Benefit Plan or Benefit Arrangement that is not a Company Benefit
Arrangement or with respect to any Benefit Plan sponsored or maintained (or
which has been or should have been sponsored or maintained) by any ERISA
Affiliate; and no facts exist that could reasonably be expected to result in
such liability, as a result of termination, withdrawal or funding waiver with
respect to any such plan, program, or arrangements.
(d) There are no pending claims or lawsuits by, against, or
relating to any non-Company Benefit Plans or non-Company Benefit Arrangements
that would, if successful, result in liability for Seller, and no claims or
lawsuits (other than routine benefit
9
claims) have been asserted, instituted or, to the Knowledge of Seller,
threatened by, against, or relating to any Company Plan or Company Benefit
Arrangement, and Seller does not have Knowledge of any fact that could form the
basis for any such claim or lawsuit. The Company Plans and Company Benefit
Arrangements are not presently under audit or examination (and have not received
notice of a potential audit or examination) by any governmental authority, and
no matters are pending with respect to the Qualified Plan under any governmental
compliance programs.
(e) No Company Plan or Company Benefit Arrangement contains
any provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions this Agreement contemplates, and Seller has not declared or
paid any bonus or other incentive compensation or established any severance
plan, program, or arrangement in contemplation of the transactions contemplated
by this Agreement.
(f) With respect to each Company Plan, there have been no
violations of Code Section 4975 or ERISA Sections 404 or 406 as to which
successful claims would result in any liability for Seller or any Person
required to be indemnified by it.
(g) Seller has made all required contributions to the
Company Plan as of the last day of each plan's most recent fiscal year, all
benefits accrued under any unfunded Company Plan or Company Benefit Arrangement
will have been paid, accrued, or otherwise adequately reserved in accordance
with generally accepted accounting principles; and all monies withheld from
employee paychecks with respect to Company Plans have been transferred to the
appropriate plan within the timing required by governmental regulations.
(h) Seller and its ERISA Affiliates have complied with the
health continuation rules of Code Sections 4980B (and its predecessor) and with
Code Section 5000. No employee or former employee of Seller nor beneficiary of
any such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits subject to reporting
under Statement of Financial Accounting Standards No. 106, other than as
required by Code Section 4980B or other applicable law.
(i) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Seller that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Code Sections 280G, 404 or 162.
10
f. LABOR. With respect to employees of and service providers
to Seller, except as set forth on Schedule 5.2f:
(a) Seller is and has been in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and has not and is not engaged
in any unfair labor practice.
(b) The employees of Seller are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against, or currently being negotiated by, the Company, and
to Seller's knowledge, no labor representation organization effort exists nor
has there been any such activity within the past three years.
(c) All Persons classified by Seller as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and Seller has fully and accurately reported their compensation on
IRS Forms 1099 when required to do so.
(d) Since December 31, 1996, Seller has not employed any
employees.
(e) There is no charge or compliance proceeding actually
pending or threatened against Seller before the Equal Employment Opportunity
Commission or any state, local, or foreign agency responsible for the prevention
of unlawful employment practices.
g. INSURANCE. Schedule 5.2g hereto contains a list of all
insurance policies of Seller and describes coverage thereunder (including
whether occurrence or claims made), other than employee-benefit related
insurance policies. All such policies are legal, valid, binding, enforceable and
in full force and effect subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to the exercise of judicial discretion in accordance with general
principles of equity (whether applied by court of law or equity). There are no
existing breaches or defaults by Seller or, to Seller's Knowledge by any other
party with respect to such policies, and no notice of cancellation or
termination has been received.
h. MATERIAL CONTRACTS. Schedule 5.2h hereto contains a list of
all the Material Contracts and true copies of such agreements have been
furnished to Purchaser or have been made available to Purchaser. All Material
Contracts listed on Schedule 5.2h are
11
legal, valid and binding obligations of Seller enforceable in accordance with
their terms and in full force and effect subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the right of
creditors generally and to the exercise of judicial discretion in accordance
with general principles of equity (whether applied by a court of law or equity).
There exists no default or event which, with notice or lapse of time, or both,
would constitute a default by Seller or to the Company's Knowledge any other
party to any such Material Contract or which would permit termination,
modification or acceleration. Seller has not received notice (or otherwise has
knowledge) that any party to any Material Contract intends to cancel or
terminate any such agreement or to exercise or not to exercise any option to
renew thereunder.
i. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2i,
Seller is in material compliance with all material applicable Federal, state and
local laws, rules and regulations, and to Seller's knowledge, there are no
actions threatened or pending alleging noncompliance therewith.
j. LITIGATION. Except as set forth on Schedule 5.2j hereto,
there is no suit, claim, action, proceeding or arbitration pending or, to
Seller's Knowledge, threatened against Seller. There is no outstanding citation,
order, judgment, writ, injunction, or decree of any court, government, or
governmental or administrative agency specifically against or specifically
affecting Seller, except as disclosed on Schedule 5.2j.
k. NO BROKERS. Except as described on Schedule 5.2k, Seller
has not employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with the sale of the
Stock and the transactions contemplated by this Agreement.
l. CONSENTS. Except (a) as set forth on Schedule 5.2l hereto,
(b) for filings pursuant to the H-S-R Act, or (c) the FCC Applications, no
filing, consent, approval or authorization of any governmental authority or of
any third party on the part of Seller is required in connection with the
execution and delivery of this Agreement by Seller or the consummation of the
transactions contemplated hereby (including any consents required under any
Company Material Contract as a result of the change in control contemplated
hereby).
m. TAX MATTERS.
(a) Except as set forth on Schedule 5.2m(a) hereto:
(i) All Tax Returns required to be filed by or
with respect to Seller have been filed when due in a timely fashion, and all Tax
Returns required to be
12
filed by or with respect to Seller for Taxable Periods ending on or before
December 31, 1997 will have been filed prior to the Closing Date, even if such
Tax Returns are not yet due. All Tax Returns filed by or with respect to Seller
are true, correct and complete in all material respects.
(ii) Seller has paid in full on a timely basis all
Taxes owed by Seller, whether or not shown on any Tax Return, and Seller will
have paid prior to the Closing Date all Taxes owed with respect to Taxable
Periods ending on or before December 31, 1997, even if such Taxes are not yet
due.
(iii) Seller's liability for unpaid Taxes did not, as
of the date of the Financial Statements exceed the liability for such Taxes
(excluding reserves for deferred Taxes) set forth on the Financial Statements.
Seller has no liability for unpaid income Taxes other than its Tax liability
attributable to Seller's allocable share of MMP's items of income, gain, loss,
deduction and credit accruing through the date hereof.
(iv) Seller has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or other
third party.
(v) No Tax Proceeding is currently pending with
respect to Seller and Seller has not received notice from any Tax Authority that
it intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is currently in effect with respect to the assessment, collection or
payment of Taxes of Seller or for which Seller is liable.
(vii) No extension of the time within which to file
any Tax Return of Seller is currently in effect.
(viii) No deficiency for Taxes has been proposed,
asserted, or assessed against Seller.
(ix) There are no liens on the assets of Seller
relating or attributable to Taxes (except liens for Taxes not yet due).
(x) Seller is not and has not been at any time during
the preceding five years a "United States real property holding corporation"
within the
13
meaning of Section 897(c)(2) of the Code.
(xi) There is no agreement or consent made under
Section 341(f) of the Code affecting Seller.
(xii) Seller has not agreed to, nor is it required
to, make any adjustments under Section 481 (a) of the Code as a result of a
change in accounting methods.
(xiii) Seller is not and has not at any time been a
party to a tax sharing, tax indemnity or tax allocation agreement, and Seller
has not assumed the Tax liability of any other entity or person under contract.
(xiv) Seller is not and has not at any time been a
member of an affiliated group filing a consolidated federal income tax return
and does not have any liability for the Taxes of another entity or person under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), as a transferee or successor, or otherwise.
(xv) Except for MMP and the Television Licensees,
Seller is not a party to any joint venture, partnership or other arrangement
that is treated as a partnership for U.S. federal income tax purposes.
(xvi) None of Seller's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(b) Seller has furnished or otherwise made available to
Purchaser correct and complete copies of (i) all income, franchise and other
material Tax Returns filed by or with respect to Seller since January 1, 1994;
and (ii) all examination reports, statements of deficiencies and closing
agreements with respect to Seller relating to Taxes.
(c) Schedule 5.2m(c) contains complete and accurate
descriptions of (i) Seller's basis in the stock of MTR and its tax capital
account in MMP, and (ii) material Tax elections made by or with respect to
Seller. Seller has no net operating losses or other Tax attributes presently
subject to limitation under Code Sections 382, 383 or 384, or the federal
consolidated return regulations.
n. RESERVED
o. ACCOUNTS RECEIVABLE. Seller has no accounts receivable
14
p. RESERVED
q. REPRESENTATIONS AS TO SELLER INTERESTS.
(i) Seller is the record and the beneficial owner of
5,140,500 Class B Membership Units (out of a total 11,631,431 Membership Units)
of MMP, sixty-nine (69) shares (out of a total one hundred (100) issued and
outstanding shares) of the issued and outstanding shares of MTR and a 2% limited
partnership interest in each Television Licensee (collectively, the "Seller
Interests"); (ii) Seller holds of record and owns beneficially Seller Interests
free and clear of any lien, security interest, pledge or encumbrance other than
those set forth on Schedule 5.2q hereof, all of which will be released at or
before the Closing; (iii) Seller has full power and authority to enter into this
Agreement, and the consummation of the transactions contemplated hereby has been
duly authorized by all necessary action on the part of Seller; (iv) this
Agreement has been duly executed and delivered by Seller and constitutes a
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to the exercise of judicial discretion in accordance with general
principles of equity (whether applied by a court of law or equity); and (v)
except as described on Schedule 5.2q, Seller Interests are not subject to any
option(s) warrant(s), voting trusts, outstanding proxies, registration rights
agreement(s), or other agreements regarding voting rights.
5.3. REPRESENTATIONS AND WARRANTIES AS TO THE MMP AND THE FCC LICENSEE
ENTITIES.
Seller and MMP, jointly and severally, hereby represent and warrant to
Purchaser as to MMP and the FCC Licensee Entities as follows:
a. MMP ORGANIZATION AND GOOD STANDING. MMP is a limited
liability company duly organized and validly existing under the laws of Virginia
and has full corporate power and authority to carry on its business as it is now
being conducted and to own and use the assets owned and used by it. To the
extent required by law, MMP is qualified as a foreign limited liability company
and is in good standing under the laws of each jurisdiction in which the conduct
of its business or the ownership of its properties requires such qualification.
MMP owns 98% of the outstanding partnership interests in the FCC Licensee
Entities.
b. CAPITALIZATION OF MMP. The designations of each class of
the membership units of MMP and the number of authorized and issued and
outstanding membership units thereof is as described on Schedule 5.3b to the MRI
Agreement. All
15
membership units have been validly issued and are fully paid and nonassessable
and are held of record by the respective members of MMP as set forth on Schedule
5.3b to the MRI Agreement. Except as described on Schedule 5.3b to the MRI
Agreement, (i) there are no other issued or outstanding equity securities of
MMP; (ii) there are no membership or value appreciation rights, phantom
membership rights, profit participation rights, or other similar rights with
respect to membership units outstanding; and (iii) there are no other issued or
outstanding membership interests or other securities of MMP convertible or
exchangeable at any time into equity securities of MMP. Except as set forth in
the Operating Agreement of MMP as amended, MMP is not subject to any commitment
or obligation that would require the issuance or sale of additional membership
interests or membership units of MMP at any time under options, subscriptions,
warrants, rights or any other obligations. Schedule 5.3b to the MRI Agreement
sets forth the equity interests in any corporation, partnership, limited
liability company, joint venture or other entity owned by MMP.
c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE
ENTITIES. Each FCC License Entity is a limited partnership duly organized and
validly existing under the laws of the Commonwealth of Virginia and has full
partnership power and authority to carry on its business as it is now being
conducted and to own and use the assets owned and used by it. Each FCC License
Entity is qualified as a foreign corporation and is in good standing under the
laws of each jurisdiction in which the conduct of its business or the ownership
of its properties requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect. No FCC License Entity owns
any direct or indirect subsidiaries. MMP is the sole general partner and owns
ninety-eight percent (98%) of the partnership interests of each of the FCC
License Entities. Seller is the sole limited partner and owns two percent (2%)
of the partnership interests of each of the FCC License Entities other than
RLLP. MRI is the sole limited partner and owns two percent (2%) of the
partnership interests of RLLP. All such partnership interests have been validly
issued and are fully paid and nonassessable and are held of record by the
respective partners as set forth above. There are no (i) other issued or
outstanding equity securities of any FCC License Entity, (ii) partnership or
value appreciation rights, phantom partnership rights, profit participation
rights, or other similar rights with respect to partnership interests
outstanding and (iii) other issued or outstanding partnership interests or other
securities of any FCC License Entity convertible or exchangeable at any time
into equity securities of such FCC License Entity. No FCC License Entity is
subject to any commitment or obligation that would require the issuance or sale
of additional partnership interests of any FCC License Entity at any time under
options, subscriptions, warrants, rights or any other obligations. No FCC
License Entity holds any equity interest in any corporation, partnership,
limited liability company, joint venture or other entity.
d. NO CONFLICTS. Except as described on Schedule 5.3d to the
MRI Agreement, neither the execution and delivery of this Agreement nor the
consummation of
16
the transactions contemplated hereby will (i) violate any provision of the
articles of organization or operating agreement of MMP or the limited
partnership agreements of the FCC Licensee Entities, (ii) violate any provision
of applicable material law, rule and regulation, or (iii) conflict with or
result in a breach of, or give rise to a right of termination of, or accelerate
the performance required by the terms of any judgment, court order or consent
decree, or any material agreement, indenture, mortgage or instrument to which
either MMP or any FCC Licensee Entity is a party or to which any of their
property is subject, or constitute a default thereunder, where such conflict,
breach, right of termination, acceleration or default would have a MMP Material
Adverse Effect.
e. REAL PROPERTY. The MMP Real Property owned and all
leaseholds and other interests in MMP Real Property used or useful in the
Business and all buildings, structures, towers, and improvements thereon used or
useful in the business and operations of the Stations are listed on Schedule
5.3e to the MRI Agreement and, except for Permitted Encumbrances and as
disclosed in Schedule 5.3e to the MRI Agreement, MMP has good and marketable fee
simple title (insurable at standard rates by a reputable national title insurer)
to all fee estates included in the Real Property, and good title to all other
MMP Real Property, in each case clear of all liens. The FCC Licensee Entities
own no real property, leaseholds or other interests in real property. No portion
of the MMP Real Property or any building, structure, fixture or improvement
thereon is the subject of, or affected by, any condemnation, eminent domain or
inverse condemnation proceeding currently instituted or pending or, to MMP's
Knowledge, threatened.
MMP has a valid leasehold interest in all leased property and subleases
to which it is a party, and MMP is the owner and holder of all the leased
property purported to be granted by such leases and subleases. The MMP Real
Property and the leases and subleases listed on Schedule 5.3e to the MRI
Agreement constitute all of the real property owned, leased or used by MMP in
the business and operations of the Stations, which is material to the business
and operations of the Stations. The Sellers have delivered or caused to be
delivered to the Purchaser correct and complete copies of the deeds, leases and
subleases listed in Schedule 5.3e to the MRI Agreement. With respect to each
lease and sublease listed in Schedule 5.3e to the MRI Agreement:
(a) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to the exercise of judicial
discretion in accordance with several principles of equity (whether applied by a
court of law or equity);
(b) MMP and, to MMP's knowledge, no other party to
the lease or sublease is in material breach or default, and no event has
occurred which, with notice
17
or lapse of time, would constitute a material breach or default or permit
termination, modification, or acceleration thereunder;
(c) MMP and, to MMP's knowledge, no other party to
the lease or sublease has repudiated any material provision thereof;
(d) MMP is not a party to and, to MMP's knowledge,
there are no material disputes, oral agreements, or forbearance programs in
effect as to the lease or sublease;
(e) except as set forth on Schedule 5.3e to the MRI
Agreement, MMP has not assigned, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or subleasehold; and
(f) all facilities leased or subleased thereunder
material to the operation of the Stations have received all approvals of
governmental authorities (including material licenses and permits) required in
connection with the operation thereof, and have been operated and maintained in
accordance with applicable laws, rules, and regulations in all material
respects.
f. PERSONAL PROPERTY. Schedule 5.3f to the MRI Agreement lists
as of the date hereof all items of Personal Property having a fair market value
in excess of $5,000.00. Except as set forth on Schedule 5.3f to the MRI
Agreement, MMP has good and marketable title to all of its material items of
tangible personal property and assets used or useful by MMP located on its
premises or shown on the MMP Financial Statements are free and clear of all
liens, security interests and encumbrances other than those that would not
materially affect Purchaser's use or ownership of such personal property after
the Closing. The tangible personal property of MMP has been maintained in
accordance with normal industry practice and is in good condition and repair
given the age and use of such property (subject to normal wear and tear) and is
adequate for its present use by MMP.
g. FINANCIAL STATEMENTS. MMP has provided or made available to
Purchaser copies of the MMP Financial Statements. The MMP Financial Statements
have been prepared in accordance with GAAP consistently applied with prior
periods except in the case of the unaudited MMP Financial Statements, the
absence of year-end audit adjustments and notes. The MMP Financial Statements
present fairly the financial position of MMP as at and for the periods indicated
therein, and are consistent with the books and records of MMP. Except as set
forth on Schedule 5.3g to the MRI Agreement hereto, since December 31, 1996,
there has not been any Material Adverse Effect on the business, financial
condition, operations, or results of operations of MMP taken as a whole. Without
limiting the generality of the foregoing, since that date, except as described
on
18
Schedule 5.3g to the MRI Agreement:
(i) MMP has not sold, leased, transferred, or
assigned any material assets, tangible or intangible, outside the ordinary
course of business;
(ii) MMP has not entered into any material
agreement, contract, lease, or license outside the ordinary course of business;
(iii) MMP has not accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which MMP is a party or by which MMP is bound;
(iv) MMP has not imposed any security interest upon
any of its assets, tangible or intangible;
(v) MMP has not made any material capital
expenditures outside the ordinary course of business;
(vi) MMP has not made any material capital
investment in, or any material loan to, any other Person outside the ordinary
course of business;
(vii) MMP has not created, incurred, assumed, or
guaranteed more than $45,000,000.00 in aggregate indebtedness for borrowed money
and capitalized lease obligations;
(viii) MMP has not granted any license or
sublicense of any material rights under or with respect to any Intellectual
Property;
(ix) there has been no change made or authorized in
the operating agreement of MMP;
(x) MMP has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xi) MMP has not made any loan to, or entered into
any other transaction with, any of its managers, officers, and employees outside
the ordinary course of business;
(xii) MMP has not entered into any employment
contract outside the ordinary course of business or collective bargaining
agreement, written or oral, or modified the terms of any such existing contract
or agreement;
19
(xiii) MMP has not granted any increase in the base
compensation of any of its members outside the ordinary course of business;
(xiv) MMP has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its managers, officers, and
employees (or taken any such action with respect to any other MMP Plan or MMP
Benefit Arrangement);
(xv) MMP has not made any other material change in
employment terms for any of its members or employees outside the ordinary course
of business;
(xvi) MMP has not made or changed any material Tax
election or taken any other action with respect to Taxes not in the ordinary
course of business and consistent with past practice;
(xvii) MMP has not made any distributions other
than in the ordinary course of business, and has not made any non-pro rata
distributions;
(xviii) MMP has not adopted any material change in
any method of accounting or accounting practice, except as contemplated or
required by GAAP; and
20
(xix) except as contemplated by this Agreement, the
Investors Agreement, the Management Agreement, the MRI Agreement, and Assignment
and Assumption Agreement by and between MMP and the Max Media LLC II
Distribution Agreement, MMP has not committed to any of the foregoing.
h. FCC. MMP and the FCC Licensee Entities have been and
currently are operated in material compliance with the terms of the FCC
Licenses, the Communications Act of 1934, as amended, and applicable rules,
regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC
Licenses, a true and complete list of which is set forth on Schedule 5.3h to the
MRI Agreement, and true and complete copies of each of which have been delivered
to Purchaser, are valid and in full force and effect. Except as set forth on
Schedule 5.3h to the MRI Agreement, no application, action or proceeding is
pending for the renewal or modification of any of the FCC Licenses and, to
Sellers' and MMP's Knowledge, there is not now before the FCC any investigation
or complaint against MMP or the FCC Licensee Entities relating to the Stations,
the unfavorable resolution of which would impair the qualifications of the FCC
Licensee Entities to hold any FCC Licenses. Except as set forth on Schedule 5.3h
to the MRI Agreement, there is no proceeding pending before the FCC, and there
is no outstanding notice of violation from the FCC with respect to the Stations.
Except as set forth on Schedule 5.3h to the MRI Agreement, no order or notice of
violation has been issued by any governmental entity which permits, revocation,
adverse modification or termination of any FCC License. Except as set forth on
Schedule 5.3h to the MRI Agreement and except for those conditions or
restrictions appearing on the face of the FCC Licenses, or other licenses, none
of the FCC Licenses or other licenses is subject to any restriction or condition
which would limit the operation of the Stations as currently operated. The FCC
Licenses listed in Schedule 5.3h to the MRI Agreement are currently in effect
and are not subject to any liens, or other encumbrances. No license renewal
applications are pending with respect to any of the FCC Licenses. As of the date
hereof, Sellers, the Company, MMP, and the FCC License Entities have no reason
to believe that the FCC would not renew the FCC Licenses in the ordinary course
for a full license term without any adverse conditions, upon the timely filing
of appropriate applications and payment of the required filing fee. As of the
date hereof, Sellers, the Company, MMP and the FCC Licensee Entities have no
reason to believe that the FCC would not grant the FCC Application in the
ordinary course without any adverse conditions. All documents required by 47
C.F.R. Section 73.3526 to be kept in each Station's public inspection files are
in such file, and such file will be maintained in proper order and complete up
to and through the Closing Date.
i. INTELLECTUAL PROPERTY. Set forth on Schedule 5.3i to the
MRI Agreement is a complete list of all Intellectual Property owned by or
licensed to MMP on the date hereof material to the operations of the Stations.
To MMP's Knowledge, except as
21
otherwise set forth on Schedule 5.3i to the MRI Agreement hereto, MMP owns such
Intellectual Property free and clear of any royalty, lien, encumbrance or charge
and does not interfere with the rights of others. Except as set forth on
Schedule 5.3i to the MRI Agreement, MMP has not received any written notice or
written claim that any such Intellectual Property is not valid or enforceable,
or of any infringement upon or conflict with any patent, trademark, service
xxxx, copyright or trade name of any third party by MMP. Except as set forth on
Schedule 5.3i to the MRI Agreement, MMP has not given any notice of infringement
to any third party with respect to any of the Intellectual Property and to MMP's
Knowledge no such infringement exists. There is no Intellectual Property owned
by or licensed to the FCC Licensee Entities.
j. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to
Benefit Plans and Benefit Arrangements:
(a) Schedule 5.3j to the MRI Agreement completely and
accurately lists all MMP Plans and MMP Benefit Arrangements currently in
existence and specifically identifies any that are Qualified Plans. Since
January 1, 1996 (the date of formation of MMP), MMP has maintained or
contributed solely to the Qualified Plans listed on Schedule 5.3j to the MRI
Agreement. The Qualified Plans listed on Schedule 5.3j to the MRI Agreement have
always qualified in form and operation under Code Section 401(a) and have a
currently applicable determination letter from the Internal Revenue Service, and
its trust has always been exempt under Code Section 501, and nothing has
occurred with respect to such plan and trust that could cause the loss of such
qualification or exemption or the imposition of any liability, lien, penalty, or
tax under ERISA or the Code.
(b) Each MMP Plan and each MMP Benefit Arrangement has been
maintained in accordance with its constituent documents and with all applicable
provisions of the Code, ERISA and other domestic and foreign laws, including
federal, state, and foreign securities laws and all laws respecting reporting
and disclosure. No MMP Plan holds employer securities.
(c) Neither MMP nor any ERISA Affiliate has sponsored,
maintained, or had any liability (direct or indirect, actual or contingent) with
respect to any Benefit Plan subject to Title IV of ERISA. Neither MMP nor any
ERISA Affiliate has never made or been obligated to make, or reimbursed or been
obligated to reimburse another employer for, contributions to any multiemployer
plan (as defined in ERISA Section 3(37)). MMP has no liability (whether actual,
contingent, or otherwise) with respect to any Benefit Plan or Benefit
Arrangement that is not a MMP Benefit Arrangement or with respect to any Benefit
Plan sponsored or maintained (or that has been or should have been sponsored or
maintained) by any ERISA Affiliate; and no facts exist that could reasonably be
expected to result in such liability, as a result of termination, withdrawal or
22
funding waiver with respect to any such plan, program, or arrangements.
(d) There are no pending claims or lawsuits by, against, or
relating to any non-MMP Benefit Plans or non-MMP Benefit Arrangements that
would, if successful, result in liability for M MP, and no claims or lawsuits
(other than routine benefit claims) have been asserted, instituted or, to the
knowledge of Sellers and the Company after due inquiry of MMP, threatened by,
against, or relating to any MMP Plan or MMP Benefit Arrangement, and MMP has
advised Sellers and the Company that MMP does not have knowledge of any fact
that could form the basis for any such claim or lawsuit. MMP Plans and MMP
Benefit Arrangements are not presently under audit or examination (and have not
received notice of a potential audit or examination) by any governmental
authority, and no matters are pending with respect to the Qualified Plan under
any governmental compliance programs.
(e) No MMP Plan or MMP Benefit Arrangement contains any
provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions this Agreement contemplates, and MMP has not declared or
paid any bonus or other incentive compensation or established any severance
plan, program, or arrangement in contemplation of the transactions contemplated
by this Agreement, the Investors Agreement, the Management Agreement or the MRI
Agreement.
(f) With respect to each MMP Plan, there have been no
violations of Code Section 4975 or ERISA Sections 404 or 406 as to which
successful claims would result in any liability for MMP or any Person required
to be indemnified by it.
(g) MMP has made all required contributions to each MMP
Plan as of the last day of each plan's most recent fiscal year, all benefits
accrued under any unfunded MMP Plan or MMP Benefit Arrangement will have been
paid, accrued, or otherwise adequately reserved in accordance with generally
accepted accounting principles; and all monies withheld from employee paychecks
with respect to MMP Plans have been transferred to the appropriate plan within
the timing required by governmental regulations.
(h) MMP and its ERISA Affiliates have complied with the
health continuation rules of Code Sections 4980B (and its predecessor) and with
Code Section 5000. No employee or former employee of MMP nor beneficiary of any
such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits subject to reporting
under Statement of Financial Accounting Standards No. 106, other than as
required by Code Section 4980B or other applicable law.
23
(i) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of MMP that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Code Sections 280G, 404 or 162.
(j) The FCC Licensee Entities employ no employees and do
not and have not in the past maintained or contributed to any Benefit Plans or
Benefit Arrangements.
k. LABOR. Except as set forth on Schedule 5.3k to the MRI
Agreement, with respect to employees of and service providers to MMP and the FCC
Licensee Entities:
(a) MMP has been in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including without limitation
any such laws respecting employment discrimination, workers' compensation,
family and medical leave, the Immigration Reform and Control Act, and
occupational safety and health requirements, and have not and are not engaged in
any unfair labor practice.
(b) The employees of MMP are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against, or currently being negotiated by, MMP or, to MMP's
Knowledge, no labor representation organization effort exists nor has there been
any such activity within the past three years.
(c) All Persons classified by MMP and the FCC Licensee
Entities as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and MMP has fully and accurately
reported their compensation on IRS Forms 1099 when required to do so.
(d) Since December 31, 1996, except as described on
Schedule 5.3k(d) to the MRI Agreement, no employee of or group of employees, the
loss of whom would have significant adverse effect on the business of MMP or the
FCC Licensee Entities, has notified MMP of his or their intent to (A) terminate
his or their relationship with MMP or the FCC Licensee Entities, or (B) make any
demand for material payments or modifications of his or their arrangements with
MMP.
(e) There is no charge or compliance proceeding actually
pending or, to the knowledge of MMP, threatened against MMP or the FCC Licensee
Entities before the Equal Employment Opportunity Commission or any state, local,
or foreign agency
24
responsible for the prevention of unlawful employment practices.
(f) The FCC Licensee Entities do not employ, and have not
in the past, employed employees.
l. INSURANCE. Schedule 5.3l to the MRI Agreement hereto
contains a list of all insurance policies concerning the Business and describes
coverage (including whether occurrence or claims made), other than
employee-benefit related insurance policies. All such policies are legal, valid,
binding, enforceable and in full force and effect subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and to the exercise of judicial discretion in
accordance with general principles of equity (whether applied by court of law or
equity). There are no existing breaches or defaults with respect to such
policies, and no notice of cancellation or termination has been received.
m. MATERIAL CONTRACTS. Schedule 5.3m to the MRI Agreement
hereto contains a list of all the Material Contracts of MMP and the FCC Licensee
Entities (other than cash agreements for the sale of advertising time and
retransmission consent agreements) and true copies of such agreements have been
furnished to Purchaser or have been made available to Purchaser. All Material
Contracts are legal, valid and binding obligations of MMP or the FCC Licensee
Entities, as the case may be, enforceable in accordance with their terms and in
full force and effect. There exists no default or event which, with notice or
lapse of time, or both, would constitute a default by any party to any such
Material Contract or which would permit termination, modification or
acceleration. Neither MMP nor the FCC Licensee Entities have received notice,
nor to MMP's Knowledge, does any party to any Material Contract intend to cancel
or terminate any such agreement or to exercise or not to exercise any option to
renew thereunder.
n. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.3n
to the MRI Agreement, MMP and the FCC Licensee Entities are in material
compliance with all material applicable Federal, state and local laws, rules and
regulations, and there are no actions threatened or pending alleging
noncompliance therewith.
25
o. LITIGATION. Except as set forth on Schedule 5.3o to the MRI
Agreement hereto, there is no suit, claim, action, proceeding or arbitration
pending or, to MMP's Knowledge, threatened against MMP or the FCC Licensee
Entities that seeks to enjoin or obtain damages in respect of MMP's conduct of
the Business or operation of the Stations, or the transactions contemplated
hereby. There is no outstanding citation, order, judgment, writ, injunction, or
decree of any court, government, or governmental or administrative agency
against or affecting the Business, MMP or the FCC Licensee Entities, except as
disclosed on Schedule 5.3o to the MRI Agreement.
p. CONSENTS. Except (a) as set forth on Schedule 5.3p to the
MRI Agreement hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC
Application, no filing, consent, approval or authorization of any governmental
authority or of any third party on the part of MMP or the FCC Licensee Entities
is required in connection with the execution and delivery of this Agreement by
Sellers or the consummation of any of the transactions contemplated hereby
(including any consents required under any MMP or FCC Licensee Entities contract
as a result of the change in control contemplated hereby).
q. ENVIRONMENTAL. Except as set forth on Schedule 5.3q to the
MRI Agreement hereto:
(a) All of the operations of MMP at or from any MMP Real
Property comply in all material respects with applicable Environmental Laws. MMP
has not engaged in or permitted any operations or activities upon any of the MMP
Real Property for the purpose of or involving the treatment, storage, use,
generation, release, discharge, emission, or disposal of any Hazardous
Substances at the MMP Real Property, except in substantial compliance with
applicable Environmental Laws.
(b) None of the MMP Real Property is listed or, to MMP's
Knowledge, proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification
of sites requiring investigation or remediation maintained by any state or other
governmental authority. MMP has not received any notice from any governmental
entity or third party of any actual or threatened Environmental Liabilities with
respect to the MMP Real Property or the conduct of the Business.
(c) To MMP's Knowledge, after due inquiry, there are no
conditions existing at the MMP Real Property that require, or which with the
giving of notice or the passage of time or both would likely require remedial or
corrective action, removal or closure pursuant to the Environmental Laws.
26
(d) To MMP's Knowledge, after due inquiry, MMP has all the
material permits, authorizations, licenses, consents and approvals necessary for
the current conduct of the Business and for the operations on, in or at the MMP
Real Property which are required under applicable Environmental Laws and are in
substantial compliance with the terms and conditions of all such permits,
authorizations, licenses, consents and approvals.
(e) To MMP's Knowledge, after due inquiry, there are no
Hazardous Substances present on or in the MMP Real Property or at any
geologically or hydrologically adjoining property, including any Hazardous
Substances contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether movable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the MMP Real Property or such adjoining property, or
incorporated into any structure therein or thereon. Neither MMP or any other
Person for whose conduct it is or may be held responsible, nor to MMP's
Knowledge after due inquiry or any other Person, has permitted or conducted, or
was aware of, any Hazardous Substances, or any illegal activity conducted with
respect to the MMP Real Property or any other properties or assets (whether
real, personal, or mixed) in which MMP has or had an interest.
r. TAX MATTERS.
(a) Except as set forth on Schedule 5.3r(a) to the
MRI Agreement hereto:
(i) All Tax Returns required to be filed by or
with respect to MMP have been filed when due in a timely fashion, and all Tax
Returns required to be filed by or with respect to MMP for Taxable Periods
ending on or before December 31, 1997 will have been filed prior to the Closing
Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with
respect to MMP are true, correct and complete in all material respects.
(ii) MMP has paid in full on a timely basis
all Taxes owed by it, whether or not shown on any Tax Return, and MMP will have
paid prior to the Closing Date all Taxes payable with respect to Taxable Periods
ending on or before December 31, 1997, even if such Taxes are not yet due.
27
(iii) MMP's liability for unpaid Taxes
(including any liability of MMP for unpaid Taxes of any other Entity or Person)
(a) did not, as of the date of the MMP Financial Statements, exceed the current
liability accruals for such Taxes (excluding reserves for deferred Taxes) set
forth on the MMP Financial Statements, (b) does not exceed such accruals as
adjusted on the books of MMP for transactions and events through the date hereof
in accordance with the past custom and practice of MMP, and (c) will not as of
the Closing Date exceed its liabilities for such Taxes as reflected in the
Closing Date Tax Liabilities as finally determined pursuant to Section
2.2(b)(ii).
(iv) MMP has withheld and paid over to the
proper governmental authorities all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid to any employee, independent contractor, creditor
or other third party.
(v) No Tax Proceeding is currently pending
with respect to MMP and MMP has not received notice from any Tax Authority that
it intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is currently in effect or has been requested with respect to the
assessment, collection or payment of Taxes of MMP or for which MMP is liable.
(vii) No extension of the time within which to
file any Tax Return of MMP is currently in effect.
(viii) No deficiency for Taxes has been
proposed, asserted or assessed against MMP.
(ix) There are no liens on the assets of MMP
relating or attributable to Taxes (except liens for Taxes not yet due).
(x) MMP is and has since its formation been
classified as a partnership for U.S. federal income tax purposes and has in
effect a valid election under Section 754 of the Code.
(xi) MMP has not agreed to, nor is it required
to, make any adjustments under Section 481(a) of the Code as a result of a
change in accounting methods.
28
(xii) MMP is not and has not at any time been
a party to a tax sharing, tax indemnity or tax allocation agreement, and MMP has
not assumed the Tax liability of any other entity or person under contract.
(xiii) MMP does not have any liability for the
Taxes of another entity or person as a transferee or successor, or otherwise.
(xiv) Except for itself and the FCC Licensee
Entities, MMP is not and has not at any time been a party to any joint venture,
partnership or other arrangement that is treated as a partnership for U.S.
federal income tax purposes.
(xv) None of MMP's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(xvi) The FCC Licensee Entities' sole asset is
the FCC Licenses, and the FCC Licensee Entities are not and have not been
required to file Tax Returns or pay Taxes.
(b) Sellers have furnished or otherwise caused to be made
available to Purchaser correct and complete copies of (i) all income, franchise
and other material Tax Returns filed by or with respect to MMP since January 1,
1996; and (ii) all examination reports, statements of deficiencies and closing
agreements with respect to MMP relating to Taxes.
(c) Schedule 5.3r(c) to the MRI Agreement contains complete
and accurate descriptions of (i) MMP's basis in its assets, and (ii) material
Tax elections made by or with respect to MMP.
s. ACCOUNTS RECEIVABLE. All accounts receivable of MMP that
are reflected on the MMP Financial Statements or on the accounting records of
MMP as of the Closing Date (collectively, the "MMP Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the MMP Accounts Receivable are or will be as of the
Closing Date current and collectable net of the respective reserve shown on the
MMP Financial Statements or on the accounting records of MMP as of the Closing
Date (which reserves are adequate and calculated consistent with past practice
and, in the case of the reserve as of the Closing Date, will not represent a
greater percentage of the MMP Accounts Receivable as of the Closing Date than
the reserve reflected in the MMP Financial Statements represented of the MMP
Accounts Receivable reflected therein and will not represent a MMP Material
Adverse Effect in the composition of such MMP Accounts Receivable in terms of
aging).
29
Subject to such reserves, each of the MMP Accounts Receivable either has been or
will be collected in full, without any setoff, within ninety (90) days after the
day on which it first becomes due and payable. There is no contest, claim, or
right of setoff, other than returns in the ordinary course of business, under
any contract with any obligor of an MMP Accounts Receivable relating to the
amount or validity of such MMP Accounts Receivable. MMP shall deliver on the
Closing Date a complete and accurate list of all MMP Accounts Receivable as of
the Closing Date.
t. REPRESENTATIONS AS TO MMP INTERESTS. (i) MMP is the record
and the beneficial owner of a 98% general partnership interest in each of the
Television Licensees; (ii) MMP holds of record and owns beneficially these
interests free and clear of any lien, security interest, pledge or encumbrance
other than those set forth on Schedule 5.3t to the MRI Agreement hereof, all of
which will be released at or before the Closing; (iii) MMP has full power and
authority to enter into this Agreement, and the consummation of the transactions
contemplated hereby has been duly authorized by all necessary action on the part
of MMP; (iv) this Agreement has been duly executed and delivered by MMP and
constitutes a legal, valid and binding obligation of MMP, enforceable against
MMP in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and to the exercise of judicial discretion in accordance with general
principles of equity (whether applied by a court of law or equity); and (v)
except as described on Schedule 5.3t to the MRI Agreement, MMP's interests in
the Television Licensees are not subject to any option(s) warrant(s), voting
trusts, outstanding proxies, registration rights agreement(s), or other
agreements regarding voting rights.
5.4. REPRESENTATIONS AND WARRANTIES AS TO MTR.
Seller hereby represents and warrants to Purchaser as to MTR as
follows:
a. ORGANIZATION AND GOOD STANDING. MTR is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has full corporate power and authority to carry on
its business as it is now being conducted and to own and use the assets owned
and used by it. MTR is not qualified as a foreign corporation in any foreign
jurisdiction.
b. CAPITALIZATION. The designations of each class of the
capital stock of MTR and the number of authorized and issued and outstanding
shares thereof is as described on Schedule 5.4b to the MRI Agreement. All the
shares of capital stock of MTR have been validly issued and are fully paid and
nonassessable and are held of record by the respective shareholders as set forth
on Schedule 5.4b to the MRI Agreement hereto. Except as described on Schedule
5.4b to the MRI Agreement, (i) no shares of capital stock of MTR
30
are held in treasury, (ii) there are no other issued or outstanding equity
securities of MTR, (iii) there are no stock appreciation rights, phantom stock
rights, profit participation rights, or other similar rights with respect to
shares outstanding; and (iv) there are no other issued or outstanding securities
of MTR convertible or exchangeable at any time into equity securities of MTR.
MTR is not subject to any commitment or obligation that would require the
issuance or sale of additional shares of capital stock of MTR at any time under
options, subscriptions, warrants, rights or any other obligations. Except for
its ownership interest in MMP, MTR holds no equity interests in any corporation,
partnership, limited liability company, joint venture or other entity owned by
MTR.
c. NO CONFLICTS. Neither the execution and delivery of this
Agreement by Sellers and MMP nor the consummation of the transactions
contemplated hereby will (a) violate any provision of the articles of
incorporation or by-laws of MTR, (b) violate any provision of applicable law,
rule and regulation, which violation would prevent or interfere with Sellers'
ability to perform hereunder, or (c) conflict with or result in a breach of, or
give rise to a right of termination of, or accelerate the performance required
by the terms of any judgment, court order or consent decree, or any agreement,
indenture, mortgage or instrument to which MTR is a party or to which its
property is subject, or constitute a default thereunder, where such conflict,
breach, right of termination, acceleration or default would prevent or
materially interfere with the Company's ownership of 31% of the equity of MTR.
d. FINANCIAL MATTERS. Except as set forth on Schedule 5.4.d to
the MRI Agreement hereto, since January 1, 1996 (the date MTR first held any
assets), there has not been any material adverse effect on the business,
financial condition, operations or results of operations of MTR taken as a
whole. Without limiting the generality of the foregoing, since that date:
(i) MTR has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the ordinary course of
business;
(ii) MTR has not entered into any material agreement,
contract, lease, or license outside the ordinary course of business;
(iii) MTR has not accelerated, terminated, made material
modifications to, or canceled any material agreement, contract, lease, or
license to which MTR is a party or by which MTR is bound;
(iv) MTR has not imposed any security interest upon any of
its assets, tangible or intangible;
31
(v) MTR has not made any material capital expenditures
outside the ordinary course of business;
(vi) MTR has not made any material capital investment in,
or any material loan to, any other Person other than MMP;
(vii) MTR has not created, incurred, assumed, or guaranteed
any indebtedness for borrowed money and capitalized lease obligations;
(viii) MTR has not granted any license or sublicense of any
material rights under or with respect to any Intellectual Property;
(ix) there has been no change made or authorized in the
charter or bylaws of MTR;
(x) other than its initial issuance of Stock to Seller and
MRI, MTR has not issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital stock;
(xi) MTR has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(xii) MTR has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xiii) MTR has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the ordinary course of business;
(xiv) MTR, since its formation, has had no employees;
(xv) MTR has not made or changed any material Tax election
or taken any other action with respect to Taxes not in the ordinary course of
business and consistent with past practices;
(xvi) MTR has not adopted any material change in any method
of accounting or accounting practice, except as contemplated or required by
GAAP; and
(xvii) except as set forth in this Agreement and the MRI
Agreement,
32
MTR has not committed to any of the foregoing.
e. EMPLOYEE BENEFIT PLANS. MTR does not, and has not in the
past, instituted or maintained any Benefit Arrangement or Benefit Plan. Neither
MTR nor any ERISA Affiliate has sponsored, maintained, or had any liability
(direct or indirect, actual or contingent) with respect to any Benefit Plan
subject to Title IV of ERISA. Neither MTR nor any ERISA Affiliate has ever made
or been obligated to make, or reimbursed or been obligated to reimburse another
employer for, contributions to any multiemployer plan (as defined in ERISA
Section 3(37). MTR has no liability (whether actual, contingent, or otherwise)
with respect to any Benefit Plan or Benefit Arrangement.
f. LABOR. Prior to the date of this Agreement, MTR has not
employed any employees.
g. INSURANCE. MTR maintains no insurance policies.
h. MATERIAL CONTRACTS. Schedule 5.4h to the MRI Agreement
contains a list of all the Material Contracts and true copies of such agreements
have been furnished to Purchaser or have been made available to Purchaser. All
Material Contracts listed on Schedule 5.4h to the MRI Agreement are legal, valid
and binding obligations of MTR enforceable in accordance with their terms and in
full force and effect subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the right of creditors
generally and the exercise of judicial discretion in accordance with general
principles of equity (whether applied by a court of law or equity). There exists
no default or event which, with notice or lapse of time, or both, would
constitute a default by any party to any such Material Contract or which would
permit termination, modification or acceleration. MTR has not received notice
(or otherwise has knowledge) that any party to any Material Contract intends to
cancel or terminate any such agreement or to exercise or not to exercise any
option to renew thereunder.
i. COMPLIANCE WITH LAWS. MTR is in material compliance with
all applicable Federal, state and local laws, rules and, regulations, and to
MTR's knowledge, there are no actions threatened or pending alleging
noncompliance therewith.
j. LITIGATION. There is no suit, claim, action, proceeding or
arbitration pending or threatened against MTR. There is no outstanding citation,
order, judgment, writ, injunction, or decree of any court, government, or
governmental or administrative agency against or affecting XXX.
00
k. CONSENTS. No filing, consent, approval or authorization of
any governmental authority or of any third party on the part of MTR is required
in connection with the execution and delivery of this Agreement by Seller and
MMP or the consummation of any of the transactions contemplated hereby
(including any consents required under any MTR contract as a result of the
change in control contemplated hereby).
l. TAX MATTERS.
(a) Except as set forth on Schedule 5.4l(a) to the
MRI Agreement:
(i) All Tax Returns required to be filed by
or with respect to MTR have been filed when due in a timely fashion, and all Tax
Returns required to be filed by or with respect to MTR for Taxable Periods
ending on or before December 31, 1997 will have been filed prior to the Closing
Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with
respect to MTR are true, correct and complete in all material respects.
(ii) MTR has paid in full on a timely basis
all Taxes owed by it, whether or not shown on any Tax Return, and MTR will have
paid prior to the Closing Date all Taxes payable with respect to Taxable Periods
ending on or before December 31, 1997, even if such Taxes are not yet due.
(iii) MTR has no liability for unpaid income
Taxes other than its Tax liability attributable to MTR's allocable share of
MMP's items of income, gain, loss, deduction and credit accruing through the
date hereof. MTR's actual liability for unpaid Taxes (determined consistently
with Section 2.2(b)(iv)) will not as of the Closing Date exceed its liability
for such Taxes as reflected in the Closing Date Tax Liabilities as finally
determined pursuant to Section 2.2(b)(ii).
(iv) MTR has withheld and paid over to the
proper governmental authorities all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid to any employee, independent contractor, creditor
or other third party.
(v) No Tax Proceeding is currently pending
with respect to MTR and MTR has not received notice from any Tax Authority that
it intends to commence a Tax Proceeding.
(vi) No waiver or extension of any statute of
limitations is
34
currently in effect with respect to the assessment, collection or payment of
Taxes of the MTR or for which MTR is liable.
(vii) No extension of the time within which
to file any Tax Return of MTR is currently in effect.
(viii) No deficiency for Taxes has been
proposed, asserted, or assessed against MTR.
(ix) There are no liens on the assets of MTR
relating or attributable to Taxes (except liens for Taxes not yet due).
(x) MTR is not and has not been at any time
during the preceding five years a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code.
(xi) There is no agreement or consent made
under Section 341(f) of the Code affecting MTR.
(xii) MTR has not agreed to, nor is it
required to, make any adjustments under Section 481(a) of the Code as a result
of a change in accounting methods.
(xiii) MTR is not and has not at any time
been a party to a tax sharing, tax indemnity or tax allocation agreement, and
MTR has not assumed the Tax liability of any other entity or person under
contract.
(xiv) MTR is not and has not at any time been
a member of an affiliated group filing a consolidated federal income tax return
and does not have any liability for the Taxes of another entity or person under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of state,
local or foreign law), as a transferee or successor, or otherwise.
(xv) Except for MTR's ownership of 100,000
Class C Membership Units of MMP, MTR is not a party to any joint venture,
partnership or other arrangement that is treated as a partnership for U.S.
federal income tax purposes. (xvi) None of MTR's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(b) Sellers have furnished or otherwise made available to
35
Purchaser correct and complete copies of (i) all income, franchise and other
material Tax Returns filed by or with respect to MTR since January 1, 1996; and
(ii) all examination reports, statements of deficiencies and closing agreements
with respect to MTR relating to Taxes.
(c) Schedule 5.4l(c) to the MRI Agreement contains complete
and accurate descriptions of (i) MTR's basis in its assets, (ii) the amount of
any net operating loss, net capital loss and any other Tax carryovers of MTR and
(iii) material Tax elections made by or with respect to MTR. MTR has no net
operating losses or other Tax attributes presently subject to limitation under
Code Sections 382, 383 or 384, or the federal consolidated return regulations.
m. DIVIDENDS. Since its formation, no dividends have been
declared, issued or otherwise approved by the Board of Directors of MTR. The
Company has no accounts receivable other than amounts due as Tax refunds from
certain Tax Authorities.
n. MTR ASSETS. Except for the 100,000 Class C Membership Units
of MMP and cash or cash equivalents received or due from Tax refunds, MTR owns
no other assets and has not engaged in any business other than in connection
with its ownership of the 100,000 Class C Membership Units.
o. REPRESENTATIONS AS TO MTR INTERESTS. (i) MTR is the record
and beneficial owner of 100,000 Class C Membership Units (out of a total
11,631,431 Membership Units) of MMP; (ii) MTR holds of record and owns
beneficially this interest free and clear of any lien, security interest, pledge
or encumbrance other than those set forth on Schedule 5.4o to the MRI Agreement
hereof, all of which will be released at or before the Closing; and (iii) except
as described on Schedule 5.4o to the MRI Agreement, MTR's interest in MMP is not
subject to any option(s) warrant(s), voting trusts, outstanding proxies,
registration rights agreement(s), or other agreements regarding voting rights.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and MMP that:
6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland. Purchaser has full corporate power and authority to carry on its
business as it is now being conducted.
36
6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate
power and authority to enter into this Agreement. The consummation of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly executed
and delivered by Purchaser and constitutes a legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and to the exercise of
judicial discretion in accordance with general principles of equity (whether
applied by a court of law or equity).
6.3. NO CONFLICTS. Except as described on Schedule 6.3 to the MRI
Agreement hereof, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate any of the
provisions of the articles of incorporation or by-laws of Purchaser, (ii)
violate any provision of applicable law, rule or regulation, which violation
would prevent or interfere with Purchaser's ability to perform hereunder, or
(iii) conflict with or result in a breach of, or give rise to a right of
termination of, or accelerate the performance required by the terms of any
judgment, court order or consent decree, or any agreement, indenture, mortgage
or instrument to which Purchaser is a party or to which its property is subject,
or constitute a default thereunder, except where such conflict, breach, right of
termination, acceleration or default would not have a material adverse effect on
the business or financial condition of Purchaser or prevent or materially
interfere with Purchaser's ability to perform hereunder.
6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 to the MRI
Agreement hereto, (ii) for filings pursuant to the H-S-R Act, or (iii) the FCC
Application, no filing, consent, approval or authorization of any governmental
authority or of any third party on the part of Purchaser is required in
connection with the execution and delivery of this Agreement by Purchaser or the
consummation of any of the transactions contemplated hereby.
6.5. LITIGATION. Except as set forth on Schedule 6.5 to the MRI
Agreement hereto, there is no suit, claim, action, proceeding or arbitration
pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks
to enjoin or obtain damages in respect of the transactions contemplated hereby.
6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the purchase of the Stock and
the transactions contemplated by this Agreement.
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6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on
Schedule 6.7 to the MRI Agreement, Purchaser is legally and financially
qualified to be the Licensee of, acquire, own and operate the Stations under the
Communications Act and the rules, regulations and policies of the FCC. Purchaser
knows of no fact that would, under existing law and the existing rules,
regulations, policies and procedures of the FCC, (a) disqualify Purchaser as an
assignee of the FCC Licenses or as the owner and operator of the Stations, or
(b) cause the FCC to fail to approve in a timely fashion the application for the
FCC Consent. Except as described on Schedule 6.7 to the MRI Agreement, no waiver
of any FCC rule or policy is necessary to be obtained for the grant of the
applications for the assignment of the FCC Licenses to Purchaser, nor will
processing pursuant to any exception or rule or general applicability be
requested or required in connection with the consummation of the transactions
contemplated by this Agreement Purchaser will have on hand at the Closing,
adequate financial resources to consummate the transactions contemplated by this
Agreement, the Investors Agreement, the Management Agreement and the MTC
Agreement.
SECTION 7
ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES
7.1. LIMITATION; SURVIVAL. Except as otherwise provided in Section 3.2
of the Indemnification Escrow Agreement, and subject to the provisions of
Section 10.3, the representations and warranties herein and the obligations of
the parties shall survive the Closing for a period ending on the earlier to
occur of (i) 15 calendar months after the Closing Date and (ii) October 31,
1999, but in no event shall the period be less than 12 calendar months after the
Closing Date; and provided further, however, that representations and warranties
relating to any claims as to which notice shall have been given pursuant to
Section 10.4 on or before such date shall survive until the final resolution of
such claims.
SECTION 8
TAX MATTERS
8.1. SECTION 338 ELECTION. Purchaser shall not make an election under
Section 338 of the Code (or any comparable provision of state, local or foreign
law) with respect to the purchase of stock in MTR as provided herein.
8.2. TAX RETURNS.
(a) Seller shall prepare or cause to be prepared and file or
cause to be
38
filed, within the time (including extensions) and manner provided by law, all
Tax Returns of Seller, MTR, MMP, and the FCC Licensee Entities that are required
to be filed on or before the Closing Date. In addition, Seller shall prepare or
cause to be prepared and file or cause to be filed prior to the Closing Date all
Tax Returns for Taxable Periods of Seller, MTR, MMP, and the FCC Licensee
Entities for Taxable Periods ending on or before December 31, 1997, even if such
Tax Returns are not yet due. Each of Seller, MTR, MMP and the FCC Licensee
Entities shall pay or cause to be paid all Taxes shown as due on its Tax
Returns. Purchaser shall have an opportunity to review and consent to the filing
of all such Tax Returns, which consent shall not be unreasonably withheld or
delayed.
(b) Purchaser shall prepare or cause to be prepared and file
or cause to be filed, within the time and manner provided by law, all Tax
Returns of MTR, MMP, and the FCC Licensee Entities (i) for Taxable Periods
ending on or before the Closing Date that are due after the Closing Date, except
as described in Section 8.2a, and (ii) for Taxable Periods beginning before and
ending after the Closing Date ("Straddle Periods"). Purchaser shall pay or cause
to be paid all Taxes shown as due on such Tax Returns; provided that this
sentence shall not in any way limit or affect Purchaser's rights to
indemnification under other provisions of this Agreement. Purchaser shall
provide Seller a reasonable opportunity to review and consent to the filing of
such Tax Returns, which consent shall not be unreasonably withheld or delayed.
Purchaser shall not file amended Tax Returns with respect to Taxable Periods
ending on or before the Closing Date or Straddle Periods without Seller's
consent; provided, however, that Purchaser may file amended Tax Returns for such
Taxable Periods without Seller's consent if (i) such amended Tax Returns are
filed to correct errors or omissions in previously filed Tax Returns that either
constitute or are related to a breach of any representation or warranty set
forth in Sections 5.2m, 5.3r or 5.4l (determined without regard to the
limitation on the survival of such representations and warranties set forth in
Section 7.1), or (ii) the filing of such amended Tax Return would not increase
the Taxes of Sellers or Taxes for which Seller has indemnification
responsibility hereunder by more than $25,000.
(c) All Tax Returns prepared and filed pursuant to this
Section 8.2 shall be prepared and filed in accordance with applicable law and in
a manner consistent with past practices of MTR, and MMP (to the extent
consistent with applicable law).
8.3. APPORTIONMENT. The parties agree to cause MTR, MMP, and the FCC
Licensee Entities to file all Tax Returns for any Taxable Period that would
otherwise be a Straddle Period on the basis that the relevant Taxable Period
consists of two periods, one ending as of the close of business on the Closing
Date and one beginning the day after the Closing Date, unless the relevant Tax
Authority will not accept a Tax Return filed on that basis. For purposes of
apportioning any Tax to the portion of any Straddle Period that
39
ends on the Closing Date, the determination shall be made assuming that there
was a closing of the books as of the close of business on the Closing Date and
that the taxable years of MTR, MMP and the FCC Licensee Entities ended on that
date, except that real, personal and intangible property Taxes shall be
apportioned ratably on a daily basis between the portions of the Straddle Period
in question.
8.4. COOPERATION IN TAX MATTERS. Seller and Purchaser shall (a)
cooperate fully, as reasonably requested, in connection with the preparation and
filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make
available to the other, as reasonably requested, all information, records or
documents with respect to Tax matters pertinent to Seller, MTR, MMP and the FCC
Licensee Entities for all Taxable Periods ending on or before the Closing Date
and Straddle Periods; and (c) preserve information, records or documents
relating to Tax matters pertinent to MTR, MMP and the FCC Licensee Entities that
is in their possession or under their control until the expiration of any
applicable statute of limitations.
8.5. CERTAIN TAXES. Seller shall timely pay all transfer, documentary,
sales, use, stamp, registration and other similar Taxes and fees arising from or
relating to the sale and transfer of the Assets, and Seller shall at its own
expense file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other
similar Taxes and fees. If required by applicable law, Purchaser will join in
the execution of any such Tax Returns and other documentation.
8.6. FIRPTA. Seller shall deliver to Purchaser at the Closing a
certificate or certificates in form and substance satisfactory to Purchaser,
duly executed and acknowledged, certifying all facts necessary to exempt the
transactions contemplated hereunder from withholding under Section 1445 of the
Code.
8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing
Date, in its sole and absolute discretion, cause MMP and any of the FCC Licensee
Entities to make a Code Section 754 Election with respect to the Taxable Period
in which the Closing occurs or later Taxable Periods. Within ninety (90) days
after the Closing, Purchaser shall cause its accountant to prepare and deliver
to Seller a certificate (the "754 Certificate") setting forth the asset-by-asset
allocations based on the fair market value of the assets determined pursuant to
Code Sections 754, 755 and 743(b) and the regulations thereunder (the "754
Allocations"). The 754 Allocations, as set forth on the 754 Certificate, shall
be final unless Sellers' Agents notify Purchaser within thirty (30) days from
their receipt of the 754 Certificate that they dispute the 754 Allocations. If
Sellers' Agents and Purchaser are unable to agree on the amount of the 754
Allocations within fifteen (15) days after Sellers' Agents notice, the parties
shall jointly appoint and engage an independent accountant or Media appraiser of
national or regional repute (the "754
40
Accountant") to perform an independent evaluation of the 754 Allocations. The
findings of the 754 Accountant as to the amount of the 754 Allocations shall be
final and binding on the parties hereto.
8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not
cause MTR, MMP or the FCC Licensee Entities to take any actions on the Closing
Date other than in the ordinary course of their business, except (i) such
actions as are expressly contemplated by this Agreement, including the repayment
of MMP's Funded Debt, and (ii) such actions as would not increase Taxes of
Seller or Taxes for which Seller has indemnification responsibility hereunder.
SECTION 9
ADDITIONAL COVENANTS AND UNDERTAKINGS
9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchasers, Seller and MMP (and
MMP shall cause the FCC Licensee Entities) to agree that each will execute and
deliver to the other any and all documents, in addition to those expressly
provided for herein, that may be necessary or appropriate to implement the
provisions of this Agreement, whether before, at, or after the Closing. The
parties agree to cooperate with each other to any extent reasonably required in
order to accomplish fully the transactions herein contemplated.
9.2. ACCESS TO INFORMATION. Seller and MMP, from and after the date of
this Agreement and until the Closing Date or termination pursuant to Section
14.1, shall give Purchaser and Purchaser's employees and counsel full and
complete access upon reasonable notice during normal business hours, to all
officers, employees, offices, properties, agreements, records and affairs of
Seller, MMP, the FCC Licensee Entities or otherwise relating to the Business,
shall provide Purchaser with all financial statements of Seller, the FCC
Licensee Entities and MMP which are currently prepared in the ordinary course of
business, which shall be prepared and delivered to Purchaser each month between
the date hereof and the Closing Date, and shall provide copies of such
information concerning Seller, MMP, the FCC Licensees and the Business as
Purchaser may reasonably request; provided, however, that the foregoing shall
not permit Purchaser or any agent thereof to (i) disrupt the Business, or (ii)
contact any employee of Seller or MMP without providing reasonable prior notice
to Seller and allowing a representative of Seller or MMP to be present. The
Company and Seller will use their commercially reasonable efforts to obtain the
consent of its auditors to permit inclusion of the Financial Statements and the
MMP Financial Statements in applicable securities filings of Xxxxxxxx Broadcast
Group, Inc. ("SBGI"). If Purchaser requests, it shall have the immediate right,
without causing unreasonable disruption to the Business, to have the access
provided for in the first sentence hereof to conduct an audit of each Station's
financial information, and, subject to the
41
foregoing, MMP and Seller shall cooperate with Purchaser's reasonable requests
in connection with such audit, including, without limitation, giving all
reasonable consents thereto as long as any expenses thereof are borne by
Purchaser.
9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by
this Agreement, from and after the date hereof, Seller and MMP shall cause the
Business to be conducted in the ordinary course. Except as contemplated by this
Agreement or as consented to by Purchaser (which consent shall not unreasonably
be withheld), from and after the date hereof, Seller and MMP shall act and cause
the FCC Licensee Entities to act, as follows:
(a) Seller and MMP will not adopt or cause the FCC Licensee
Entities to adopt any material change in any method of accounting or accounting
practice, except as contemplated or required by GAAP;
(b) Seller shall not change or amend its charter or by-laws
and MMP shall not change or amend the operating agreement dated as of January 1,
1996, as amended February 14, 1997 or cause or allow any of the FCC Licensee
Entities to change or amend any limited partnership agreement;
(c) Except (i) for the disposition of obsolete equipment in
the ordinary course of business, (ii) the transfer of the Excluded Assets, (iii)
the transfers of the MMP II Licenses to MMP II and the distribution of MMP II to
Seller or (iv) as set forth on Schedule 9.3(c) to the MRI Agreement, neither
Seller nor MMP shall sell, mortgage, pledge or otherwise dispose of any assets
or properties owned, leased or used in the operation of the Business;
(d) Neither Seller nor MMP or the FCC Licensee Entities will
merge or consolidate with, agree to merge or consolidate with, or purchase or
agree to purchase all or substantially all of the assets of, or otherwise
acquire, any other business entity other than Seller's acquisition of MMP II
pursuant to the MMP II Distribution;
42
(e) MMP will not merge or consolidate with, or agree to merge
or consolidate with, or purchase or agree to purchase all or substantially all
of the assets of, or otherwise acquire, any other business entity or cause the
FCC Licensee Entities to do likewise;
(f) Neither Seller nor MMP or the FCC Licensee Entities will
authorize for issuance, issue or sell any additional shares of its capital stock
or any securities or obligations convertible or exchangeable into shares of its
capital stock or issue or grant any option, warrant or other right to purchase
any shares of its capital stock;
(g) Neither Seller nor MMP or the FCC Licensee Entities will
incur, or agree to incur, any debt for borrowed money other than draws under the
Company's or MMP's, as the case may be, existing revolving credit agreements;
(h) Neither Seller nor MMP or the FCC Licensee Entities will
change its historical practices concerning the payment of accounts payable; and
(i) Neither Seller nor MMP or the FCC Licensee Entities will
declare, issue, or otherwise approve the payment of dividends or distributions
of any kind in respect of its stock or redeem, purchase or otherwise acquire any
of its stock.
(j) Seller and MMP shall maintain the existing insurance
coverages on the assets of the Stations or other policies providing
substantially similar coverages.
(k) Seller and MMP will not permit any increases in the
compensation of any of the employees of Seller or MMP except as required by law
or existing contract or agreement or enter into or amend any Company Plan, MMP
Plan, Company Benefit Arrangement, or MMP Benefit Arrangement other than as
contemplated by MMP's operating budgets and in accordance with the past
practice.
(l) Neither Seller nor MMP or the FCC Licensee Entities shall
enter into or renew any contract or commitment relating to the Stations or the
Assets of MMP, or incur any obligation that will be binding on Purchaser after
Closing, except in the ordinary course of business, and MMP shall not enter
into, modify, amend, renew, or change any contract with respect to programming
for the Stations for any period after the Closing Date without the prior
approval of Purchaser.
(m) Neither Seller nor MMP or the FCC Licensee Entities shall
enter into any transactions with any Affiliate of Seller that will be binding
upon Purchaser, or the Stations following the Closing Date.
43
(n) Seller and MMP shall use all commercially reasonable
efforts to maintain the assets of the Stations or replacements thereof in good
operating condition and adequate repair, normal wear and tear excepted.
(o) Seller and MMP shall, in connection with the operation of
the Stations, make expenditures materially consistent with the estimates of
expenses set forth in MMP's operating budgets of the Stations and, including,
without limitation, expenditures in respect of promotional, programming and
engineering activities for the Station (and any employee expenditures related to
such activities) for any period covered by the current operating budgets of the
Stations.
(p) Neither Seller nor MMP shall make or allow MTR or the FCC
Licensee Entities to make or change any material Tax election, amend any Tax
Return, or take or omit to take any other action not in the ordinary course of
business and consistent with past practice that would have the effect of
increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of MMP
for any Post-Closing Tax Period.
(q) Except as provided by Section 2.2 hereof and the MMP II
Distribution, MMP and the FCC Licensee Entities shall not make distributions
other than in the ordinary course of business and consistent with past practice,
and shall not make non-pro rata distributions.
(r) MMP shall not enter into or renew any Tradeout Agreement
that would be binding on Purchaser after the Closing Date, except in the
ordinary course of business, as contemplated by MMP's operating budgets and in
accordance with past practice.
(s) Except as provided in Section 9.3(r) above, MMP shall not
enter into or renew any Time Sales Agreement except in the ordinary course of
business and which are for cash at prevailing rates for a term not exceeding
twelve (12) months.
(t) MMP shall not acquire or enter into or renew any Local
Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network
Affiliation Agreement, without the prior approval of Purchaser other than as
contemplated by this Agreement, the Management Agreement, the MRI Agreement, and
the Investor Agreement.
(u) Neither Seller nor MMP shall enter into or become subject
to any employment, labor, union or professional service contract not terminable
at will, or any bonus, pension, insurance, profit sharing, incentive, deferred
compensation, severance pay, retirement, hospitalization, employee benefit, or
other similar plans, or increase the
44
compensation payable or to become payable to any employee, except in the
ordinary course of business, other than any value appreciation rights agreements
with current employees of MMP, all of which liabilities shall be paid by MMP at
or prior to Closing.
(v) Neither Seller nor MMP or the FCC Licensee Entities shall
take any action which may jeopardize the validity or enforceability of or rights
under the FCC Licenses.
(w) Before the Closing, MMP shall pay all one-time fees under
Section 3.1 of the Time Brokerage Agreements (LMAs") aggregating $1,430,000.00
and MMP shall amend LMAs with the LMA Stations to reflect the payment by MMP
before the Closing of the fees set forth in Section 3.1 of the LMAs and the
reduction of continuing fees as a result of such payments.
9.4. H-S-R ACT. Each of Purchaser and Seller shall, within ten Business
Days following the date hereof, file duly completed and executed Pre-Merger
Notification and Report Forms as required under the H-S-R Act and shall
otherwise use their respective best efforts to comply promptly with any requests
made by the Federal Trade Commission ("FTC") or the Department of Justice
("DOJ") pursuant to the H-S-R Act or the regulations promulgated thereunder.
Seller shall cause MMP, to the extent required by law, to join in or provide
information in connection with such filing, including, but not limited to, any
response to any request by the FTC or DOJ. All filing fees and other similar
payments in connection with the H-S-R Act shall be split equally by Purchaser
and the Seller.
9.5. FCC APPLICATION.
(a) Each of Purchaser, MMP and Seller shall, within seven
Business Days following the date hereof, file with the FCC the FCC Application;
provided that the parties shall cooperate with each other in the preparation of
the FCC Application and shall in good faith and with due diligence take all
reasonable steps necessary to expedite the processing of the FCC Application and
to secure such consents or approvals as expeditiously as practicable; and
provided further that MMP shall cause the FCC Licensee Entities, to the extent
deemed reasonably necessary by counsel to Purchaser to join in and provide
information in connection with the FCC Application and comply with the
immediately preceding provisions and 9.5(b) below. If the Closing shall not have
occurred for any reason within the initial effective periods of the granting of
FCC approval of the FCC Application, and no party shall have terminated this
Agreement under Section 14, the parties shall jointly request and use their
respective best efforts to obtain one or more extensions of the effective
periods of such grants. No party shall knowingly take, or fail to take, any
action the intent or reasonably anticipated consequence of which would be to
cause the FCC not to grant approval of the FCC Application.
45
(b) Seller and MMP, as the case may be, shall publish (and
cause the FCC Licensee Entities to publish) the notices required by the FCC
Rules and Regulations relative to the filing of the FCC Application. Copies of
all applications, documents and papers filed after the date hereof and prior to
the Closing, or filed after the Closing with respect to the transaction under
this Agreement, by Purchaser, Seller, MMP, or the FCC Licensee Entities with the
FCC shall be mailed to the other simultaneously with the filing of the same with
the FCC. Each party shall bear its own costs and expenses (including the fees
and disbursements of its counsel) in connection with the preparation of the
portion of the application to be prepared by it and in connection with the
processing of that application. All filing and grant fees, if any, paid to the
FCC, shall be split equally by Purchaser and the Seller. None of the information
contained in any filing made by Purchaser or Seller with the FCC with respect to
the transaction contemplated by this Agreement shall contain any untrue
statement of a material fact.
(c) FCC APPLICATIONS TO TRANSFER CERTAIN FCC LICENSES. Seller
and MMP shall cause the FCC Licensee Entities holding the FCC Licenses for
Television Stations WKEF-TV in Dayton, Ohio, WEMT-TV in Greeneville, Tennessee,
within five (5) Business Days following the date hereof, to file with the FCC
the MMP II FCC Applications and take all reasonable steps necessary to expedite
the processing of the MMP II FCC Applications to secure the Consent of the FCC
to the transfer of control of the FCC Licenses from MMP to MTC.
9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit
Seller (a) to have reasonable access to the books and records of Purchaser and
those retained or maintained by the Company relating to the operation of the
Business prior to the Closing or after the Closing to the extent related to
transactions or events occurring prior to the Closing, and (b) to have
reasonable access to employees of the Company and Purchaser to obtain
information relating to such matters. Purchaser shall maintain such books and
records for a period of four (4) years following the Closing.
9.7. EMPLOYEES AND EMPLOYEE BENEFITS. Purchaser is not planning or
contemplating, and has not made or taken, any decisions or actions concerning
the employees of the Stations after the Closing Date that would require the
service of notice under the Worker Adjustment and Retraining Notification Act of
1988, as amended, (the so-called WARN Act) or any other similar law.
9.8. INTERRUPTION OF BROADCAST TRANSMISSION.
(a) In the event of any loss, damage or impairment,
confiscation or condemnation of any of the assets of the Stations prior to the
completion of the Closing
46
that interferes with the normal operation of the Stations, MMP shall notify
Purchaser of same in writing immediately, specifying with particularity the
loss, damage or impairment, confiscation or condemnation incurred, the cause
thereof, if known or reasonably ascertainable, and the insurance coverage. MMP
shall apply the proceeds of any insurance policy, judgment or award with respect
thereto and take such other commercially reasonable actions, as determined in
its sole discretion, as are necessary to repair, replace or restore such assets
of any Station so damaged to their prior condition as soon as possible after
such loss, damages or impairment, confiscation or condemnation.
(b) If before the Closing Date, due to damage or destruction
of the assets of any Station (other than WMMP-TV in the Charleston, South
Carolina market), the regular broadcast transmission of one (1) or more
Television Stations or two (2) or more Radio Stations in the normal and usual
manner is interrupted for a period of twelve (12) continuous hours or more, MMP
shall give prompt written notice thereof to Purchaser. If on the Closing Date,
due to damages or destruction of the assets of one (1) or more Television
Stations (other than WMMP-TV in the Charleston, South Carolina market) or two
(2) or more Radio Stations the regular broadcast transmission of one (1) or more
Television Stations (other than WMMP-TV in the Charleston, South Carolina
market) or two (2) or more Radio Stations in the normal and usual manner is
interrupted such that the regular broadcast signal of any such Station
(including its effective radiated power) is diminished in any material respect,
then (i) MMP shall immediately give written notice thereof to Purchaser; and
(ii) Purchaser shall have the right, by giving prompt written notice to the
other, to postpone the Closing Date for a period of up to sixty (60) days
provided, however, that the Closing shall occur no later than ten (10) Business
Days after regular broadcast transmission has been restored.
(c) In the event any one (1) or more Television Stations
(other than WMMP-TV in Charleston, South Carolina market) or two (2) or more
Radio Stations normal and usual transmission has not been resumed by the Closing
Date as postponed pursuant to section (b) above, Purchaser may, pursuant to
Section 14.1(e), terminate this Agreement by written notice to the Sellers'
Agent. Notwithstanding the foregoing, however, Purchaser may, at its option,
proceed to close this Agreement and complete the restoration and replacement of
any damaged assets of the Station in question after the Closing Date, MMP shall
deliver or assign to Purchaser all insurance or other proceeds received in
connection therewith to the extent such proceeds are received by or payable to
the Company or MMP and have not therefore been used in or committed to the
restoration or replacement of the assets.
(d) If before the Closing Date, due to damage or destruction
of the assets the regular broadcast transmission of any Station (other than
WMMP-TV in the Charleston, South Carolina market) in the normal and usual manner
is interrupted for a
47
period of seven (7) continuous days or more, MMP shall give prompt written
notice thereof (the "Interruption Notice") to Purchaser. Upon receipt of the
Interruption Notice, Purchaser shall have the right, in its sole and absolute
discretion, by giving prompt written notice thereof to Seller and MMP within two
(2) Business Days of the date of the Interruption Notice, to terminate this
Agreement with the effect specified in Section 14.2(b) hereof.
(e) Until the Closing Date, MMP will maintain and cause MMP to
maintain the existing insurance coverages listed on Schedule 5.3l to the MRI
Agreement on the Stations and each Station's assets.
9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and
is not relying on the specification of any dollar amount in any representation
or warranty made in this Agreement or any Schedule hereto to indicate that such
amounts, or higher or lower amounts, are or are not material, and agrees not to
assert in any dispute or controversy between the parties hereto that
specification of such amounts indicates or is evidence as to whether or not any
obligation, item or matter is or is not material for purposes of this Agreement
and the transactions contemplated hereby.
9.10. COLLECTION OF ACCOUNTS RECEIVABLE.
(a) At the Closing, Sellers' Agents shall designate Purchaser
as its agent solely for the purposes of collecting the MMP Accounts Receivable.
Purchaser will collect the MMP Accounts Receivable during the period beginning
on the Closing Date and ending on the 180th day after the Closing Date (the
"Collection Period") with the same care and diligence Purchaser uses with
respect to its own accounts receivable and hold all such MMP Accounts Receivable
in trust for Sellers until remitted by Purchaser to the Indemnification Escrow
Agent or the Collections Account pursuant hereto. Purchaser shall not make any
referral or compromise of any of the MMP Accounts Receivable to a collection
agency or attorney for collection and shall not settle or adjust the amount of
any of the MMP Accounts Receivable without the written approval of Sellers'
Agent. If, during the Collection Period, Purchaser receives monies from an
account debtor of Purchaser that is also an account debtor of MMP with respect
to any MMP Accounts Receivable, Purchaser shall credit the sums received to the
oldest account due, except where an account is disputed by the account debtor as
properly due, and the account debtor has so notified Purchaser in writing, in
which case, payments received shall be applied in accordance with the account
debtor's instructions; provided that upon resolution of such dispute if any
amounts in dispute are received by Purchaser, Purchaser shall remit such amounts
to the Indemnification Escrow Agent in accordance with the Indemnification
Escrow Agreement up to the amount of the Additional Indemnification Amount
Deposit and, thereafter, to the Collections Account.
48
(b) On the ninetieth (90th) day after the Closing Date and on
or before the fifth Business Day after the end of each full fifteen (15) day
period thereafter during the Collection Period, Purchaser shall deliver to
Sellers' Agents a list of the amounts collected by Purchaser before the end of
such period with respect to the Accounts Receivable. On or before the fifth
Business Day after the end of the Collection Period, Purchaser shall deliver to
Sellers' Agents a list of all of the Accounts Receivable that remain
uncollected.
(c) Sellers' Agents shall establish and maintain during the
Collection Period (and for as long after the Collection Period as Sellers deem
appropriate) a bank account (the "Collections Account") at a commercial bank in
Norfolk, Virginia, as notified in writing by Sellers' Agents to Purchaser for
the deposit of collections of the MMP Accounts Receivable in accordance with
this Section 9.10. Sellers' Agents shall have sole disbursement authority over
the Collections Account. On the ninetieth (90th) day after the Closing Date (or
if such day is not a Business Day, on the next succeeding Business Day),
Purchaser shall (i) deposit with the Indemnification Escrow Agent pursuant to
the Indemnification Escrow Agreement all amounts collected with respect to any
MMP Accounts Receivable, not to exceed the excess of $12,750,000 over the
Initial Deposit (the "Additional Indemnification Amount Deposit"), and (ii)
deposit in the Collections Account any other MMP Accounts Receivable collected
by Purchaser as of such date. On and after the ninetieth (90th) day after the
Closing Date until the expiration of the Collections Period, within five (5)
Business Days of the end of each full fifteen (15) day period, Purchaser shall
deposit all amounts collected with respect to the Accounts Receivable with the
Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement
until the total of all amounts deposited pursuant to the previous sentence and
this sentence equals the Additional Indemnification Amount Deposit and,
thereafter, in the Collections Account. Sellers' Agents shall be entitled to
dispose of all amounts deposited in the Collections Account from time to time as
it chooses, in its sole discretion, and Purchaser and the Indemnification Escrow
Agent shall have no rights therein; provided, however, that Purchasers shall
have no liability whatsoever to Sellers with respect to Sellers' Agents
disposition of any amounts disbursed by Sellers' Agent from the Collections
Account.
(d) After the expiration of the Collection Period, Purchaser
shall have no further obligation hereunder other than (1) so long as Sellers'
Agents continue to maintain the Collections Account, to deposit in such account
any payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives, and (2) thereafter, to remit directly to Sellers' Agents
any payments with respect to any of the MMP Accounts Receivable that Purchaser
subsequently receives.
49
(e) Any MMP Accounts Receivable remaining uncollected 180 days
after the Closing Date shall be transferred to Sellers' Agents, together with
all files concerning the collection or attempt to collect such MMP Accounts
Receivable hereunder, and Purchaser shall thereafter have no further
responsibility with respect thereto.
(f) Purchaser shall have no right to setoff any amounts
collected for MMP Accounts Receivable against any amounts owed to Purchaser by
Seller; provided that this Section 9.10 shall not be deemed to limit the right
of Purchaser to make claims against the Indemnification Amount in accordance
with, and subject to, the terms and conditions of this Agreement and the
Indemnification Escrow Agreement.
9.11. OTHER ACQUISITIONS. Without limiting any other provisions of this
Agreement, prior to the Closing, without the prior written consent of Sellers'
Agents, neither Purchaser nor any of its subsidiaries or any party acting
directly or indirectly by or on behalf of any of them shall acquire or enter
into any agreement to acquire a television station or radio station in any
markets in which any Television Station or Radio Station currently broadcasts,
if such acquisition would materially delay the granting of the FCC Application;
provided, however, that nothing in this Section 9.11 shall be construed to
preclude Purchaser proceeding to closing with respect to any transaction pending
as of the date hereof.
9.12. PAYMENT OF CERTAIN LIABILITIES PRIOR TO CLOSING. Seller and MMP
shall comply in all respects with their obligations under Section 2.2(b) of this
Agreement.
9.13. RESERVED
9.14. VALUE APPRECIATION RIGHTS AND INCENTIVE FEES. Before Closing, MMP
shall make all payments, discharge all obligations and terminate any and all
Value Appreciation Rights Agreements ("VARS"), and the Management Incentive
Agreements ("Incentive Agreements"), including, but not limited to, the VARS and
Incentive Agreements listed on Schedules 5.3j and 5.3m to the MRI Agreement.
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SECTION 10
INDEMNIFICATION
---------------
10.1. INDEMNIFICATION OF PURCHASER BY SELLER.
(a) Subject to Section 10.3 hereof after the Closing Date,
Seller shall indemnify and hold Purchaser harmless from and against any and all
Losses, however incurred, which arise out of or result from any breach by Seller
of any representation or warranty of Seller in Section 5.1 of this Agreement.
(b) Subject to Section 10.3 hereof after the Closing Date,
Seller shall indemnify and hold Purchaser harmless from and against any and all
Losses, howsoever incurred, which arise out of or result from:
(i) any breach of any representation or warranty
of Seller set forth in Sections 5.2, 5.3 or 5.4 of this Agreement; provided,
however, for purposes of this Section 10.1(b)(i), the representation set forth
in Sections 5.2c and 5.3d will be deemed not to include the requirement of a MMP
Material Adverse Effect;
(ii) the material failure by Seller to perform
any covenant of Seller contained herein;
(iii) breaches by Seller, MMP, MTR or any of the
FCC License Entities of other agreements and certificates specifically
contemplated hereby;
(iv) any and all Taxes of MTR, MMP and the FCC
Licensee Entities (including ay liability of MTR, MMP or the FCC Licensee
Entities for Taxes of any other entity or person) for any Pre-Closing Tax Period
except to the extent that such Taxes are specifically identified in the Closing
Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii);
(v) RESERVED
(vi) any liabilities under the Shareholder
Settlement Agreements; or
(vii) the Closing Date Liabilities, to the extent
the Closing Date Liabilties exceed (A) the aggregate cash equivalents and other
cash items retained as
51
provided by Section 2.2(b) and (B) payments made from the Indemnification Escrow
as provided by Section 2.2(b)(iii).
(c) For purposes of Section 10.1(b)(iv), Taxes of MTR for
Pre-Closing Tax Periods shall be deemed to include Taxes payable by MTR,
Purchaser, or Purchaser's Affiliates that are attributable to items of income,
gain, loss, deduction, and credit of MMP and the FCC Licensee Entities accruing
through the Closing Date, determined on the basis of a closing of the books of
MMP and the FCC Licensee Entities as of that date, notwithstanding that such
items may be reported in Taxable Periods ending after the Closing Date.
10.2. INDEMNIFICATION OF SELLER BY PURCHASER. Subject to Section 10.3
hereof after the Closing, Purchaser shall indemnify and hold Seller harmless
from and against any and all Losses, howsoever incurred, which arises out of or
results from:
(a) any breach by Purchaser of any representation or warranty
of Purchaser set forth in Section 6 of this Agreement; or
(b) the material failure by Purchaser to perform any covenant
of Purchaser contained herein.
(c) any and all Taxes of MTR, MMP and the FCC Licensee
Entities (including any liability of MTR, MMP or the FCC Licensee Entities for
Taxes of any other persons) for any Post-Closing Tax Period except to the extent
that (i) such Taxes should have been but were not specifically identified in the
Closing Date Liabilities or are described in Section 10.1(c), or (ii) such Taxes
arise out of, result from or are attributable to a breach of any representation,
warranty or covenant of Sellers set forth in this Agreement.
10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION
OBLIGATIONS.
Seller's obligation to indemnify Purchaser pursuant to Section 10.1
shall be subject to all of the following limitations:
(a) Notwithstanding anything contained in this Agreement or
applicable law to the contrary, Purchaser agrees that the payment of any claim
(whether such claim is framed in tort, contract, or otherwise) made by Purchaser
for indemnification hereunder subsequent to the Closing Date, for whatever
reason, shall be limited to, and shall only be made from, the Indemnification
Amount in accordance with the Indemnification Escrow Agreement and, except for
claims against the Indemnification Amount, Purchaser waives and releases, and
shall have no recourse against, Seller as a result of the breach of any
52
representation, warranty, covenant or agreement of Seller contained herein, or
otherwise arising out of or in connection with the transactions contemplated
hereby or the operation of the Stations, and such indemnification shall be the
sole and exclusive remedy for Purchaser with respect to any such claim for
indemnification after the Closing Date; provided, however, that nothing herein
shall be deemed to limit any rights or remedies that Purchaser may have for
Sellers' fraud. The Indemnification Escrow shall be disbursed in accordance with
the Indemnification Escrow Agreement.
(b) Anything in this Agreement or any applicable law to the
contrary notwithstanding, it is understood and agreed by Purchaser that, other
than with respect to Seller (but not including any partner, director, officer,
employee, agent or Affiliate Seller (including any shareholder, director,
officer, employee, agent or Affiliate of the Seller)) as expressly provided for
in Section 10.1, no partner, director, officer, employee, agent or Affiliate of
Seller (including any shareholder, director, officer, employee, agent or
Affiliate of Seller) shall have (i) any personal liability to Purchaser as a
result of the breach of any representation, warranty, covenant or agreement of
Sellers contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or thereby or the operations of the Stations,
or (ii) any personal obligation to indemnify Purchaser for any of Purchaser's
claims pursuant to Section 10.1 and Purchaser waives and releases and shall have
no recourse against any of such parties described in this Section 10.3(c) as a
result of the breach of any representation, warranty, covenant or agreement of
Seller contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or thereby or the operations of the Stations;
provided, however, that nothing herein shall be deemed to limit any rights or
remedies that Purchaser may have for Seller's fraud.
(c) Notwithstanding any other provision of this Agreement to
the contrary, Seller shall not be liable to Purchaser in respect of any
indemnification hereunder until the aggregate amount of Losses of Purchaser
under this Agreement, the MRI Agreement, the Investors Agreement and the
Management Agreement exceeds Two Hundred Fifty Thousand Dollars ($250,000.00)
(the "Basket Amount"), and then only to the extent of the excess of Losses over
the amount of One Hundred Twenty Five Thousand Dollars ($125,000.00); provided,
however, that this paragraph shall not apply to (i) payments pursuant to Section
2.2(b)(iii), (ii) indemnification pursuant to Section 10.1(b)(iv), 10.1(b)(vi),
and 10.1(b)(vii) (to the extent indemnification pursuant to Section 10.1(b)(vii)
relates to an item disclosed on a Schedule and/or set forth on the Estimate
Certificate or the Accountant's Certificate), or (iii) indemnification pursuant
to Sections 10.1(b)(i) for breaches of the representations and warranties set
forth in Sections 5.2m, 5.3r, and 5.41.
(d) In determining the amount of any Tax or other Loss for
which
53
indemnification is provided under this Agreement, such Loss shall be (i) net of
any insurance recovery made by the indemnified party, (ii) reduced to take into
account any net Tax benefit realized by the indemnified party arising from the
deductibility of such Tax or Loss, and (iii) increased to take account of any
net Tax cost incurred by the indemnified party arising from the receipt of
indemnification payments hereunder. Any indemnification payment hereunder shall
initially be made without regard to this paragraph and shall be reduced to
reflect any net Tax benefit or increased to reflect any net Tax cost only after
the indemnified party has actually realized such benefit or cost. For purposes
of this Agreement, an indemnified party shall be deemed to have "actually
realized" a net Tax benefit or net Tax cost to the extent that, and at such time
as, the amount of Taxes payable by such indemnified party is (x) reduced below
the amount of Taxes that such indemnified party would have been required to pay
but for the deductibility of such Tax or Losses, and (y) increased above the
amount of Taxes that such indemnified party would have been required to pay but
for the receipt of such indemnification payments. The amount of any reduction
hereunder shall be adjusted to reflect any final determination (which shall
include the execution of Form 870-AD or successor form) with respect to the
indemnified party's liability for Taxes. Any indemnity payments under this
Agreement shall be treated as an adjustment to the Purchase Price for Tax
purposes, unless a final determination with respect to the indemnified party or
any of its affiliates causes any such payment not to be treated as an adjustment
to the Purchase Price.
(e) No claim for indemnification for Losses shall be made
after expiration of the applicable period set forth in Section 7.1 hereof.
(f) Anything to the contrary in this Section 10.3
notwithstanding, the terms, conditions and limitations set forth in this Section
10.3 do not apply to or limit Purchaser's rights under Section 14.2.
10.4. NOTICE OF CLAIM; DEFENSE OF ACTION.
(a) An indemnified party shall promptly give the Sellers'
Agent notice of any matter which an indemnified party has determined has given
or could give rise to a right of indemnification under this Agreement, stating
the nature and, if known, the amount of the Losses, and method of computation
thereof, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such right to indemnification
is claimed or arises; provided that the failure of any party to give notice
promptly as required in this Section 10.4 shall not relieve any indemnifying
party of its indemnification obligations except to the extent that such failure
materially prejudices the rights of such indemnifying party. The indemnified
party shall give continuing notice promptly thereafter of all developments
coming to Sellers' Agent's attention materially
54
affecting any matter relating to any indemnification claims.
(b) Except as otherwise provided in Section 10.5, the
obligations and liabilities of an indemnifying party under this Section 10 with
respect to Losses arising from claims of any third party that are subject to the
indemnification provided for in this Section 10, shall be governed by and
contingent upon the following additional terms and conditions:
(i) With respect to third party claims, promptly
after receipt by an indemnified party of notice of the commencement of any
action or the presentation or other assertion of any claim which could result in
any indemnification claim pursuant to Section 10.1 or 10.2 hereof, such
indemnified party shall give prompt notice thereof to Sellers' Agent and the
indemnifying part(ies) shall be entitled to participate therein or, to the
extent that it desires, assume the defense thereof with its own counsel.
(ii) If the indemnifying part(ies) elects to assume
the defense of any such action or claim, the indemnifying part(ies) shall not be
liable to the indemnified party for any fees of other counsel or any other
expenses, in each case incurred by such indemnified party in connection with the
defense thereof.
(iii) The indemnifying part(ies) shall be authorized,
without consent of the indemnified party being required, to settle or compromise
any such action or claim, provided that such settlement or compromise includes
an unconditional release of the indemnified party from all liability arising out
of such action or claim.
(iv) Whether or not an indemnifying part(ies) elects
to assume the defense of any action or claim, the indemnifying part(ies) shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent, such consent not to be unreasonably withheld.
(v) The parties agree to cooperate to the fullest
extent possible in connection with any claim for which indemnification is or may
be sought under this Agreement, including, without limitation, making available
all witnesses, pertinent records, materials and information in its possession or
under its control relating thereto as is reasonably requested by the other
party.
10.5 TAX CONTESTS.
(a) If any party receives written notice from any Taxing
Authority of any Tax Proceeding with respect to any Tax for which the other
party is obligated to provide indemnification under this Agreement, such party
shall give prompt written notice thereof to the other party; provided, however,
that the failure to give such notice shall not affect
55
the indemnification provided hereunder except to the extent that the failure to
give such notice materially prejudices the indemnifying party.
(b) Seller, acting through Sellers' Agents, shall have the
right, at its own expense, to control and make all decisions with respect to any
Tax Proceeding relating solely to Taxes of Seller and MTR for Taxable Periods
ending on or before the Closing Date; provided, that Purchaser and counsel of
its own choosing shall have the right, at Purchaser's own expense, to
participate fully in all aspects of the prosecution or defense of such Tax
Proceeding; and provided further that Seller shall not settle any such Tax
Proceeding without the prior written consent of Purchaser if such settlements
could increase the past, present or future Tax liability of Purchaser or any of
its Affiliates, or any Tax Liability of MTR for any Post-Closing Tax Period by
an amount greater than $25,000.
(c) Seller, acting through Sellers' Agents, shall have the
right, at its own expense, to jointly control and participate with Purchaser in
all Tax Proceedings relating to Taxes of MTR for a Straddle Period. If Seller
exercises such right, neither party shall settle any such Tax Proceeding without
the prior written consent of the other.
(d) If Seller, acting through Sellers' Agents, does not
exercise its right to assume control of or participate in any Tax Proceeding as
provided under this Section 10.5, Purchaser may, without waiving any rights to
indemnification hereunder, defend or settle the same in such manner as it may
deem appropriate in its sole and absolute discretion.
(e) Purchaser shall control all Tax Proceedings relating to
Taxes or Tax Returns of MMP and the FCC Licensee Entities. In the case of Tax
Proceedings relating solely to Taxable Periods of MMP ending on or before the
Closing Date and Straddle Periods of MMP, Purchaser shall keep Seller's Agents
fully informed as to the status of any such Tax Proceeding and shall not settle
such a Tax Proceeding without the prior written consent of Seller's Agents,
which consent shall not be unreasonably withheld; provided that Seller's Agents'
consent to a settlement shall only be required if such settlements could
increase Sellers' Taxes or Taxes for which Seller has indemnification
responsibility hereunder by an amount greater than $25,000.
(f) In the event that the provisions of this Section 10.5 and
the provisions of Section 10.4(b) conflict or otherwise each apply by the terms,
this Section 10.5 shall exclusively govern all matters concerning Taxes.
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SECTION 11
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
-----------------------------------------------------------
11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The
obligation of Purchaser to consummate the Closing is subject to the fulfillment
or waiver, on or prior to the Closing Date, of each of the following conditions
precedent:
(a) Seller shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Seller contained herein shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though made on and as of the Closing Date, except that
representations and warranties that were made as of a specified date shall
continue on the Closing Date to have been true as of the specified date, and
Purchaser shall have received a certificate of one of Sellers' Agents, dated as
of the Closing Date and signed by Sellers' Agent, certifying as to the
fulfillment of the condition set forth in this Section 11.1(a) ("Sellers'
Bring-Down Certificate").
(b) No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits Purchaser
from consummating the transactions contemplated hereby and no action or
proceeding shall be pending wherein an unfavorable ruling would affect any right
to own the Assets or the assets of the Station.
(c) All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
(d) All consents identified on Schedules 5.2h hereto and
Schedules 5.3e and 5.3m to the MRI Agreement as required consents shall have
been received.
(e) The Final Order approving the applications for transfer of
control of the FCC Licenses (other than the MMP II Licenses) shall have been
obtained. All the material conditions contained in the Final Order required to
be satisfied on or prior to the Closing Date shall have been duly satisfied and
performed. Notwithstanding the foregoing, other than conditions relating the
broadcast industry generally, if the consent of the FCC is conditional or
qualified in any manner that has a material adverse effect on Purchaser or
requires Purchaser or any of its subsidiaries to divest any television or radio
station owned, operated or programmed by Purchaser or any of its subsidiaries.
Purchaser may, nevertheless, in its sole discretion, require the consummation of
the transactions contemplated by this Agreement, but shall not be required to do
so.
(f) Seller shall have delivered to Purchaser at the Closing
each document required by Section 12.1 hereof.
57
(g) Since the date of this Agreement through the Closing Date,
there shall not have been either a Material Adverse Effect with respect to the
Assets or a MMP Material Adverse Effect with respect to the business,
operations, properties, assets, or condition of MMP, and no event shall have
occurred or circumstance exist that reasonably could be expected to result in
either a Material Adverse Effect or an MMP Material Adverse Effect.
(h) The transfer of the FCC Licenses for Television Stations
WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, Tennessee to MMP II and the
distribution of MMP II to Seller shall have occurred pursuant to the Assignment
and Assumption Agreement and the Distribution Agreement substantially in the
form attached hereto as Exhibit C, and MMP and MMP II shall have entered into
one or more Time Brokerage Agreements generally in the form (subject to such
revisions, additions, and deletions as determined by counsel to MMP II and
Purchaser prior to the Closing) attached hereto as Exhibit D.
(i) The closings under the Investors Agreement, the MRI
Agreement and the Management Agreement shall have occurred or will occur
simultaneously with the Closing.
(j) Seller or MMP, as the case may be, shall have complied
with its obligations under Section 9.12.
11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER. The obligation
of Seller to consummate the Closing is subject to the fulfillment or waiver, on
or prior to the Closing Date, of each of the following conditions precedent:
(a) Purchaser shall have complied in all material respects
with its agreements and covenants contained herein to be performed at or prior
to the Closing, and the representations and warranties of Purchaser contained
herein shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the Closing Date,
except that representations and warranties that were made as of a specified date
shall continue on the Closing Date to have been true as of the specified date,
and Seller shall have received a certificate of Purchaser, dated as of the
Closing Date and signed by an officer of Purchaser, certifying as to the
fulfillment of the condition set forth in this Section 11.2(a) ("Purchaser's
Bring-Down Certificate").
(b) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which restrains or prohibits Seller
from consummating the transactions contemplated hereby.
58
(c) All applicable waiting periods under the H-S-R Act shall
have expired or been terminated.
(d) The issuance by the FCC of a Final Order approving the
applications for transfer of control of the FCC Licenses contemplated by this
Agreement shall have occurred, and there shall have been duly satisfied and
performed on or prior to the Closing Date all the material conditions contained
in the Final Order required to be so satisfied; provided, however, Purchaser, in
its sole discretion, may waive the necessity of a "Final Grant" by the FCC and
close following an "Initial Grant".
(e) Purchaser shall have delivered to Seller at the Closing
the Purchase Price and each document required by Section 12.2 hereof.
(f) The closings under the Investors Agreement, the MRI
Agreement and the Management Agreement shall have occurred or occur
simultaneously with the Closing.
SECTION 12
DELIVERIES AT THE CLOSING
12.1. DELIVERIES BY SELLERS. At the Closing, Seller will deliver or
cause to be delivered at the Closing to Purchaser:
(a) Seller's Bring-Down Certificate;
(b) a legal opinion of Xxxxx & Stant, P.C., counsel to
Seller and MMP substantially in the form attached as Exhibit E hereto;
(c) a legal opinion of counsel to the FCC Licensee
Entities in the form attached hereto as Exhibit F;
(d) a xxxx of sale, assignment and other transfer
documents, dated as of the Closing Date and executed by the Seller, transferring
the Assets to Purchaser;
(e) [RESERVED];
(f) a certificate as to the existence of Seller issued by
the Secretary of the State Corporation Commission of the Commonwealth of
Virginia dated not more than five (5) Business Days before the Closing Date;
(g) a certificate as to the existence and good standing of
MMP issued by
59
the Secretary of the State Corporation Commission of the Commonwealth of
Virginia not more than five (5) Business Days before the Closing Date and
certificates issued by the appropriate governmental authorities in each
jurisdiction in which MMP is qualified to do business and a certificate as to
the existence for each of the FCC Licensee Entities of the Secretary of the
State Corporation Commission of the Commonwealth of Virginia dated not more than
five (5) Business Days before the Closing Date;
(h) receipt for Purchase Price;
(i) [RESERVED];
(j) the certificate(s) required by Section 8.6;
(k) a copy of any instrument evidencing any consents
received;
(l) the Indemnification Escrow Agreement duly executed by
Seller and Sellers' Agent;
(m) a copy of any instrument evidencing any consent
received, including, but not limited to, estoppel certificates from MMP's
landlords with respect to the Real Property;
(n) RESERVED;
(o) the Estimate Certificate;
(p) RESERVED
(q) the amendments to the LMAs in a form reasonably
satisfactory to Purchaser duly executed by the necessa ry parties thereto; and
(r) evidence reasonably satisfactory to Purchaser that the
Limited Partnership Agreements of the FCC Licensee Entities have been amended,
and that sufficient actions have been taken by or with respect to MMP, to
require allocation of items of income, gain, loss, deduction and credit with
respect to transferred interests in the FCC Licensee Entities and MMP based on
the interim closing of the books method authorized by Code Section 706 and the
regulations promulgated thereunder;
(s) release and indemnity agreements properly executed by
Seller and the shareholders of Seller in a form reasonably satisfactory to
Purchaser releasing MMP from all liabilities of Taxes of such persons under
certain Assignment and Assumption
60
Agreements dated as of January 1, 1996, and indemnifying and holding harmless
MMP from and against all such liabilities; and
(t) such other documents as Purchaser shall reasonably
request.
12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be
delivered at the Closing to Seller, the Disbursing Agent or the Indemnification
Escrow Agent, as the case may be:
(a) Purchaser's Bring-Down Certificate;
(b) a legal opinion of Xxxxxx & Xxxxxxxx, P.A., counsel to
Purchaser, substantially in the form attached as Exhibit G hereto;
(c) the Purchase Price as required pursuant to Section 3.1
hereof;
(d) the Indemnification Escrow Agreement duly executed by
Purchaser;
(e) a certificate as to the existence and good standing of
the Purchaser issued by the Maryland Department of Assessments and Taxation of
the State of Maryland dated as of the Closing Date;
(f) one or more fully executed Time Brokerage Agreements
as negotiated pursuant to Section 11.1(h); and
(g) such other documents as Seller shall reasonably
request.
SECTION 13
EXPENSES
Except as provided in Sections 9.4 and 9.5, each party will pay its own
fees, expenses, and disbursements and those of its counsel in connection with
the subject matter of this Agreement (including the negotiations with respect
hereto and the preparation of any documents) and all other costs and expenses
incurred by it in the performance and compliance with all conditions and
obligations to be performed by it pursuant to this Agreement or as contemplated
hereby.
SECTION 14
TERMINATION
61
14.1 TERMINATION. This Agreement may be terminated:
(a) At any time by mutual written consent of Purchaser and
Seller;
(b) By either Purchaser or Seller, if the terminating party is
not in default or breach in any material respect of its obligations under this
Agreement, if the Closing hereunder has not taken place on or before October 31,
1998, except where the Closing has been postponed pursuant to the provisions of
Section 9.8, in which case the applicable date shall be upon the expiration of
the period referred to in Section 9.8(b) (the "Termination Date");
(c) by Seller, if Seller's not in default or breach in any
respect of their obligations under this Agreement, if all of the conditions in
Section 11.2 have not been satisfied or waived by the date scheduled for the
Closing (as such date may be postponed pursuant to Section 9.8);
(d) by Purchaser, if Purchaser is not in default or breach in
any material respect of its obligations under this Agreement, if all of the
conditions set forth in Section 11.1 have not been satisfied or waived by the
date scheduled for the Closing (as such date may be postponed pursuant to
Section 9.8);
(e) by Purchaser, pursuant to Section 9.8.
14.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either or
both Purchaser and/or Seller pursuant to Sections 9.8 or 14.1 hereof, prompt
written notice thereof shall forthwith be given to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned without further action by any of the parties hereto, but subject to
and without limiting any other rights of the parties specified herein in the
event a party is in default or breach in any material respect of its obligations
under this Agreement. If this Agreement is terminated as provided herein, all
filings, applications and other submissions relating to the transactions
contemplated hereby as to which termination has occurred shall, to the extent
practicable, be withdrawn from the agency or other Person to which such filing
is made.
(b) If this Agreement is terminated pursuant to Section
14.1(d), the payment made by Purchaser pursuant to Section 3.1(1) shall be
returned to Purchaser and Purchaser shall have the right to pursue all remedies
available hereunder at law or in equity, including, without limitation, the
right to seek specific performance and/or actual monetary
62
damages, but excluding consequential and incidental damages. In recognition of
the unique character of the property to be sold hereunder, and the damages which
Purchaser will suffer in the event of a termination pursuant to the foregoing
Sections of this Agreement, Seller hereby waives any defense that Purchaser has
an adequate remedy at law for the breach of this Agreement by Seller.
(c) If this Agreement is terminated pursuant to Section
14.1(c) and Purchaser shall be in breach in any material respect of its
representations, warranties, covenants, agreements, or obligations set forth in
this Agreement, then and in that event, Seller shall have the right to retain
the amount delivered by Purchaser pursuant to Section 3.1(1) as liquidated
damages, and as the sole and exclusive remedy of Seller as a consequence of
Purchaser's default (which aggregate amount the parties agree is a reasonable
estimate of the damages that will be suffered by Seller as a result of the
default by Purchaser and does not constitute a penalty), the parties hereby
acknowledging the inconvenience and nonfeasability of otherwise obtaining
inadequate remedy.
(d) If this Agreement is terminated pursuant to Sections
14.1(a), 14.1(b) and 14.1(e), the payment made by Purchaser pursuant to Section
3.1(1) shall be returned to Purchaser.
(e) A notice of termination made under any provision of
Section 14.1 of this Agreement shall be deemed to be a notice of termination
under the termination provisions of the Investor Agreement, the Management
Agreement and the MRI Agreement.
(f) In the event of a default by either party that results in
a lawsuit or other proceeding for any remedy available under this Agreement, the
prevailing party, to the extent it is the prevailing party, shall be entitled to
reimbursement from the other party of its reasonable legal fees and expenses,
whether incurred in arbitration, at trial, or on appeal.
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SECTION 15
NOTICES
All notices, requests, consents, payments, demands, and other
communications required or contemplated under this Agreement shall be in writing
and (a) personally delivered or sent via telecopy (receipt confirmed), or (b)
sent by Federal Express or other reputable overnight delivery service (for next
Business Day delivery), shipping prepaid, as follows:
To Purchaser: XXXXXXXX COMMUNICATIONS, INC.
------------ 0000 X. 00xx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
with copies Xxxxxxxx Communications, Inc.
(which shall not constitute 0000 X. 00xx Xxxxxx
notice) to: Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
and
Xxxxxx & Xxxxxxxx, P.A.
Suite 1100
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
64
To Sellers' Agents: Xxxxxxx X. Xxxxxxxx
------------------ Quad-C, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Xxxxx X. Xxxxx, III
Colonnade Capital, L.L.C.
00xx Xxxxx
000 Xxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Xxxxxxx X. Xxxxx
Xxxxx & Stant, P.C.
Suite 900
One Columbus Center
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
or to such other Persons or addresses as any Person may request by notice given
as aforesaid. Notices shall be deemed given and received at the time of personal
delivery or completed telecopying, or, if sent by Federal Express or such other
overnight delivery service one Business Day after such sending.
SECTION 16
SELLERS' AGENTS
---------------
16.1. SELLERS' AGENTS. Seller hereby irrevocably appoints Xxxxx X.
Xxxxx, III, Xxxxxxx X. Xxxxxxxx, and Xxxxxxx X. Xxxxx (herein called the
"Sellers' Agents") as his, her or its agent and attorney-in-fact to take any
action required or permitted to be taken by Seller under the terms of this
Agreement, including, without limiting, the generality of the foregoing, the
payment of expenses relating to the transactions contemplated by the Agreement,
and the right to waive, modify or amend any of the terms of this Agreement in
any respect, whether or not material, and agrees to be bound by any and all
actions taken by the Sellers' Agents on his or its behalf. Any action to be
taken by the Sellers' Agents shall
65
be unanimous. In the event of the death, incapacity or liquidation of any of
Sellers' Agents, such person or entity shall not be replaced, and the remaining
Sellers' Agents shall continue in that capacity. Seller agrees to indemnify the
Sellers' Agents from and against and in respect of any and all liabilities,
damages, claims, costs, and expenses, including, but not limited to attorneys'
fees, arising out of or due to any action by them as the Sellers' Agents and any
and all actions, proceedings, demands, assessments, or judgments, costs, and
expenses incidental thereto, except to the extent that the same result from bad
faith or gross negligence on the part of the Sellers' Agents. Purchaser shall be
entitled to rely exclusively upon any communications given by the Sellers'
Agents on behalf of Seller, and shall not be liable for any action taken or not
taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to
disregard any notices or communications given or made by Seller unless given or
made through the Sellers' Agents.
SECTION 17
MISCELLANEOUS
17.1. HEADINGS. The headings contained in this Agreement (including,
but not limited to, the titles of the Schedules and Exhibits hereto) have been
inserted for the convenience of reference only, and neither such headings nor
the placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Terms used in the
singular shall be read in the plural, and vice versa, and terms used in the
masculine gender shall be read in the feminine or neuter gender when the context
so requires.
17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits
attached to or referenced in this Agreement constitute an integral part of this
Agreement as if fully rewritten herein.
17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
17.4. ENTIRE AGREEMENT. This Agreement, the Investors Agreement, the
Management Agreement, the MRI Agreement and the FCC Licensee Transfer Agreement,
the Annexes, Schedules and Exhibits and the documents to be delivered hereunder
and thereunder constitute the entire understanding and agreement between the
parties hereto concerning the subject matter hereof. All negotiations and
writings between the parties hereto are merged into this Agreement, the
Investors Agreement, the Management Agreement, the MRI Agreement, the FCC
Licensee Transfer Agreement, and there are no representations, warranties,
covenants, understandings, or agreements, oral or otherwise, in
66
relation thereto between the parties other than those incorporated herein or to
be delivered hereunder.
17.5. GOVERNING LAW. This Agreement is to be delivered in and should be
construed in accordance with and governed by the laws of the Commonwealth of
Virginia without giving effect to conflict of laws principles.
17.6. MODIFICATION. This Agreement cannot be modified or amended
except in writing signed by each of the Purchaser and Seller's Agent.
17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the
rights and obligations hereunder shall be assigned, delegated, sold,
transferred, sublicensed, or otherwise disposed of by operation of law or
otherwise, without the prior written consent of each of the other parties
hereto; provided, however, that Purchaser may assign its rights and obligations
hereunder to one or more subsidiaries so long as Purchaser is not relieved of
its obligations hereunder; and provided further that any change of control in
respect of Purchaser's parent, SBGI, shall not require the consent of Seller. In
the event of such permitted assignment or other transfer, all of the rights,
obligations, liabilities, and other terms and provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by and against, the
respective successors and assigns of the parties hereto, whether so expressed or
not.
17.8. WAIVER. Any waiver of any provision hereof (or in any related
document or instrument) shall not be effective unless made expressly and in a
writing executed in the name of the party sought to be charged. The failure of
any party to insist, in any one or more instances, on performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant, or condition, but the obligations of the parties with
respect hereto shall continue in full force and effect.
17.9. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provisions shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.
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17.10. ANNOUNCEMENTS. From the date of this Agreement, all further
public announcements relating to this Agreement or the transactions contemplated
hereby will be made only as agreed upon jointly by the parties hereto, except
that nothing herein shall prevent Seller or any Affiliate thereof or Purchaser
from making any disclosure in connection with the transactions contemplated by
this Agreement if required by applicable law or otherwise as a result of its, or
its Affiliate's, being a public company, provided that prior notice of such
disclosure is given to the other party hereto.
17.11. SPECIFIC PERFORMANCE. Sellers acknowledges that Purchaser will
have no adequate remedy at law if Seller fails to perform its obligation to
consummate the sale of Stock contemplated under this Agreement. In such event,
Purchaser shall have the right, in addition to any other rights or remedies it
may have, to specific performance of this Agreement.
17.12 FEES AND EXPENSES. Except as otherwise provided in this
Agreement, each party shall pay their own expenses incurred in connection with
the authorization, preparation, execution, and performance of this Agreement and
the exhibits, Schedules, and other documentation, including all fees and
expenses of counsel, accountants, and each party shall be responsible for all
fees and commissions payable to any finder, broker, adviser, or other similar
Person retained by or on behalf of such party; provided, however, that all
transfer taxes, recordation taxes, sales taxes, and document stamps in
connection with the transactions contemplated by this Agreement shall be paid
one-half (1/2) by Purchaser and one-half (1/2) by Seller and all other filing
fees (including all FCC and H-S-R Act filing fees), and other charges levied by
any governmental entity in connection with the transactions contemplated by this
Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by
Seller. Purchaser hereby waives compliance with the provisions of any applicable
bulk transfer law.
17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in
this Agreement shall be construed to give any Person other than the parties to
this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
17.14 INTERPRETATION. The Purchaser and Seller acknowledge and agree
that the preparation and drafting of this Agreement and the Exhibits hereto are
the result of the efforts of all parties to this Agreement and every covenant,
term, and provision of this Agreement shall be construed according to its fair
meaning and shall not be construed against any particular party as the drafter
of such covenant, term, and/or provision. The
68
Purchaser and Seller agree that this Agreement is to be construed in a manner
consistent with the terms of the Investors Agreement, the Management Agreement
and the MRI Agreement.
[SIGNATURE PAGES TO FOLLOW
--REST OF PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
MAX TELEVISION COMPANY,
a Virginia corporation
By _________________________________
its _____________________________
XXXXXXXX COMMUNICATIONS, INC.,
a Maryland corporation
By _________________________________
its _____________________________
70
ANNEX 1
DEFINITIONS
As used in the attached Asset Purchase Agreement, the following terms
shall have the corresponding meaning set forth below:
"Affiliate" of, or a Person "Affiliated" with, a specified Person,
means a Person who directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.
"Agreement" has the meaning set forth in the preamble.
"Allocable Portion" shall mean 0% in the case of each of Investors and
MRI, 96.470% in the case of Seller and 3.530% in the case of Management.
"Assets" has the meaning set forth in the Recitals.
"Basket Amount" has the meaning set forth in Section 10.3(c).
"Benefit Arrangement" shall mean any benefit arrangement, obligation,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Benefit Plan, including
without limitation, employment agreements, severance agreements, executive
compensation arrangements, including but not limited to stock options,
restricted stock rights and performance unit awards, incentive programs or
arrangements, sick leave, vacation pay, severance pay policies, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, employee loans,
employee banking privileges, any plans subject to Section 125 of the code, and
any plans providing benefits or payments in the event of a change of control,
change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, directors, or agents.
"Benefit Plan" shall have the meaning given in Section 3(3) of ERISA.
71
"Broadcast Time Sales Agreement" shall mean all contracts and
agreements pursuant to which MMP has sold commercial air time on the Stations
for cash.
"Business" means the business of owning and operating the Stations.
"Business Day" means any day on which banks in New York City are open
for business.
"Cash Price" shall mean the excess of $252 million over the Funded Debt
immediately prior to the Closing.
"CERCLA" has the meaning set forth in Section 5.3q of the Agreement.
"Closing" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Liabilities" has the meaning set forth in Section 2.2(b)
of the Agreement.
"Closing Date Tax Liabilities" shall have the meaning set forth in
Section 2.2(b)(iv) of this Agreement.
"Closing Date" has the meaning set forth in Section 4 of the Agreement.
"Closing Date Estimated Accounts Receivable" has the meaning of an
amount equal to the Seller's good faith estimate of Accounts Receivable of MMP
as of the Closing Date, which have been outstanding for no more than 120 days,
as set forth in the Certificate of Seller's Agent delivered to Purchaser five
(5) days before the Closing Date.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Company" refers to Seller in this Agreement.
"Company Benefit Arrangement" shall mean any Benefit Arrangement
sponsored or maintained by the Company or with respect to which the Company has
or may have any liability (whether actual, contingent, with respect to any of
its assets or otherwise) as of the Closing Date, in each case with respect to
any present or former directors, employees, or agents of the Company.
72
"Company Plan" shall mean, as of the Closing Date, any Benefit Plan for
which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of
ERISA) or any Benefit Plan maintained by the Company or to which the Company is
obligated to make payments, in each case with respect to any present or former
employees of the Company. Company Plan shall include any Qualified Plan
terminated within the preceding six years.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to lawfully and validly transfer
the Stock and the Station assets to Purchaser to maintain the validity and
effectiveness (any default or violation of the terms thereof) of any Material
Contract and any licenses (including, without limitation, the FCC Licenses) to
be transferred to Purchaser, or otherwise to consummate the transactions
contemplated by this Agreement.
"Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of
the Agreement.
"Disbursing Agent" means Xxxxx X. Xxxxx, III, Xxxxxxx X. Xxxxxxxx, and
Xxxxxxx X. Xxxxx.
"Disbursement Agreement" means that certain Disbursement Agreement
dated not later thirty (30) days prior to the Closing, among the Disbursing
Agent and the Seller.
"Environment" means any surface or subsurface physical medium or
natural resource, including air, land, soil (surface or subsurface), surface
waters, ground waters, wetlands, stream and river sediments, rock and biota.
"Environmental Laws" means any federal, state, or local law,
legislation, rule, regulation, ordinance or code of the United States or any
subdivision thereof relating to the injury to, or the pollution or protection
of, human health and safety or the Environment.
"Environmental Liability" means any loss, liability, damage, cost or
expense arising under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA Affiliate" shall mean any Person that together with the Company
or MMP, as applicable, would be or was at any time treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA and any general
partnership of which the Company or MMP, as applicable, is or has been a general
partner.
"Estimate Certificate" shall have the meaning set forth in Section
2.2(b)(i).
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"FCC" has the meaning set forth in the recitals to the Agreement.
"FCC Application" means the applications requesting approval and
consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP
II Transfers, and (ii) the transfer of control of the FCC Licenses to Purchaser
or its assignee for those Television Stations and Radio Stations not included in
the MMP II Transfers.
"FCC Licenses" means those licenses, permits and authorizations issued
by the FCC to the FCC Licensee Entities in connection with the business and
operations of the Stations (together with any renewals, extensions,
modifications or additions thereto between the date of this Agreement and the
Closing Date.
"FCC Licensee Entities" shall have the meaning set forth in the
Recitals.
"FCC Rules and Regulations" has the meaning set forth in Section 5.3h
of the Agreement.
"Final Order" means action by the FCC as to which no further steps
(including those of appeal or certiorari) can be taken in any action or
proceeding to review, modify or set the determination aside, whether under
Section 402 or 405 of the Communications Act, or otherwise.
"Financial Statements" means the unaudited balance sheet of Seller as
of December 31, 1996 and the unaudited income statement for the year then ended.
"Funded Debt" means indebtedness of MMP for borrowed money, including
any and all fees, costs or other payments associated with its payoff or
retirement other than (i) any indebtedness due after the Closing Date with
respect to program contract liabilities, and (ii) Closing Date Liabilities.
"GAAP" means generally accepted accounting principles.
74
"Hazardous Substances" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing asbestos, and any materials or substances regulated or
defined as or included in the definition of "hazardous substances, "hazardous
materials," "hazardous constituents," "toxic substances," "pollutants,
"pollutants," "contaminants" or any similar denomination intended to classify
substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or
reactivity under any Environmental Laws.
"H-S-R Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Initial Deposit" means $12,750,000 less an amount equal to the lesser
of $6,375,000 or ninety percent (90%) of the Closing Date Estimated Accounts
Receivable.
"Initial Grant" means the date of the publication of the FCC "Public
Notice" announcing the grant of the "Assignment Applications" for the FCC
License to be transferred hereunder which contain no conditions materially
adverse to Purchaser. The term "Public Notice" and "Assignment Applications"
have the same meaning herein as are generally given the same under existing FCC
rules, regulation and procedures.
"Intellectual Property" means the patents, patent applications,
trademark registrations and applications therefor, service xxxx registrations
and applications therefor, copyright registrations and applications therefor and
trade names that are (i) owned by the Company and (ii) material to the continued
operation of the Business.
"IRS" means the Internal Revenue Service.
"Incentive Agreements" has the meaning set forth in Section 9.14.
"Indemnification Amount" means $12,750,000.00 deposited or collected
pursuant to the Indemnification Escrow Agreement.
"Indemnification Escrow Agreement" has the meaning set forth in
Section 3.1 of the Agreement.
"Indemnification Escrow" has the meaning set forth in Section 3.1 of
the Agreement.
"Investors Agreement" has the meaning set forth in the Recitals.
"Investors" has the meaning set forth in the Recitals.
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"Knowledge or knowledge" shall mean with respect to Seller, MMP, MTR
and the FCC Licensee Entities the actual knowledge (without any requirement of
inquiry except as otherwise provided in the Agreement) of X. X. Xxxxxx, Xx.,
Xxxx X. Xxxxxxx, Xxxxxxx X. XxXxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxx, Xxxxx X.
Xxxxxxx and Xxxxxxxxx X. Xxxxxxx, the general managers of the Stations, the
managers and officers of MMP, and the officers and directors of Seller.
"LMA Stations" shall have the meaning set forth in the Recitals.
"Losses" means any loss, liability, damage, cost or expense (including,
without limitation, reasonable attorneys' fees and expenses) but exclusive of
incidental or consequential damages.
"MMP Accounts Receivable" has the meaning given in Section 5.3s.
"MMP's Benefit Arrangements" means any Benefit arrangement sponsored or
maintained by MMP or by the FCC Licensee Entities or with respect to which MMP
or the FCC Licensee Entities has or may have any liability (whether actual,
contingent, with respect to any of its assets or otherwise) as of the Closing
Date, in each case with respect to any present or former director, employees, or
agent of MMP or the FCC Licensee Entities.
"MMP's Benefit Plan" means, as of the Closing Date, any Benefit Plan
for which MMP or the FCC Licensee Entities is the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA) or any Benefit Plan maintained by MMP or the FCC
Licensee Entities or which MMP or the FCC Licensee Entities is obligated to make
payments, in each case with respect to any present or former employees of MMP or
the FCC Licensee Entities. MMP's Benefit Plan shall include any Qualified Plan
terminated within the preceding six (6) years.
"MMP II FCC Applications" means the application requesting the approval
and consent of the FCC to the transfer of control of Television Stations WKEF-TV
and WEMT-TV from MMP to MTC.
"MMP Financial Statements" means the audited consolidated balance sheet
of MMP at December 31, 1996, the audited consolidated statements of operations
and cash flows for the year then ended, all notes thereto and the independent
auditor's audit report thereon, together with the unaudited balance sheet of MMP
at September 30, 1997 and the unaudited statement of operations for the nine (9)
months then ended.
"MMP Material Adverse Effect" shall mean a material adverse effect on
the business, or financial condition of any Television Station with the
exception of WMMP-TV
76
in the Charleston, South Carolina market or the Radio Stations taken as a whole.
"MMP Real Property" means all real property owned or leased by MMP.
"MRI" shall have the meaning set forth in the Recitals.
"MRI Agreement" shall have the meaning set forth in the Recitals.
"MTR" has the meaning set forth in the Recitals.
"Management Agreement" shall have the meaning set forth in the
Recitals.
"Material Adverse Effect" shall mean a material adverse effect on the
business, or financial condition of the Company taken as a whole.
"Material Contract" means all agreements to which Seller or MMP is a
party or by or to which it or its assets or properties are bound, except: (i)
agreements for the cash sale of advertising time with a term of less than six
months, (ii) agreements cancelable on no more than 90 days' notice without
material penalty, or (iii) agreements which are otherwise immaterial to the
Business and the Station.
"Permitted Encumbrances" shall mean liens for taxes not yet due and
payable; landlord's liens; liens for property taxes not delinquent; statutory
liens that were created in the ordinary course of business; restrictions or
rights required to be granted to governmental authorities or otherwise imposed
by governmental authorities under applicable law; zoning, building or similar
restrictions relating to or effecting property, including leasehold interests;
all liens of record as of the date of this Agreement, but only if such liens do
not materially effect the ownership or use of the MMP Real Property or leasehold
interests and real property owned by others and operating leases for personal
property and leased interests in property leased to others; liens and
encumbrances on the MMP Real Property, currently of record as of the date
hereof, and other liens or encumbrances on the MMP Real Property, in any case
that individually or in the aggregate do not materially effect the current use
and enjoyment thereof in the operation of any Station.
"Person" means a natural person, a governmental entity, agency or
representative (at any level of government), a corporation, partnership, joint
venture or other entity or association, as the context requires.
"Post-Closing Tax Period" means any Taxable Period or portion thereof
beginning after the Closing Date.
77
"Pre-Closing Tax Period" means any Taxable Period or portion thereof
that ends on or before the Closing Date.
"Pro Rata Share" shall mean 26.9433% in the case of Investors, 1.6167%
in the case of Management, 26.6519% in the case of MRI and 44.7881% in the case
of Seller.
"Purchase Price" shall mean the sum of (a) the Pro Rata Share of the
excess of the Cash Price over 40% of the Step-Up, plus (b) the Allocable Portion
of 40% of the Step-Up.
"Purchaser" has the meaning set forth in the preamble to the Agreement.
"Purchaser's Bring-Down Certificate" has the meaning set forth in
Section 11.2(a) of the Agreement.
"Purchaser's Knowledge" means the actual knowledge of the officers of
Purchaser.
"Qualified Plan" shall mean any Company Plan or MMP Plan that meets,
purports to meet, or is intended to meet the requirements of Section 401(a) of
the Code.
"RLLP" shall have the meaning set forth in the Recitals.
"Radio Stations" shall have the meaning set forth in the Recitals.
"Real Property" means any real property owned or leased by Seller.
"Related Agreement" means any document delivered at the Closing and any
contract which is to be entered into at the Closing or otherwise pursuant to
this Agreement, including the Escrow Agreement.
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller Interests" shall have the meaning set forth in Section 5.2q.
"Sellers' Agents" shall have the meaning set forth in Section 16.1.
"Seller's Bring-Down Certificate" has the meaning set forth in Section
11.1(a) of this Agreement.
"Shareholder Settlement Agreements" shall have the meaning set forth
in Section 2.2(b).
78
"Stations" has the meaning set forth in the recitals to the Agreement.
"Step-Up" shall mean the amount of Code Section 754 basis step-up,
calculated as the present value (determined using an 8.0% discount rate over a
15-year period assuming straight line amortization) of 45.812% of the Cash Price
minus (or plus in the case of a negative) the aggregate tax basis capital
accounts of Seller and Management in MMP immediately prior to the Closing.
"Stock" has the meaning set forth in the recitals to the Agreement.
"Straddle Period" shall have the meaning set forth in Section 8.2 of
this Agreement.
"Tax" or "Taxes" means all taxes, including, but not limited to, income
(whether net or gross), excise, property, sales, transfer, gains, gross
receipts, occupation, privilege, payroll, wage, unemployment, workers'
compensation, social security, occupation, use, value added, franchise, license,
severance, stamp, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), capital stock, withholding, disability, registration,
alternative or add-on minimum, estimated or other tax of any kind whatsoever
(whether disputed or not) imposed by any Tax Authority, including any related
charges, fees, interest, penalties, additions to tax or other assessments.
"Tax Authority" means any federal, national, foreign, state, municipal
or other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body or other authority exercising any taxing
or tax regulatory authority.
"Tax Liability" means any liability for a Tax.
"Taxable Period" means any taxable year or any other period that is
treated as a taxable year with respect to which any Tax may be imposed under any
applicable statute, rule or regulation.
"Tax Proceeding" means any audit, examination, claim or other
administrative or judicial proceeding relating to Taxes or Tax Returns.
"Tax Returns" means all returns, reports, forms, estimates, information
returns and statements (including any related or supporting information) filed
or to be filed with any Tax Authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Television Licensee" shall have the meaning set forth in the Recitals.
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"Television Stations" shall have the meaning set forth in the Recitals.
"Termination Date" shall have the meaning set forth in Section 14.1(b).
"Trade-out Agreements" shall mean all contracts and agreements
(excluding program contracts) pursuant to which MMP has sold, traded or bartered
commercial air time on the Stations in consideration for any property or
services in lieu of or in addition to cash.
"VARS" has the meaning set forth in Section 9.14.
