STOCK PURCHASE AGREEMENT
BY AND BETWEEN
▇▇▇▇▇▇▇▇ COMMUNICATIONS, INC.
AND
THE STOCKHOLDERS OF
LAKELAND GROUP TELEVISION, INC.
TABLE OF CONTENTS
1. DEFINITIONS ...............................................................1
2. SALE OF SHARES ............................................................2
3. PURCHASE PRICE ............................................................2
3.1 Payment ..........................................................2
4. CLOSING ...................................................................3
5. REPRESENTATIONS AND WARRANTIES OF SELLERS .................................3
5.1. Representations as to Shares, Etc. .............................3
5.2. Representations and Warranties as to the Company ...............4
a. Organization and Good Standing ..........................4
b. Capitalization ..........................................4
c. No Conflicts ............................................5
d. Real Property ...........................................5
e. Personal Property .......................................6
f. Financial Statements ....................................6
g. FCC .....................................................8
h. Intellectual Property ...................................9
i. Employee Benefit Plans ..................................9
j. Labor ..................................................11
k. Insurance ..............................................12
l. Material Contracts ....................................12
m. Compliance with Laws ...................................13
n. Litigation .............................................13
o. No Brokers .............................................13
p. Consents ...............................................13
q. Environmental ..........................................13
r. Tax Matters ............................................14
s. Dividends ..............................................16
t. Accounts Receivable ....................................17
i
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER ..............................17
6.1. Organization and Good Standing ................................17
6.2. Execution and Effect of Agreement .............................17
6.3. No Conflicts ..................................................17
6.4. Consents ......................................................18
6.5. Litigation ....................................................18
6.6. No Brokers ....................................................18
6.7. Funds Available ...............................................18
6.8. Purchaser Qualifications ......................................18
7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES ........19
7.1. Limitation; Survival ..........................................19
7.2. Schedules and Exhibits ........................................19
7.3. Non-Employee Sellers ..........................................19
8. TAX MATTERS ..............................................................19
8.1. Section 338 Election ..........................................19
8.2 Apportionment ..................................................20
8.2 Apportionment ..................................................20
8.3 Cooperation in Tax Matters .....................................20
8.4 Certain Taxes ..................................................20
8.6. Certain Withheld Amounts ......................................20
9. ADDITIONAL COVENANTS AND UNDERTAKINGS ....................................22
9.1. Further Assurances and Assistance .............................22
9.2. Access to Information .........................................22
9.3. Conduct of Business Prior to Closing ..........................22
9.4. H-S-R Act .....................................................25
9.5. FCC Application ...............................................25
9.6. Books and Records .............................................26
9.7. Contractual Obligations .......................................26
9.8. Control of Stations ...........................................26
9.9. Assumption of Brokerage Amounts ...............................27
9.10. Interruption of Broadcast Transmission. ......................27
ii
10. INDEMNIFICATION .........................................................28
10.1. Indemnification of Purchaser by Sellers ....................28
10.2. Indemnification of Sellers by Purchaser ....................29
10.3. Limitations and Other Provisions Regarding Indemnification
Obligations ................................................29
10.4. Notice of Claim /Defense of Action .........................30
10.5 Tax Contests ...............................................31
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE .............32
11.1. Conditions Precedent to the Obligation of Purchaser ........32
11.2. Conditions Precedent to the Obligation of Sellers ..........34
12. DELIVERIES AT THE CLOSING ...............................................35
12.1. Deliveries by Sellers ......................................35
12.2. Deliveries by Purchaser ....................................36
13. EXPENSES ................................................................36
14. TERMINATION .............................................................37
14.1 Termination ................................................37
14.2 Procedure and Effect of Termination ........................37
15. NOTICES .................................................................38
16. SELLERS' AGENT ..........................................................40
16.1. Sellers' Agent .............................................40
17. MISCELLANEOUS ...........................................................41
17.1. Headings ...................................................41
17.2. Schedules and Exhibits .....................................41
17.3. Execution in Counterparts ..................................41
17.4. Entire Agreement ...........................................41
17.5. Governing Law ..............................................41
17.6. Modification ...............................................41
17.7. Successors and Assigns .....................................42
17.8. Waiver .....................................................42
17.9. Severability ...............................................42
iii
17.10. Announcements ..............................................42
17.11. Specific Performance .......................................43
17.12 Bulk Transfers .............................................43
17.13 Third Party Beneficiaries ..................................43
17.14 Interpretation .............................................43
ANNEX 1 -- Definitions
ANNEX 2 -- Sellers
EXHIBITS
A - Deposit Escrow Agreement
B - Indemnification Escrow Agreement
C - Form of Opinion
D - Form of Opinion
SCHEDULES
5.1 Encumbrances on Stock
5.2c Conflicts Regarding Sellers or the Company
5.2d Leases of Real Property
5.2e Exceptions to Title to Personal Property
5.2f Financial Statements
5.2g FCC Licenses
5.2h Intellectual Property
5.2i Company Plans and Benefit Arrangements
5.2k Insurance Policies
5.2l Material Contracts
5.2m Exceptions to Compliance with Laws
5.2n Litigation Involving the Company
5.2p Consents Required for Sellers or the Company
5.2q Environmental Notices or Claims
5.2r(i) Exceptions to Certain Tax Representations
5.2r(ii) Tax Matters (Statement as to Basis, etc.)
iv
5.2t Exceptions Regarding Accounts Receivable
6.3 Conflicts Regarding Purchaser
6.4 Consents Required for Purchaser
6.5 Litigation Involving Purchaser
9.3c Pre-Closing Sales, etc. of Company Property
9.3j Pre-Closing Changes to Compensation, etc.
9.9 Engagement Letter with ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated
11.1(i) Form of Statement by the Company under FIRPTA
v
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of this 14th
day of November, 1997, is entered into by and among ▇▇▇▇▇▇▇▇ Communications,
Inc., a Maryland corporation ("Purchaser"), and each person who has executed
this Agreement (each a "Seller" and collectively, "Sellers").
WITNESSETH:
-----------
WHEREAS, Sellers own issued and outstanding shares of capital stock
(the "Stock") of Lakeland Group Television, Inc., a Minnesota corporation (the
"Company"); and
WHEREAS, the Company is the owner of the assets and operator of
KLGT-TV, Channel 23, in the Minneapolis-Saint ▇▇▇▇, Minnesota market (the
"Station"); and
WHEREAS, the Company holds the licenses granted by the Federal
Communications Commission (the "FCC") pursuant to which the Station is permitted
to operate (the "FCC Licenses"); and
WHEREAS, each Seller desires to sell to Purchaser, and Purchaser
desires to purchase from such Seller, all of the issued and outstanding shares
of Stock held by such Seller.
NOW, THEREFORE, for the purpose of consummating the above transaction
and in consideration of the promises and mutual covenants herein contained,
Sellers and Purchaser hereby agree as follows:
SECTION 1
DEFINITIONS
-----------
As used in this Agreement, capitalized terms shall have the meanings
specified in the text hereof or on Annex 1 hereto (which is incorporated herein
by reference), which meanings shall be applicable to both the singular and
plural forms of the terms defined.
SECTION 2
SALE OF SHARES
--------------
At the Closing, each Seller shall sell, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase from each Seller, that number and class
of shares of Stock as is set forth opposite the name of such Seller in Annex 2
hereto.
SECTION 3
PURCHASE PRICE
--------------
3.1 Payment. In consideration for the sale of the Stock, Purchaser
shall pay to Sellers the aggregate amount of $50,000,000.00 (the "Purchase
Price"), payable as follows:
(1) One Million Five Hundred Thousand Dollars ($1,500,000.00)
simultaneously with the execution and delivery of this Agreement, to be held in
escrow by Richfield Bank & Trust Co. as Escrow Agent pursuant to the Escrow
Agreement in the form of Exhibit A hereto (the "Deposit Escrow Agreement"). At
the Closing, Purchaser and Sellers shall cause such $1,500,000.00 to be released
to the Sellers' Agent (as hereinafter defined) and shall cause any interest or
other additional amounts in such escrow to be released to Purchaser;
(2) $1,000,000.00 at the Closing, to be held in Escrow (the
"Indemnification Escrow") by First Union National Bank 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 United States funds to the
accounts specified by the Sellers' Agent no less than two (2) Business Days
prior to the Closing.
2
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 ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.,
Suite 1100, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 A.M. local
time (but shall be deemed to have occurred at the close of business on the
immediately preceding 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, unless (i)
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 (the actual date of Closing
being the "Closing Date").
SECTION 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
5.1. REPRESENTATIONS AS TO SHARES, ETC.
a. Each Seller (severally and not jointly) hereby represents and
warrants to Purchaser that: (i) such Seller holds of record and owns
beneficially all of the shares of the Stock set forth opposite such Seller's
name in Annex 2 hereto free and clear of any lien, security interest, pledge or
encumbrance other than those set forth on Schedule 5.1 hereof, all of which will
be released at or before the Closing; (ii) upon transfer of the Stock set forth
opposite such Seller's name in Annex 2 hereto to Purchaser at the Closing,
Purchaser will have legal and equitable title to such Stock, free and clear of
any lien, security interest, pledge or encumbrance (other than any created by or
on behalf of Purchaser); (iii) such 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 such
Seller, and if such Seller is an entity that such entity is duly and validly
organized, existing and in good standing in the jurisdiction of its formation;
(iv) this Agreement has been duly executed and delivered by such Seller and
constitutes a legal, valid and binding obligation of such Seller, enforceable
against such 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 (collectively, the "Enforceability Limits"); (v) such Seller's shares
of Stock are not subject
4
to any option(s), warrant(s), voting trusts, outstanding proxies, registration
rights agreement(s), or other agreements regarding voting rights (other than
those reflected in Schedule 5.1 and that contemplated by Section 16 hereof); and
(vi) neither the execution and delivery of this Agreement by such Seller nor the
consummation of the transactions contemplated hereby by such Seller will (a)
violate any of the provisions of any governing documents of such Seller if it is
an entity, (b) violate any provision of applicable law, rule or regulation,
which violation would prevent or interfere with such Seller's ability to perform
its obligations 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 such 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 such Seller's ability to perform hereunder.
b. Neither Seller nor anyone acting on behalf of such Seller, has
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 other than the Company's engagement
of ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated.
5.2. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY.
Sellers, jointly and severally, hereby represent and warrant to
Purchaser as to the Company as follows:
a. ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Minnesota 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 not required to be qualified as a foreign corporation in any other
jurisdiction. The Company does not own any direct or indirect subsidiaries.
b. CAPITALIZATION. The authorized capital stock of the Company consists
of a single class of common stock having a par value of $.01 per share, of which
10,000,000 shares are authorized. The issued and outstanding shares thereof are
as described on Annex 2. All the outstanding shares of the Stock have been
validly issued and are fully paid and nonassessable and are held of record by
the respective Sellers as set forth on Annex 2 hereto. Except as described on
Annex 2, (i) no shares of capital stock of the Company are held in treasury,
(ii) there are no other issued or outstanding equity securities of the Company,
(iii) there are no outstanding stock appreciation rights, phantom stock rights,
4
profit participation rights, or other similar rights with respect to shares;
(iv) there are no other issued or outstanding securities of the Company
convertible or exchangeable at any time into equity securities of the Company;
and (v) the Company is not subject to any commitment or obligation that would
require the issuance or sale of additional shares of capital stock of the
Company at any time under options, subscriptions, warrants, rights or any other
obligations. The Company does not have any equity interest in any corporation,
partnership, joint venture or other entity.
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 the Company, (ii) violate any provision of
applicable law, rule and regulation, which violation would prevent or interfere
with Sellers' 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 the Company 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 Sellers' ability to perform hereunder or have a Material Adverse Effect.
d. REAL PROPERTY. The Company owns no real estate. All leaseholds and
other interests in Real Property and all buildings, structures, towers and
improvements thereon used in the business and operations of the Station are
listed on Schedule 5.2d to this Agreement.
The Sellers have delivered to the Purchaser correct and complete copies of the
leases and subleases listed in Schedule 5.2d. With respect to each lease and
sublease listed in Schedule 5.2.d (except as disclosed in such Schedule 5.2d):
(i) the lease or sublease is legal, valid, binding,
enforceable (subject to the Enforceability Limits), and in full force and effect
in all material respects;
(ii)no party to the lease or sublease is in material breach
or default, and no event has occurred which, with notice or lapse of time, would
constitute a material breach or default or permit termination, modification, or
acceleration thereunder;
5
(iii) no party to the lease or sublease has repudiated
any material provision thereof;
(iv) there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(v) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold; and
(vi) all facilities leased or subleased thereunder have
received all material 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 .
e. PERSONAL PROPERTY. Except as set forth on Schedule 5.2e hereto or on
the Financial Statements, the Company has good and marketable (to the extent
applicable under Minnesota law) title to all of its material items of tangible
personal property and assets used or useful by the Company located on its
premises or shown on the Financial Statement, and the Company owns such assets
free and clear of all liens, security interests and encumbrances. The tangible
personal property of the Company has been maintained in accordance with normal
industry practice and is in good condition and repair (subject to normal wear
and tear) and is adequate for its present use by the Company.
f. FINANCIAL STATEMENTS. Schedule 5.2f includes copies of the Financial
Statements. The Financial Statements have been prepared in accordance with GAAP,
consistently applied with prior periods (except that the balance sheet of July
31, 1997, is not a year-end statement and is subject to year-end adjustments and
the Financial Statements do not include the notes required by GAAP). 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.f
hereto, since July 31, 1997, there has not been any material adverse change in
the business, financial condition, operations, or results of operations of the
Company taken as a whole. Without limiting the generality of the foregoing,
since that date:
6
(i) the Company has not sold, leased, transferred, or
assigned any material assets, tangible or intangible, outside the ordinary
course of business;
(ii) the Company has not entered into any material
agreement, contract, lease, or license outside the ordinary course of business;
(iii) the Company has not accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which the Company is a party or by which the Company is bound;
(iv) the Company has not imposed any security interest upon
any of its assets, tangible or intangible;
(v) the Company has not made any material capital
expenditures outside the ordinary course of business;
(vi) the Company has not made any material capital
investment in, or any material loan to, any other Person outside the ordinary
course of business;
(vii) the Company has not created, incurred, assumed, or
guaranteed more than $25,000.00 in aggregate indebtedness for borrowed money and
capitalized lease obligations;
(viii) the Company 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
articles or bylaws of the Company;
(x) the Company 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) the Company 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) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
7
(xiii) the Company 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) the Company has not entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(xv) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
ordinary course of business;
(xvi) the Company 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 Employee Benefit
Plan);
(xvii) the Company has not made any other material change
in employment terms for any of its directors, officers, and employees outside
the ordinary course of business;
(xviii) the Company 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; and
(xix) the Company has not committed to do any of the
foregoing.
g. FCC. The Company and the Station 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 5.2g, 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 5.2g, no application, action or proceeding is pending for the
renewal or modification of any of the FCC Licenses and, to the Company's
Knowledge, there is not now before the FCC any investigation or complaint
against the Company or relating to the Station, the unfavorable resolution of
which would impair the qualifications of the Company to hold any FCC Licenses.
Except as set forth on Schedule 5.2g, there is no proceeding pending before the
FCC, and the Company has received no notice of violation from the FCC with
respect to the Station. Except as set forth on Schedule 5.2g, the Company has
received no order or notice of violation issued by any governmental entity which
permits revocation, adverse modification or termination of
8
any FCC License. Except as set forth on Schedule 5.2g, none of the FCC Licenses
or other licenses is subject to any restriction or condition which requires any
material change in the operation of the Station as currently operated. The FCC
Licenses listed in Schedule 5.2g are currently in effect and, except as
disclosed on the Schedules, are not subject to any liens, or other encumbrances.
No license renewal applications are pending with respect to any of the FCC
Licenses, but the Company must file an application for renewal of the FCC
Licenses on or before December 1, 1997. As of the date hereof, the Company has
received no notice or other information to the effect 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, the Company has
received no notice or other information to the effect 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 the Station's
public inspection files are in such file, other than documents, the absence of
which either individually or in the aggregate would not have a material adverse
effect on the renewal of the FCC Licenses or the Company's ability to consummate
the transactions contemplated by this Agreement, and such file will be
maintained in proper order and complete up to and through the Closing Date,
except for any such immaterial documents.
h. INTELLECTUAL PROPERTY. Set forth on Schedule 5.2h is a complete list
of all Intellectual Property owned by or licensed to the Company on the date
hereof and, except as otherwise set forth on Schedule 5.2h hereto, the Company
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 5.2h, the Company 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 ▇▇▇▇,
copyright or trade name of any third party by the Company. Except as set forth
on Schedule 5.2h, the Company has not given any notice of infringement to any
third party with respect to any of the Intellectual Property and to the
Company's Knowledge no such infringement exists.
i. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit
Plans and Benefit Arrangements:
(i) Schedule 5.2i completely and accurately lists all
Company Plans and Company Benefit Arrangements and specifically identifies any
that are Qualified Plans. Neither the Company nor any ERISA Affiliate has
maintained or contributed to any Qualified Plans since October 18, 1991, other
than the IDS Financial Services Inc. Defined Contribution Prototype Plan (the
"401(k) Plan"). The 401(k) Plan is qualified in form and operation under Code
Section 401(a) and has a currently applicable determination letter
9
from the Internal Revenue Service, and its trust is exempt under Code Section
501, and nothing has occurred with respect to the 401(k) Plan or such trust that
could cause the loss of such qualification or exemption or the imposition of any
material liability, lien, penalty, or tax under ERISA or the Code, other than
the obligation to make contributions in accordance with the 401(k) Plan.
(ii) 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, in each case in all material respects. No Company Plan
holds employer securities.
(iii) The Company neither has nor has ever had any ERISA
Affiliates. The Company has never sponsored, maintained, or had any liability
(direct or indirect, actual or contingent) with respect to any Benefit Plan
subject to Title IV of ERISA, nor has the Company ever made or been obligated to
make or reimbursed or been obligated to reimburse another employer for,
contributions to any multi-employer plan (as defined in ERISA, Section 3(37)).
The Company has no liability (whether actual, contingent or otherwise) with
respect to any Benefit Plan or Benefit Arrangement that is not a Company Benefit
Plan or Arrangement.
(iv) No claims or lawsuits (other than routine benefit
claims) have been asserted, instituted or, to the knowledge of the Company,
threatened by, against, or relating to any Company Plan or Company Benefit
Arrangement, and the Company does not have knowledge of any fact that could form
the basis for any material liability of the Company in the event of any such
claim or lawsuit. The Company has not received any notice that the Company Plans
and Company Benefit Arrangements are presently under audit or examination (and
has not received notice of a potential audit or examination by any governmental
authority, or of any matters pending with respect to the 401(k) Plan under any
governmental compliance programs).
(v) 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, except as
disclosed herein or in the Schedule 5.2i, the Company 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.
(vi) With respect to each Company Plan, there have been no
violations of
10
Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims
would result in any material liability for the Company or any Person required to
be indemnified by it.
(vii) The Company 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 as of July 31, 1997; 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.
(viii) The Company has complied in all material respects
with the health continuation rules of Code Sections 4980B (and its predecessor)
and with Code Section 5000. No employee or former employee of the Company nor
dependent 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.
(ix) There are no contracts, agreements, plans or
arrangements covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount (or
portion thereof) that, under Code Sections 280G, 404 or 162(m) would not be
deductible when paid.
j. LABOR. With respect to employees of the Company:
(i) The Company 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.
(ii) The employees of the Company are not and have never
been represented by any labor union in connection with employment by the
Company, and no collective bargaining agreement is binding and in force against,
or currently being negotiated by, the Company. To the Company's knowledge, no
labor representation organization effort currently exists nor has there been any
such activity within the past three years.
11
(iii) All Persons classified by the Company as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and the Company has fully and accurately reported the Company's
payments to them on IRS Forms 1099 when required to do so.
(iv) Since December 31, 1996, no employee of the Company,
or group of employees, the loss of whom would have significant adverse effect on
the business of the Company, has notified the Company of his or their intent to
(A) terminate his or their relationship with the Company, or (B) make any demand
for material payments or modifications of his or their arrangements with the
Company.
(v) The Company has received no notice of any charge or
compliance proceeding actually pending or threatened against the Company before
the Equal Employment Opportunity Commission or any state, local, or foreign
agency responsible for the prevention of unlawful employment practices.
k. INSURANCE. Schedule 5.2k hereto contains a list of all insurance
policies concerning the Business, other than employee-benefit related insurance
policies. All such policies are in full force and effect, there are no existing
breaches or defaults by the Company with respect to such policies, and no notice
of cancellation or termination has been received by the Company.
l. MATERIAL CONTRACTS. Schedule 5.2l 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 5.2l are legal, valid and binding obligations of the Company
enforceable in accordance with their terms (subject to the Enforceability
Limits) and in full force and effect. There exists no default by the Company or
event which, with notice or lapse of time, or both, would constitute a default
by the Company (or, to its knowledge) any other party to any such Material
Contract or which would permit termination, modification or acceleration. Except
as disclosed in Schedule 5.21, the Company has not received notice (or other
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.
12
m. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2m, the
Company is in compliance in all material respects with all applicable Federal,
state and local laws, rules and regulations, and the Company has received no
notice of any action threatened or pending alleging noncompliance therewith.
n. LITIGATION. Except as set forth on Schedule 5.2n hereto, there is no
suit, claim, action, proceeding or arbitration which seeks to enjoin or obtain
damages in respect of the transactions contemplated hereby pending or, to the
Company's Knowledge, threatened against (i) any of Sellers, or (ii) the Company.
The Company has received no citation, order, judgment, writ, injunction, or
decree of any court, government, or governmental or administrative agency
against or affecting the Business or the Company, except as disclosed on
Schedule 5.2n, and except for such FCC orders and other governmental orders,
decrees and other actions which apply to the broadcasting industry generally.
o. NO BROKERS. The Company 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, other than the Company's engagement of ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated.
p. CONSENTS. Except (i) as set forth on Schedule 5.2p hereto, (ii) for
filings pursuant to the H-S-R Act, or (iii) for the application requesting the
approval and consent of the FCC to the transaction contemplated by this
Agreement (the "FCC Application"), no filing, consent, approval or authorization
of any governmental authority or of any third party on the part of any Seller or
the Company is required in connection with the execution and delivery of this
Agreement by Sellers or the consummation by Sellers of any of the transactions
contemplated hereby (including any consents required under any Company contract
as a result of the change in control contemplated hereby).
q. ENVIRONMENTAL. Except as set forth on Schedule 5.2q hereto:
(i) The Company has not received any notice or claim
alleging that the operations of the Company at or from any Real Property do not
comply in all material respects with applicable Environmental Laws, or alleging
that the Company has engaged in or permitted any operations or activities upon
any of the Real Property for the purpose of or involving the treatment, storage,
use, generation, release, discharge, emission, or disposal of any Hazardous
Substances at the Real Property, except in substantial compliance with
applicable Environmental Laws.
13
(ii) The Company has not received any notice or claim
alleging that the Real Property is listed or, to the Company'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. The Company has not received any notice from any
governmental entity or third party of any actual or threatened Environmental
Liabilities with respect to the Real Property or the conduct of the Business.
(iii) The Company has not received any notice or claim
alleging that there are conditions existing at the 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.
(iv) The Company has not received any notice or claim
alleging that the Company does not have 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 Real Property
which are required under applicable Environmental Laws, or is not in substantial
compliance with the terms and conditions of all such permits, authorizations,
licenses, consents and approvals
(v) The Company has not received any notice or claim
alleging that there are Hazardous Substances present on or in the 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 Real Property or such adjoining property,
or incorporated into any structure therein or thereon. The Company has not
received any notice or claim alleging that the Company (or any other Person for
whose conduct it is or may be held responsible) has permitted or conducted, or
was aware of, any Hazardous Substances, or any illegal activity conducted with
respect to the Real Property or any other properties or assets (whether real,
personal, or mixed) the Company has or had an interest.
r. TAX MATTERS.
(i) Except as set forth on Schedule 5.2r(i) hereto:
14
(A) All Tax Returns required to be filed by the
Company have been filed when due in a timely fashion and all such Tax Returns
are true, correct and complete in all material respects.
(B) The Company has paid in full on a timely basis
all Taxes owed by it that were payable on or prior to the date hereof, whether
or not shown on any Tax Return.
(C) The amount of the Company's liability for unpaid
Taxes did not, as of July 31, 1997, exceed the amount of the current liability
accruals for such Taxes (excluding reserves for deferred Taxes) reflected on the
Financial Statements.
(D) The Company has withheld and paid over to the
proper governmental authorities all Taxes required to have been withheld and
paid over (and complied in all material respects 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.
(E) The Company has received no notice of any Tax
Proceeding currently pending with respect to the Company and the Company has not
received notice from any Tax Authority that it intends to commence a Tax
Proceeding.
(F) No waiver or extension by the Company of any
statute of limitations is currently in effect with respect to the assessment,
collection or payment of Taxes of the Company or for which the Company is
liable.
(G) The Company has not requested any extension of
the time within which to file any Tax Return of the Company that is currently in
effect.
(H) There are no liens on the assets of the Company
relating or attributable to
Taxes (except liens for Taxes not yet due).
(I) The Company 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.
(J) The Company has not entered into an agreement or
consent made under Section 341(f) of the Code affecting the Company.
15
(K) The Company 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.
(L) The Company is not and has not at any time been a
party to a tax sharing, tax indemnity or tax allocation agreement, and the
Company has not assumed the Tax liability of any other entity or person under
contract.
(M) The Company 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.
(N) The Company 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.
(O) None of the Company's assets are treated as "tax
exempt use property" within the meaning of Section 168(h) of the Code.
(ii) Sellers have furnished or otherwise made available to
Purchaser correct and complete copies of (A) all income, franchise and other
material Tax Returns filed by the Company since January 1, 1994; and (B) all
examination reports, statements of deficiencies and closing agreements received
by the Company with respect to the Company relating to Taxes.
(iii) Schedule 5.2r(iii) contains complete and accurate
statements of (A) the Company's basis in its assets, (B) the amount of any net
operating loss, net capital loss and any other Tax carryovers of the Company
(including losses and other carryovers subject to any limitations), and (C)
material Tax elections made by or with respect to the Company. Except as stated
in Schedule 5.2r(iii), the Company 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.
s. DIVIDENDS. Since December 31, 1996, no dividends have been declared,
paid, issued or otherwise approved by the Board of Directors of the Company in
respect of the Stock.
16
t. ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected on the Financial Statements or on the accounting records of the
Company as of the date hereof (collectively, the "Accounts Receivable")
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. Except as stated in
Schedule 5.2t, the Accounts Receivable are current and collectable, net of the
reserves shown on the Financial Statements (which reserves are adequate and
calculated consistent with past practice) or on the accounting records of the
Company. 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
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. The Company's financial records include a complete and accurate list
of all Accounts Receivable.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to Sellers 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. Purchaser is qualified (or Purchaser or
its permitted assignee will be qualified as of the Closing Date) as a foreign
corporation in the State of Minnesota.
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 hereof, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (a)
17
violate any of the provisions of the articles of incorporation or by-laws of
Purchaser, (b) violate any provision of applicable law, rule or regulation,
which violation would prevent or interfere with Purchaser's 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 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 hereto, (ii) for
filings pursuant to the H-S-R Act, or (iii) for 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 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. Except for ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Company (whose fees and
expenses will be paid in full by Purchaser), 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.
6.7. FUNDS AVAILABLE. Purchaser currently has (and on the Closing Date
will have) sufficient funds to pay the Purchase Price, in full and in accordance
with this Agreement, and Purchaser's obligations to purchase the Stock are not
subject to any condition or contingency involving financing, availability of
funds, or any similar matter.
6.8. PURCHASER QUALIFICATIONS. Purchaser is legally, financially and
otherwise qualified to be the licensee of, acquire, own and operate the Station
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 a transferee of the FCC Licenses or as the owner and operator of the Station,
or (b) cause the FCC to fail to approve in a timely
18
fashion the FCC Application for any reason attributable to Purchaser. No waiver
of any FCC rule or policy is necessary to be obtained for the grant of the FCC
Application for the transfer of control over the FCC Licenses to Purchaser, nor
will processing pursuant to any exception to a rule of general applicability be
requested or required in connection with the consummation of the transactions
contemplated hereby.
SECTION 7
ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES
--------------------------------------------------------------
7.1. LIMITATION; SURVIVAL. The representations and warranties herein
and the obligations of the parties shall survive the Closing Date for a period
of one year, except to the extent any claims for indemnification in respect of a
breach of any such representation or warranty is made on or before such date, in
which case such representation or warranty shall survive until the resolution of
such claim.
7.2. SCHEDULES AND EXHIBITS. Disclosure of any fact or item in this
Agreement or in any Schedule, Annex or Exhibit hereto shall be deemed to have
been disclosed in all other Schedules or Exhibits requiring such disclosure and
for purposes of all other representations and warranties made herein.
7.3. NON-EMPLOYEE SELLERS. In the case of each Seller who is not an
officer, director or employee of the Company, the parties acknowledge that (a)
such Seller does not have direct access to the books, records, employees and
assets of the Company; (b) such Seller does not have personal knowledge of the
matters discussed in the representations and warranties set forth in Section
5.2; (c) such Seller has not made any independent investigation or inquiry
regarding such matters; and (d) such Seller is relying principally on the
representations and warranties made by those Sellers who are officers or
employees of the Company.
SECTION 8
TAX MATTERS
-----------
8.1. SECTION 338 ELECTION. In the event that Purchaser makes an
election under Section 338 of the Code (or any comparable provision of state,
local or foreign law) with
19
respect to the purchase of the stock in the Company as provided herein,
Purchaser shall be responsible for and shall pay all Taxes resulting from such
election.
8.2 APPORTIONMENT. For purposes of apportioning any Tax to a portion of
any Taxable Period, the determination shall be made assuming that there was a
closing of the books as of the close of business on the last day of such
portion, except that real, personal and intangible property Taxes shall be
apportioned ratably on a daily basis between the portions of the Taxable Period
in question.
8.3 Sellers 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 the Company for all Taxable Periods or portions thereof
ending on or before the Closing Date; and (c) preserve information, records or
documents relating to Tax matters pertinent to the Company that is in their
possession or under their control until the expiration of any applicable statute
of limitations.
8.4 Sellers shall timely pay all transfer, documentary, sales, use,
stamp, registration and other similar Taxes and fees arising from or relating to
the sale of Stock under this Agreement, and Sellers shall at their 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.
8.5. CERTAIN WITHHELD AMOUNTS.
(a) Sellers and Purchaser acknowledge and agree that:
(i) Annex 2 refers to certain options to purchase shares of
Stock ("Options" and each an "Option");
(ii) immediately prior to Closing, some Options may remain
outstanding (each an "Unexercised Option");
(iii) Sellers shall cause each Unexercised Option to be
canceled without cost to the Company or Purchaser at or before the time of
Closing;
(iv) Sellers may cause part of the Purchase Price to be paid
to the
20
holder of each Unexercised Option;
(v) Sellers may cause part of the Purchase Price to be paid to
the holder of certain shares of Stock listed on Annex 2 that were issued by the
Company as compensation for services previously rendered by such holder to the
Company (each a "Compensatory Share"); and
(vi) certain amounts so paid with respect to an Unexercised
Option or a Compensatory Share may be taxable income and subject to Tax
reporting, or withholding of Tax, or both.
(b) For each holder of any Unexercised Option or Compensatory
Share, Sellers shall
(i) determine the amount of such taxable income (if any) and
the amount of Tax (if any) required to be withheld;
(ii) withhold such amount (the "Withheld Amount") from the
amount otherwise payable to such holder;
(iii) provide to the Company a statement that (A) identifies
such holder, (B) specifies such Withheld Amount, and (C) states the amount of
taxable income to be reported for such holder on Form W-2 or Form 1099 (as the
case may be) and the Withheld Amount (if any);
(iv) at or before the time of Closing, provide to the
Purchaser an opinion of counsel or certified public accountants reasonably
satisfactory to Purchaser to the effect that the amount of taxable income and
Tax required to be withheld with respect to each holder of any Unexercised
Option or Compensatory Share, as set forth in Seller's statement, are correct;
and
(v) pay to the Company the Withheld Amount (if any).
(c) For each such holder, upon the Company's receipt of such
statement and such Withheld Amount (if any), Purchaser shall cause the Company
to
(i) report on Form W-2 or Form 1099 (as the case may be) each
amount specified on such statement, in accordance with such statement; and
(ii) pay the Withheld Amount to the Internal Revenue Service
and
21
the Minnesota Department of Revenue, in each case in the respective amount
specified on such statement (or, in the case of any holder who is not a resident
of Minnesota, to such alternate state Tax authority (if any) as may be specified
in such statement).
SECTION 9
ADDITIONAL COVENANTS AND UNDERTAKINGS
-------------------------------------
9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchaser and Sellers 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. Sellers, from and after the date of this
Agreement and until the Closing Date, shall cause the Company to (a) 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 the Company or otherwise
relating to the Business, (b) provide Purchaser with all financial statements of
the Company, which shall be prepared and delivered to Purchaser each month
between the date hereof and the Closing Date, and (c) provide copies of such
information concerning the Company 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 the
Company without providing reasonable prior notice to Sellers and allowing a
representative of Sellers to be present. The Company and Sellers will use their
commercially reasonable efforts to obtain the consent of its auditors to permit
inclusion of the Financial Statements in applicable securities filings of
▇▇▇▇▇▇▇▇ 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
the Station's financial information, and, subject to the foregoing, the Company
and Sellers 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, Sellers shall use their best
efforts to cause the
22
Company to conduct such Business 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, Sellers shall act,
and shall cause the Company to act, as follows:
(a) The Company will not adopt any material change in any method
of accounting or accounting practice, except as contemplated or required by
GAAP;
(b) The Company will not amend its charter or by-laws;
(c) Except (i) for the disposition of obsolete equipment in the
ordinary course of business, or (ii) as set forth on Schedule 9.3(c) hereto, the
Company will not sell, mortgage, pledge or otherwise dispose of any material
assets or properties owned, leased or used in the operation of the Business;
(d) The Company 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;
(e) The Company will not authorize for issuance, issue or sell
any additional shares of its capital stock except as required by the exercise of
options outstanding on the date hereof as described in Annex 2 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;
(f) The Company will not incur, or agree to incur, any debt for
borrowed money other than draws under the Company's existing revolving credit
agreement;
(g) The Company will not change its historic practices concerning
the payment of accounts payable;
(h) The Company will not declare, issue, or otherwise approve the
payment of dividends of any kind in respect of the Stock or redeem, purchase or
acquire any of its capital stock;
(i) The Company shall maintain the existing insurance policies on
the assets of the Station or other policies providing substantially similar
coverages;
23
(j) Except as stated in Schedule 9.3(j) and except as otherwise
agreed to by Purchaser, the Company will not permit any increases in the
compensation of any of the employees of the Station except as required by law or
existing contract or agreement or enter into or amend any Company Plan or
Company Benefit Arrangement;
(k) The Company shall not enter into or renew any contract or
commitment relating to the Station or the assets of the Station, or incur any
obligation that will be binding on Purchaser after Closing, except in the
ordinary course of business; provided that (i) except for time sales contracts
for cash at prevailing rates for a term not exceeding twelve (12) months,
Sellers shall not enter into time sales agreement that will be binding on
Purchaser after Closing; and (ii) the Company shall not enter into, modify,
amend, renew, or change any contract with respect to programming for the Station
for any period after the Closing Date (each a Programming Action) without the
prior approval of Purchaser which approval shall not be unreasonably withheld or
delayed. For purposes of clause (ii) above, Sellers acknowledge that it shall
not be unreasonable for Purchaser to withhold its consent to approve of any
Programming Action where Purchaser, acting in good faith, has advised the
Company in writing that Purchaser has reason to conclude that it can acquire
such programming on better terms. Purchaser acknowledges that any failure of the
Company or Sellers to take any Programming Action as a result of Purchaser's
withholding consent shall not be a breach of any provision of this Agreement by
Sellers and shall not be a failure to satisfy any condition to be satisfied by
the Company or Sellers hereunder;
(l) The Company shall not enter into any transactions with any
Affiliate of the Company or any Seller that will be binding upon Purchaser, or
the Station following the Closing Date;
(m) The Company shall use all commercially reasonable efforts to
maintain the assets of the Station or replacements thereof in good operating
condition and adequate repair;
(n) The Company shall, in connection with the operation of the
Station, make expenditures materially consistent with the estimates of expenses
set forth in the Company's operating budget and, including, without limitation,
the Company shall make such materially consistent expenditures in respect to
promotional, programming and engineering activities for the Station (and any
employee expenditures related to such activities) for any period covered by the
current operating budget of the Station;
24
(o) The Company shall not 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 the Company.
(p) The Company shall file all Tax Returns when due; provided,
however, that the Company shall not file any material Tax Return without
providing Purchaser with reasonable opportunity to review and consent to the
filing of such Tax Return, which consent will not be unreasonably withheld;
provided further, however, that the Company shall not be in breach of this
Section 9.3(p) if Purchaser has not consented to such filing by the fifth (5th)
Business Day preceding the due date (including any extension periods) of such
filing.
9.4. H-S-R ACT. Each of Purchaser and Sellers 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 or the Department of Justice
pursuant to the H-S-R Act or the regulations promulgated thereunder. All filing
fees and other similar payments in connection with the H-S-R Act shall be split
equally by Purchaser and the Company.
9.5. FCC APPLICATION.
(a) Purchaser and Sellers jointly shall, within five Business
Days following the date hereof, file (or cause to be filed) 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. 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 of which the intent or
reasonably anticipated consequence would be to cause the FCC not to grant
approval of the FCC Application.
(b) Sellers shall cause the Company 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 with the FCC
after the date hereof and prior to the Closing, or filed after the Closing with
respect to the transaction under this Agreement, by
25
Purchaser or Sellers shall be mailed to the other simultaneously with the filing
of the same with the FCC or as soon as practicable thereafter. Each of Purchaser
and the Company 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 Company. None of the information contained in
any filing made by Purchaser or Sellers with the FCC with respect to the
transaction contemplated by this Agreement shall contain any untrue statement of
a material fact.
9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit
each 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 three (3) years following the Closing.
9.7. CONTRACTUAL OBLIGATIONS. At all times after Closing, Purchaser
shall cause the Company to:
(a) honor all of the Company's contractual obligations disclosed
herein (including, without limitation, those under employment arrangements
disclosed herein or in any Schedule hereto), in each case in accordance with
their respective terms and conditions;
(b) continue, for at least ninety (90) days after the Closing
Date, the employment of each person who is employed by the Company immediately
prior to Closing, in each case under terms and conditions of employment
(including, without limitation, compensation and benefits as such are disclosed
herein or in any Schedule hereto) that are not less favorable to such person
than those existing immediately prior to Closing, provided, however, that
nothing in this clause (b) shall require the continued employment of the
Station's general manager or general sales manager, except to the extent of any
such contractual obligations disclosed herein or in any Schedule hereto.
9.8. CONTROL OF STATIONS. From the date hereof until the Closing Date,
subject to the express provisions of this Agreement, Purchaser shall not
directly or indirectly control, supervise or direct the operation of the
Station.
9.9. ASSUMPTION OF BROKERAGE AMOUNTS. At the Closing, Purchaser shall
pay the
26
brokerage fees and expenses due from the Company to ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated
in accordance with the engagement letter dated November 12, 1996, executed by
the Company as set forth on Schedule 9.9 hereto.
9.10. INTERRUPTION OF BROADCAST TRANSMISSION.
(a) In the event of any loss, damage or impairment, confiscation
or condemnation of any of the assets of the Station prior to the completion of
the Closing that materially interferes with the normal operation of the Station,
the Company 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. The Company 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 the Station 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 the Station, the regular broadcast transmission of the Station in
the normal and usual manner is interrupted for a period of twelve (12)
continuous hours or more, the Company shall give prompt written notice thereof
to Purchaser. If on the Closing Date, due to damages or destruction of the
assets of the Station the regular broadcast transmission of the Station in the
normal and usual manner is interrupted such that the regular broadcast signal of
such Station (including its effective radiated power) is diminished in any
material respect, then (i) the Company shall immediately give written notice
thereof to Purchaser; and (ii) either, and both of, the Sellers' Agent or
Purchaser shall have the right, by giving prompt written notice to the other, to
postpone the Closing Date for a period of up to ninety (90) days.
(c) In the event the Station's normal and usual transmission has
not been resumed by the Closing Date as postponed pursuant to section (b) above,
either Purchaser or Sellers' Agent, may pursuant to Section 14.1(e), terminate
this Agreement by written notice to the other party. 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 after the Closing Date, in which event Sellers shall cause the
Company to 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 and have not therefore been used in or committed to the
restoration or replacement of the assets but Sellers shall have no other
liability or obligation to
27
Purchaser in connection therewith.
(d) If before the Closing Date, due to damage or destruction of
the assets the regular broadcast transmission of the Station in the normal and
usual manner is interrupted for a period of seven (7) continuous days or more,
Sellers 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 Sellers within two (2) Business Days of the date of the Interruption
Notice, to terminate this Agreement with the effect specified in Section 14.2(a)
hereof.
SECTION 10
INDEMNIFICATION
---------------
10.1. INDEMNIFICATION OF PURCHASER BY SELLERS.
(a) Subject to Section 10.3 hereof, each Seller, severally but
not jointly, 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 such Seller of any representation or warranty of such Seller as to itself or
himself, in Section 5.1 of this Agreement.
(b) Subject to Section 10.3 hereof, Sellers shall jointly and
severally 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 Sellers
set forth in Section 5.2 of this Agreement other than any representation or
warranty of any Seller set forth in Section 5.1 of this Agreement; or
(ii) the material failure by Sellers to perform any covenant
of Sellers contained herein; or
(iii) breaches of other agreements contemplated hereby.
28
10.2. INDEMNIFICATION OF SELLERS BY PURCHASER. Subject to Section 10.3
hereof, Purchaser shall indemnify and hold Sellers harmless from and against any
and all Losses, howsoever incurred, which arise out of or result from:
(a) any breach by Purchaser of any representation or warranty of
Purchaser set forth in Section 6 of this Agreement;
(b) the material failure by Purchaser to perform any covenant of
Purchaser contained herein; or
(c) breaches of other agreements contemplated hereby.
10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION
OBLIGATIONS.
(a) Notwithstanding the provisions of Section 10.1 hereof,
Purchaser shall not be entitled to indemnification or to receive indemnification
payments with respect to any Losses except if and to the extent that the
aggregate amount of Losses incurred by Purchaser and its Affiliates to which it
or they would otherwise be entitled to indemnification under Section 10.1
hereof, exceeds $50,000.00.
(b) In determining the amount of any Losses for which
indemnification is provided under this Agreement, such Losses 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 Losses, 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 Loss, 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
29
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.
(c) No claim for indemnification for Losses shall be made or
available after the first anniversary of the Closing Date (except to the extent
of any claims made on or before such first anniversary).
(d) Indemnification pursuant to this Section 10 shall be the sole
and exclusive remedy of each party hereto with respect to any Losses,
notwithstanding that indemnification may not be available and shall be in lieu
of any and all other rights and remedies after the Closing Date (whether
asserted as claims for breach of contract, tort claims, actions in equity or
otherwise.
(e) The maximum aggregate liability of all Sellers (including,
without limitation, all liability for indemnification under this Article 10)
shall not exceed the amount held in the Indemnification Escrow, and Purchaser
shall not (and shall have no right to) proceed against any Seller, other than
the right to proceed against the Indemnification Escrow to the extent of Losses
incurred by Purchaser for which Purchaser is entitled to indemnification
hereunder.
(f) The terms and conditions of Section 10.3(a) through (e) shall
not be deemed to limit any rights or remedies Purchaser may have for any act or
acts of fraud by Sellers or any Seller.
10.4. NOTICE OF CLAIM /DEFENSE OF ACTION.
(a) An indemnified party shall promptly give the indemnifying
part(ies) 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 the indemnified party's attention materially affecting
any matter relating to any indemnification claims.
30
(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 the indemnifying part(ies) and the
indemnifying part(ies) shall be entitled to participate therein or, to the
extent that it shall wish, 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 the indemnification
provided hereunder except to the extent that the failure to give such
31
notice materially prejudices the indemnifying party.
(b) Sellers, acting through Sellers' Agent, shall have the
right, at their own expense, to control and make all decisions with respect to
any Tax Proceeding relating solely to Taxes of the Company for which Sellers are
liable to indemnify Purchaser; 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 Sellers shall not settle any such Tax Proceeding without
the prior written consent of Purchaser if such settlement could adversely affect
the past, present or future Tax liability of Purchaser or any of its Affiliates,
or any Tax liability of the Company for which Seller is not obligated to
indemnify Purchaser.
(c) If Sellers do not exercise their 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.
(d) In the event that the provisions of this Section 10.5 and
the provisions of Section 10.4 conflict or otherwise each apply by the terms,
this Section 10.5 shall exclusively govern all matters concerning Taxes.
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) Sellers shall have complied in all material respects with
their agreements and covenants contained herein to be performed at or prior to
the Closing, and the representations and warranties of Sellers 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 from Sellers' Agent, dated as of the
Closing Date and signed by Sellers' Agent, certifying as to the fulfillment of
the conditions set forth in this Section 11.1(a) ("Sellers' Bring-Down
Certificate").
32
(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 Stock 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 and/or agreements identified on Schedule 5.2p
shall have been received.
(e) The Final Order approving the applications for transfer of
control of the FCC Licenses and the approval of the Company's application for
renewal of the FCC 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, if the consent of the FCC is conditional or qualified in any
manner that has a material adverse effect on Purchaser, 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;
provided, however, that if the consent of the FCC includes a condition to the
effect that Closing cannot occur until after grant of the application for
renewal of the FCC Licenses, such condition will not be deemed to have a
material adverse effect on Purchaser.
(f) Sellers shall have delivered to Purchaser at the Closing each
document required by Section 12.1 hereof.
(g) The Company shall have delivered to Purchaser a written
statement by a duly authorized officer of Richfield Bank & Trust Co. that the
Existing Debt of the Company does not exceed $2,500,000.00 on the Closing Date.
(h) Since the date of this Agreement through the Closing Date,
there shall not have been any Material Adverse Effect to the business,
operations, properties, assets, or condition of the Company, and no event shall
have occurred or circumstance exist that would reasonably be expected to result
in such a Material Adverse Effect.
33
(i) Purchaser shall have received from the Company a properly
executed statement in the form set forth in Schedule 11.1(i), together with
evidence that the Company has complied with the notice requirements of Section
1.897-2(h)2 of the Treasury regulations.
(j) Sellers shall have taken the actions and delivered the
payments, statements and opinions required by Section 8.5.
11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS. The obligation
of Sellers 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 Sellers
from consummating the transactions contemplated hereby.
(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. 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, that
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 Sellers at the Closing the
Purchase Price and each document required by Section 12.2 hereof.
34
SECTION 12
DELIVERIES AT THE CLOSING
-------------------------
12.1. DELIVERIES BY SELLERS. At the Closing, Sellers will deliver or
cause to be delivered to Purchaser:
(a) Sellers' Bring-Down Certificate;
(b) the legal opinions of Faegre & ▇▇▇▇▇▇ LLP, counsel to
Sellers, and ▇▇▇▇▇ ▇▇▇▇ & Fielding, FCC counsel to the Company, substantially in
the form attached as Exhibit C hereto;
(c) stock certificates evidencing the Stock, together with stock
powers, dated as of the Closing Date and executed by the respective Sellers,
transferring the Stock to Purchaser;
(d) the original corporate minute books, stock registry and seal
of the Company (to the extent available);
(e) a certificate as to the existence and good standing of the
Company issued by the Secretary of State of the State of Minnesota dated shortly
before the Closing Date confirmed as of the Closing Date;
(f) receipt for Purchase Price;
(g) resignations of each of the officers and directors of the
Company, effective as of the Closing Date;
(h) the statement required by Section 11.1(i);
(i) a copy of any instrument evidencing any consents received,
including, but not limited to, estoppel certificates from the Company's landlord
with respect to the Real Property;
(j) the Indemnification Escrow Agreement, duly executed by
Sellers or Sellers' Agent;
(k) the statement required by Section 8.5(b)(iii);
35
(l) the opinion of counsel or certified public accountants
required by Section 8.5(b)(iv); and
(m) 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 Sellers' Agent or the Indemnification Escrow Agent,
as the case may be:
(a) Purchaser's Bring-Down Certificate;
(b) a legal opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A., counsel to
Purchaser, substantially in the form attached as Exhibit D hereto;
(c) the Purchase Price as required pursuant to Section 3.1
hereof;
(d) the Indemnification Escrow Agreement, duly executed by
Purchaser;
(e) certificates as to the existence and good standing of the
Purchaser issued by the Maryland Department of Assessments and Taxation of the
State of Maryland and the Secretary of State of Minnesota as to the Purchaser's
qualification as a foreign corporation dated shortly before the Closing Date and
confirmed as of the Closing Date; and
(f) such other documents Sellers' Agent shall reasonably
request.
SECTION 13
EXPENSES
--------
Except as provided in Sections 9.4, 9.5 and 9.9, 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. The parties acknowledge and agree that (a) the Company has
incurred expenses in connection with considering, evaluating, preparing and
negotiating this Agreement and related documents and transactions (including,
without limitation, fees and expenses of accountants, legal counsel and other
professional advisors), (b) the Company will continue to incur and pay such
reasonable expenses in connection
36
with completing this Agreement and transactions and documents contemplated
hereby, and (c) the Company's doing so does not violate any representation,
warranty or other obligation of the Company hereunder.
SECTION 14
TERMINATION
-----------
14.1 TERMINATION. This Agreement may be terminated:
(a) at any time by mutual written consent of Purchaser and
Sellers;
(b) by either Purchaser or Sellers, if the terminating party is
not in default or breach in any material respect of its or their obligations
under this Agreement, if the Closing hereunder has not taken place on or before
twelve (12) calendar months from the date hereof, except where Closing has been
postponed pursuant to the provisions of 9.10, in which case the applicable date
shall be upon the expiration of the ninety (90) period referred to in Section
9.10;
(c) by Sellers, if Sellers are not in default or breach in any
material respect of its 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
9.10);
(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 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
9.10);
(e) by Purchaser or Sellers, pursuant to Section 9.10.
14.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either or
both Purchaser and/or Sellers pursuant to Sections 9.10 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
37
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 Sections 14.1(b),
14.1(d), or 14.1(e), the payment made by Purchaser pursuant to Section 3.1(1)
shall be returned to Purchaser. 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 of this Agreement caused by a breach by Sellers,
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 monetary damages. Sellers hereby waive any defense that
Purchaser has an adequate remedy at law for such breach of this Agreement by
Sellers.
(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, Sellers 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 Sellers 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 Sellers 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 an adequate remedy.
(d) If this Agreement is terminated pursuant to Section 14.1(a),
the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to
Purchaser.
(e) 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 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.
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 and
followed promptly by delivery of the
38
original), or (b) sent by Federal Express or other reputable overnight delivery
service (for next Business Day delivery), shipping prepaid, as follows:
If to Purchaser to:
Mr. ▇▇▇▇▇ ▇▇▇▇▇
President
▇▇▇▇▇▇▇▇ Communications, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Communications, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Sellers to:
▇▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇' Agent
Lakeland Group Television, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
39
with a copy to:
Faegre & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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' AGENT
--------------
16.1. SELLERS' AGENT. Each of the Sellers hereby irrevocably appoints
▇▇▇▇▇ ▇▇▇▇ Brook (herein called the "Sellers' Agent"), or any successor Sellers'
Agent appointed in accordance with this Section 16.1 as his, her or its agent
and attorney-in-fact to take any action required or permitted to be taken by
such 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'
Agent on his or its behalf. In the event of the death or incapacity of Sellers'
Agent, such person shall be replaced by Miles ▇. ▇▇▇▇▇▇▇ (automatically and
without any action by any Seller) who shall continue in that capacity. If at any
time, neither of the persons named above is serving as Sellers' Agent, then
Sellers' Agent shall be such person as may be named as such in a notice to
Purchaser, executed by Sellers holding (or, if such time is after Closing,
formerly holding) more than 50% of all shares of Stock listed on Annex 2. The
Sellers agree jointly and severally to indemnify the Sellers' Agent 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 as the Sellers' Agent 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' Agent. Purchaser shall be entitled to rely exclusively
upon any communications given by the Sellers' Agent on behalf of any Seller, and
shall not be liable for any action taken or not taken in reliance upon any
40
such communications from the Sellers' Agent. Purchaser shall be entitled to
disregard any notices or communications given or made by Sellers unless given or
made through the Sellers' Agent.
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 Schedules, Annexes and Exhibits
attached to 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 two
(2) 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 Annexes, Schedules,
Exhibits, and other 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, and there are no representations,
warranties, covenants, understandings, or agreements, oral or otherwise, in
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 State of Maryland
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 Sellers' Agent.
41
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. 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.
17.10. ANNOUNCEMENTS. From the date of this Agreement, all 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 any Seller or any Affiliate thereof or Purchaser
from making any disclosure in connection with the transactions contemplated by
this Agreement if (and to the extent) required by applicable law 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.
42
17.11. SPECIFIC PERFORMANCE. Sellers acknowledge that Purchaser will
have no adequate remedy at law if Sellers fail to perform their 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 BULK TRANSFERS. Purchaser hereby waives compliance for the
provisions of any applicable bulk transfer laws subject to Sellers'
indemnification as a result of such failure to comply.
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 Sellers acknowledge and agree
that the preparation and drafting of this Agreement and the Exhibits, Annexes
and Schedules 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.
[SIGNATURE PAGE TO FOLLOW -
PAGE LEFT INTENTIONALLY BLANK]
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
PURCHASER: SELLERS:
▇▇▇▇▇▇▇▇ COMMUNICATIONS,
INC.
By:
--------------------------------- ---------------------------------
Title:
---------------------------------
44
ANNEX 1
DEFINITIONS
As used in the attached Stock Purchase Agreement, the following terms
shall have the corresponding meaning set forth below:
1. "Accounts Receivable" has the meaning given in Section 5.2t.
2. 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.
3. "Agreement" has the meaning set forth in the preamble to the
attached Stock Purchase Agreement.
4. "Benefit Arrangement" shall mean any legally enforceable benefit
arrangement, obligation, custom, or practice to provide benefits (other than
regular cash compensation for services rendered) to present or former directors,
employees, 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, 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 or directors.
5. "Benefit Plan" shall have the meaning given in Section 3(3) of
ERISA.
6. "Business" means the business of owning and operating the Station.
7. "Business Day" means any day on which banks in New York City are
open for business.
8. "CERCLA" has the meaning set forth in Section 5.2q of the Agreement.
45
9. "Closing" has the meaning set forth in Section 4 of the Agreement.
10. "Closing Date" has the meaning set forth in Section 4 of the
Agreement.
11. "Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
12. "Company" has the meaning set forth in the recitals to the
Agreement.
13. "Company Benefit Arrangement" shall mean any Benefit Arrangement
sponsored or maintained by the Company or with respect to which the Company has
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 or employees of the Company.
14. "Company's Knowledge" means the actual knowledge (without any
requirement of inquiry) of any Seller who is not an officer, employee or
director of the Company or the actual knowledge, after due inquiry, of any
Person who is an officer or director (including any benefit manager whether or
not an officer) of the Company on the date of the Agreement or any other
individuals responsible for the day-to-day operations of the Stations.
15. "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.
16. "Compensatory Share" has the meaning set forth in Section 8.5 of
the Agreement.
17. "Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to lawfully and validly transfer
the Stock to Purchaser to maintain the validity and effectiveness (without any
material 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.
18. "Deposit Escrow Agreement" has the meaning set forth in Section 3.1
of the Agreement.
46
19. "Enforceability Limits" has the meaning set forth in Section 5.1.
20. "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.
21. "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
the Environment.
22. "Environmental Liability" means any loss, liability, damage, cost
or expense arising under any Environmental Law.
23. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
24. "ERISA Affiliate" shall mean any Person that together with the
Company 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 is or has been a general partner.
25. "Existing Debt" means the principal amount of all indebtedness of
the Company for borrowed money or the deferred purchase price of any property,
plus the amount required to be recorded as a liability on the financial
statements of the Company in accordance with GAAP with respect to any capital
lease.
26. "FCC" has the meaning set forth in the recitals to the Agreement.
27. "FCC Application" has the meaning set forth in Section 5.2p of the
Agreement.
28. "FCC Licenses" has the meaning set forth in the Recitals of the
Agreement.
29. "FCC Rules and Regulations" has the meaning set forth in Section
5.2g of the Agreement.
47
30. "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.
31. "Financial Statements" means the consolidated balance sheet of the
Company as of July 31, 1997 and the consolidated income statement and statement
of changes in financial condition for the calendar year 1996.
32. "GAAP" means generally accepted accounting principles, consistently
applied.
33. "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" under any Environmental Laws.
34. "H-S-R Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
35. "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.
36. "Intellectual Property" means the trademarks, trademark
registrations and applications therefor, service marks, service ▇▇▇▇
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.
37. "IRS" means the Internal Revenue Service.
38. "Indemnification Escrow Agreement" has the meaning set forth in
Section 3.1 of the Agreement.
39. "Indemnification Escrow" has the meaning set forth in Section 3.1
of the Agreement.
48
40. "Losses" means any loss, liability, damage, cost or expense
(including, without limitation, reasonable attorneys' fees and expenses)
determined in each case on an after-tax, after-insurance coverage basis in
accordance with Section 10.3(b) hereof.
41. "Material Adverse Effect" shall mean a material adverse effect on
the business, business prospects or financial condition of the Company taken as
a whole.
42. "Material Contract" means all agreements to which the Company 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.
43. "Permitted Exceptions" means matters that (i) do not render title
to the Real Property unmarketable or (ii) do not prohibit the continued
existence and/or continued use (as presently used) or maintenance of the
buildings, structures or improvements presently located on the Real Property.
Notwithstanding the foregoing, any matter shown on Schedule 5.2d shall be
considered a Permitted Exception.
44. "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.
45. "Purchase Price has the meaning set forth in Section 3.1 of the
Agreement.
46. "Purchaser" has the meaning set forth in the preamble to the
Agreement.
47. "Purchaser's Bring-Down Certificate" has the meaning set forth in
Section 11. 2 (a) of the Agreement.
48. "Purchaser's Knowledge" means the actual knowledge, after due
inquiry, of the officers of Purchaser.
49. "Qualified Plan" shall mean any Company Plan that meets or purports
to meet the requirements of Section 401(a) of the Code.
50. "Real Property" means any real property leased by the Company.
51. "Sellers" has the meaning set forth in the preamble to the
Agreement.
49
52. "Sellers' Bring-Down Certificate" has the meaning set forth in
Section 11.1(a) of this Agreement.
53. "Station" has the meaning set forth in the recitals to the
Agreement.
54. "Stock" has the meaning set forth in the recitals to the Agreement.
55. "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.
56. "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.
57. "Tax Liability" means any liability for a Tax.
58. "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.
59. "Tax Proceeding" means any audit, examination, claim or other
administrative or judicial proceeding involving Taxes.
60. "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.
61. "Unexercised Option" has the meaning set forth in Section 8.5 of
the Agreement.
50