Document:

2012 8-K Exhibit 10.1 - US Bank Loan Modification

Exhibit 10.1

MODIFICATION AGREEMENT

This Modification Agreement ("Agreement") is made as of June 29, 2012, by and among KENNEDY-WILSON, INC., a Delaware corporation ("Borrower"), U.S. BANK NATIONAL ASSOCIATION, a national banking association, as administrative agent, lead arranger and book manager ("Agent") under the Loan Agreement described below, U.S. BANK NATIONAL ASSOCIATION, a national banking association, as a Lender ("U.S. Bank National Association"), and EAST-WEST BANK,  a California banking corporation ("East-West Bank", and together with U.S. Bank National Association, and any bank that becomes a party to the Loan Agreement in the future, collectively, "Lenders").
Factual Background
A.    Under a Revolving Loan Agreement dated July 22, 2010 (the "Loan Agreement"), Lenders agreed to make an unsecured revolving loan of up to $75,000,000 to Borrower (the "Loan"), subject to the terms and conditions specified therein. Borrower's obligations under the Loan are evidenced by (i) a Promissory Note (Facility A) dated July 22, 2010 made payable to U.S. Bank National Association in the stated principal amount of Forty-Three Million Dollars ($43,000,000), (ii) a Promissory Note (Facility B) dated July 22, 2010 made payable to U.S. Bank National Association in the stated principal amount of Seven Million Dollars ($7,000,000), (iii) a Promissory Note (Facility A) dated July 22, 2010 made payable to East-West Bank in the stated principal amount of Twenty-Two Million Dollars ($22,000,000), and (iv) a Promissory Note (Facility B) dated July 22, 2010 made payable to East-West Bank in the stated principal amount of Three Million Dollars ($3,000,000) (collectively, the "Note").
B.    As of the date of this Agreement, (i) the principal balance outstanding under Facility A is $34,188,750, and $30,811,250 in Loan funds under Facility A are available for disbursement, and (ii) the principal balance outstanding under Facility B is $0, and $10,000,000 in Loan funds under Facility B are available for disbursement.
C.    In connection with the Loan, Kennedy-Wilson Holdings, Inc., a Delaware corporation ("Guarantor"), executed in favor of Agent and Lenders that certain Repayment Guaranty dated as of July 22, 2010 (the "Repayment Guaranty").
D.    Subject to the terms and conditions of this Agreement, Borrower, Agent and Lenders have agreed to modify the terms of the Loan to, among other things, extend the term of the Loan, modify the interest rate payable under the Loan, and make additional Loan proceeds available under the Loan (so that the total available principal amount of the Loan shall be $100,000,000), as more fully set forth herein.
E.    As used in this Agreement, the term "Loan Documents" means the Loan Agreement, the Note, the Repayment Guaranty and the other "Loan Documents" described in the Loan Agreement, all as amended or modified hereby.  This Agreement shall also constitute a Loan Document.  Capitalized terms used herein without definition have the meanings ascribed to them in the Loan Agreement.

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Agreement
Therefore, Borrower, Agent and Lenders agree as follows:
1.Recitals.  The recitals set forth above in the Factual Background are true, accurate and correct, and such recitals hereby are incorporated herein as an agreement of Borrower, Agent and Lenders.

2.Reaffirmation of Obligations.  Borrower reaffirms all of its Obligations under the Loan Documents, and Borrower acknowledges that it has no claims, offsets or defenses with respect to the payment of sums due under the Note or any other Loan Document.  Without limiting the foregoing, Borrower (a) reaffirms Agent's right, following the occurrence of any Event of Default, subject to the terms and conditions of Section 1.14 of the Loan Agreement, to apply any and all payments made by Borrower or otherwise received by Agent or Lenders with respect to the Loan to the obligations owing by Borrower under the Loan Documents in such order and manner deemed appropriate by Agent in its sole discretion (subject only, as between Agent and Lenders, to the provisions of Section 9.5(b) of the Loan Agreement, as amended hereby), and (b) expressly waives all of its rights under applicable law or otherwise to direct Agent as to such application or to designate the portion of the obligations to be satisfied.

3.Increased Availability.  The Loan Documents are hereby amended as follows:
 
(a)On the Effective Date, Lenders shall make available to or for the benefit of Borrower additional sums so that the total principal amount available to be borrowed by Borrower under the Loan Agreement and the Note shall be $100,000,000, of which $75,000,000 shall constitute the new Facility A Committed Amount, and of which $25,000,000 shall constitute the new Facility B Committed Amount (such additional sums being referred to herein as the "Additional Advance").   As used herein and in the other Loan Documents going forward, the term "Loan" shall be deemed to include the Additional Advance.  U.S. Bank National Association and East-West Bank agree that they shall each make available such portion of the Additional Advance to be made hereunder in an amount such that following the making of such Additional Advance, (i) U.S. Bank National Association shall have a commitment for Facility A of $48,750,000 and a commitment for Facility B of $16,250,000, and its Commitment Percentages shall be as set forth on Exhibit E to the Loan Agreement (as amended hereby), and (ii) East-Bank shall have a commitment for Facility A of $26,250,000 and a commitment for Facility B of $8,750,000, and its Commitment Percentages shall be as set forth on Exhibit E to the Loan Agreement (as amended hereby).  On the Effective Date, the Exhibit E attached to this Agreement shall be deemed substituted in place of the Exhibit E attached to the Loan Agreement.

(b)Each reference in the Loan Documents to "Sixty Five Million Dollars" and "$65,000,000" is hereby deleted in its entirety and replaced with "Seventy Five Million Dollars" and "$75,000,000", respectively.  Each reference in the Loan Documents to "Ten Million Dollars" and "$10,000,000" (other than the references in Section 5.8(a) of the Loan Agreement) is hereby deleted in its entirety and replaced with "Twenty Five Million Dollars" and "$25,000,000", respectively.  Each reference in the Loan Documents to "Seventy-Five Million Dollars" and "$75,000,000" is hereby deleted in its entirety and replaced with "One Hundred
Million Dollars" and "$100,000,000", respectively.  Each reference in the Loan Documents to "Forty-Three Million Dollars" and "$43,000,000" is hereby deleted in its entirety and replaced with "Forty-Eight Million Seven Hundred Fifty Thousand Dollars" and "$48,750,000", respectively.  Each reference in the Loan Documents to "Seven Million Dollars" and "$7,000,000" is hereby deleted in its entirety and replaced with "Sixteen Million Two Hundred Fifty Thousand Dollars" and "$16,250,000", respectively.  Each reference in the Loan Documents to "Twenty-Two Million Dollars" and "$22,000,000" is hereby deleted in its entirety and replaced with "Twenty-Six Million Two Hundred Fifty Thousand Dollars" and "$26,250,000", respectively.  Each reference in the Loan Documents to "Three Million Dollars" and "$3,000,000" is hereby deleted in its entirety and replaced with "Eight Million Seven Hundred Fifty Thousand Dollars" and "$8,750,000", respectively. 
               
4.New Definitions.  The "Definitions" section of the Loan Agreement is hereby amended by adding the following definitions, in appropriate alphabetical order:

 "Excluded Taxes:  Means, in the case of each Lender or applicable Lending Installation and Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (a) the jurisdiction under the laws of which such Lender or Agent is incorporated or organized or (b) the jurisdiction in which Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located."
"Lending Installation:  Means, with respect to a Lender or Agent, the office, branch, subsidiary or affiliate of such Lender or Agent listed on the signature pages hereof (in the case of Agent) or on its Administrative Questionnaire (in the case of a Lender) or otherwise selected by such Lender or Agent."

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"Modification Agreement:  Means that certain Modification Agreement dated as of June 29, 2012 executed by and among Borrower, Agent and the Lenders."
"Other Taxes:  Means any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note."
"Permitted Investors:  Means William McMorrow and Fairfax Financial Holdings Limited and its Affiliates, in each case, together with such Permitted Investors' heirs, assigns and successors."
"Taxes"  Means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes."
5.Existing Definitions.

(a)The definition of "Applicable Spread" contained in the "Definitions" section of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"Applicable Spread:  Means two and three-quarters percent (2.75%) per annum as to all Advances and other amounts owing under both Facility A and Facility B." 
(b)The definition of "Regulatory Change" contained in the "Definitions" section of the Loan Agreement is hereby deleted in its entirety and replaced with the following, and all references in the Loan Agreement and any of the other Loan Documents to the term "Regulatory Change" are hereby deleted and replaced with references to the term "Change":

"Change:  Shall have the meaning ascribed to such term in Section 1.9 of this Agreement."
(c)The definition of "Change of Control" contained in the "Definitions" section of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"Change of Control:  Shall be deemed to have occurred at such time as there is (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), but excluding (i) Permitted Investors and (ii) any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan unless such plan is part of a group, becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934), directly or indirectly, of thirty-five percent (35%) or more of the equity securities of Guarantor entitled to vote for members of the board of directors or equivalent governing body of Guarantor on a fully diluted basis or (b) during any period of 12 consecutive months, a majority of the members of the board of directors of Guarantor cease to be composed of individuals (i) who were members of that board on the first day of such period, (ii) whose election or nomination to that board was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or (iii) whose election or nomination to that board was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors)."
(d)The definition of "EBITDA" contained in the "Definitions" section of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"EBITDAR: Means the net income of Borrower (excluding extraordinary items), for the applicable period, plus all interest expense (including Borrower's allocable share of any interest expense relating to any joint venture in which Borrower is a member, partner or joint venturer), income tax expense (including foreign income tax expense), depreciation and amortization (including Borrower's allocable share of any depreciation and amortization relating to any joint venture in which Borrower is a member, partner or joint venturer) and corporate rental 

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lease expense (which, for the avoidance of doubt, does not include rental lease expense related to any investment property) for the period."
(e)The definition of "Maturity Date" contained in the "Definitions" section of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"Maturity Date":  June 30, 2015.
(f)The definition of "Minimum Rent Adjusted Fixed Charge Coverage Ratio" contained in the "Definitions" section of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"Minimum Rent Adjusted Fixed Charge Coverage Ratio: Means, as of the end of the most recently concluded calendar quarter, and/or as of any other date specified in this Agreement, as applicable, (i) EBITDAR for that portion of the calendar year then concluded, minus cash taxes (including foreign income taxes), cash dividends (both preferred and common), and maintenance capital expenditures, divided by (ii) interest expense (excluding Borrower's allocable share of any interest expense relating to any joint venture in which Borrower is a member, partner or joint venturer), plus any mandatory debt retirement plus corporate rental lease expense (which, for the avoidance of doubt, does not include rental lease expense related to any investment property)."
6.Further Modifications to the Loan Agreement.  The Loan Documents are hereby further amended as follows:

(a)Section 1.2(a) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"(a)    Absent an Event of Default hereunder, the outstanding Principal Balance owing under the Notes shall bear interest at the Applicable Interest Rate (as defined below). The "Applicable Interest Rate" shall mean (a) the LIBOR Daily Reset Based Rate, as the same may fluctuate from time to time, as to all amounts outstanding on the Loans, other than LIBOR Rate Advances, and (b) the LIBOR Rate as to those portions of the Loans that are 
LIBOR Rate Advances.  Changes in the LIBOR Daily Reset Based Rate shall become effective on the same day as the date of any change in the LIBOR Daily Reset Based Rate, and shall apply to all Advances made hereunder (other than LIBOR Rate Advances), whether such Advances are made prior to, the same day as, or subsequent to any particular change in the LIBOR Daily Reset Based Rate."
(b)Section 1.2(e) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"(e)    Absent manifest error, Agent's records as to the amounts of any sums owing hereunder (including without limitation any sums owing pursuant to Sections 1.6 and 1.9) shall be conclusive and binding."
(c)Section 1.6 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"1.6    Yield Protection.  If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation, promulgation, implementation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof including, notwithstanding the foregoing, all requests, rules, guidelines or directives in connection with Dodd-Frank Wall Street Reform and Consumer Protection Act regardless of the date enacted, adopted or issued, or compliance by Agent or any Lender (or applicable Lending Installation) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:
(a)    subjects Agent and/or any Lender (or any applicable Lending Installation) to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to Agent and/or any Lender in respect of the Loan or participations therein, including without 

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limitation the principal of or interest on any LIBOR Rate Advance or any other fees or amounts payable hereunder (other than with respect to Excluded Taxes), or
(b)    imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, Agent and/or any Lender (or any applicable Lending Installation), or
(c)    imposes any other condition the result of which is to increase the cost to Agent and/or any Lender (or any applicable Lending Installation) of making, funding or maintaining the Loan or any LIBOR Rate Advance (or any related Loan commitment), or to reduce any amount receivable by Agent and/or any Lender (or any applicable Lending Installation) in connection with the Loan or participations therein (whether of principal, interest or otherwise), or requires Agent and/or any Lender (or any applicable Lending Installation) to make any payment calculated by reference to the amount of the Loan by an amount deemed material by Agent and/or such Lender,
and the result of any of the foregoing is to increase the cost to Agent and/or such Lender (or applicable Lending Installation) of making or maintaining the Loan or to reduce the return received by Agent and/or such Lender (or applicable Lending Installation), as the case may be, in connection with the Loan, then, Agent may notify Borrower that events or conditions have occurred that may result in increased costs to Agent and/or such Lender or reductions in amounts to be received by Agent and/or such Lender (the “Event Notice”).  Once the amount of the increased costs or reductions in amounts to be received is determined, Agent may give Borrower notice thereof (the “Payment Notice”) and, within 15 days of the Payment Notice, Borrower shall pay Agent and/or such Lender such additional amount or amounts as will compensate Agent and/or such Lender for such increased cost or reduction in amount received, as reasonably determined by Agent and/or such Lender.  Borrower shall not be required to compensate Agent and/or such Lender pursuant to this paragraph for any increased costs or reductions suffered prior to the date that Agent sends Borrower the Event Notice.  The Payment Notice shall include a statement from Agent setting forth such amount or amounts as shall be necessary to so compensate Agent and/or such Lender, and shall, in the absence of manifest error, be conclusive and binding upon Borrower.  Failure on the part of Agent and/or such Lender to demand compensation for any increased costs, lost income or reduction in amounts received or receivable shall not constitute a waiver of Agent's or such Lender's rights to demand compensation for any increased costs or reduction in amounts received or receivable.  The protection under this section shall be available to Agent and the Lenders regardless of any possible contention of the invalidity or inapplicability of any law, regulation or directive which shall give rise to any demand by Agent or any Lender."
(d)Section 1.9 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"1.9    Changes in Capital Adequacy Requirements.  If Agent determines the amount of capital required or expected to be maintained by Agent or any Lender, any Lending Installation of Agent or any Lender, or any corporation or other Person controlling Agent or any Lender is increased as a result of a Change, then, Agent may notify Borrower that a Change has occurred that may result in an increase in the amount of capital required or expected to be maintained by such parties described above (the “Change Event Notice”).  Once the shortfall in the rate of return on the portion of such increased capital is determined, Agent may give Borrower notice thereof (the “Capital Adequacy Payment Notice”) and, within 15 days of the Capital Adequacy Payment Notice, Borrower shall pay to Agent (for the benefit of the applicable Lender(s)) the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which Agent determines is attributable to this Agreement or any Loan or commitment made hereunder (after taking into account Agent's and Lenders' policies as to capital adequacy).   Without limiting the foregoing, such compensation shall include an amount equal to any reduction in return on assets or return on equity to a level below that which Agent or any Lender could have achieved absent its extension of credit hereunder and but for such Change.  Borrower shall not be required to compensate Agent or any Lender pursuant to this paragraph for any shortfall in the rate of return suffered prior to the date that Agent sends Borrower the Change Event Notice.  “Change” means (i) any change after the date of this Agreement in the Risk-Based Capital Guidelines (defined below) 

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or (ii) any adoption of or change in any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) or in the interpretation, promulgation, implementation or administration thereof after the date of this Agreement which affects the amount of capital required or expected to be maintained by Agent or any Lender (or any Lending Installation) or any corporation or other Person controlling Agent or any Lender, including without limitation, (a) any such law, regulation or change which affects the London interbank market, and (b) any such change which results in an adjustment (i) of the Federal Deposit Insurance Corporation assessment rate, or (ii) of the reserve requirement specified by Regulation D.  Notwithstanding the foregoing, for purposes of this Agreement, all requests, rules, guidelines or directives in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act shall be deemed to be a Change regardless of the date enacted, adopted or issued and all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel 
Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States financial regulatory authorities shall be deemed to be a Change regardless of the date adopted, issued, promulgated or implemented.  “Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement."
(e)The reference to "Twenty-Five Million Dollars ($25,000,000)" in Section 3.3(a) of the Loan Agreement is hereby deleted in its entirety and replaced with "Thirty Million Dollars ($30,000,000)."

(f)Section 3.3(c) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"(c)    any Advances with respect to hotel properties shall be limited to sixty percent (60%) of the initial acquisition price in the aggregate;"
(g)Section 3.3(f) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"(f)    any Advances for (i) the acquisition or refinancing of any land (excluding land entitled for hotels) shall be limited to forty percent (40%) of the initial acquisition price of such land in the aggregate, and (ii) the acquisition or refinancing of any land entitled for hotels (whether developed or undeveloped) shall be limited to twenty-five percent (25%) of the initial acquisition price of such land in the aggregate; and"
(h)The reference to "1.75:1" in Section 5.2(a) of the Loan Agreement is hereby deleted in its entirety and replaced with "1.50:1".

(i)The reference to "Thirty Million Dollars ($30,000,000)" in Section 5.2(b) of the Loan Agreement is hereby deleted in its entirety and replaced with "Forty Million Dollars ($40,000,000)".

(j)Section 5.2(c) of the Loan Agreement remains unmodified and in full force and effect.

(k)The reference to "Two Hundred Million Dollars ($200,000,000)" in Section 5.2(d) of the Loan Agreement is hereby deleted in its entirety and replaced with "Two Hundred Fifty Million Dollars ($250,000,000)".
(l)The reference to "sixty (60)" in Section 5.3(c) of the Loan Agreement is hereby deleted in its entirety and replaced with "ninety (90)". 

Section 5.4 of the Loan Agreement is hereby deleted in its entirety.
(m)Section 6.1(d) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"(d)    refinancings, renewals, or extensions of Indebtedness permitted under clauses (b), (c), (e) and (f) of this Section 6.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as: (i) the terms and conditions of such refinancings, renewals, or extensions do not materially impair the prospects of repayment of the Obligations by Borrower, (ii) to 

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the extent that the Indebtedness that is refinanced was subordinated in right of payment to the Obligations, then the subordination terms and conditions of the refinancing Indebtedness must be at least as favorable to Lenders as those applicable to the refinanced Indebtedness, (iii) if and to the extent any such refinancings, renewals, or extensions are for assets acquired, sold, refinanced, or funded by an Equity Infusion, the original amount of the Advance corresponding to such asset shall be repaid to Lenders concurrently with such refinancing, extension or renewal, (iv) the amount of the refinancing Indebtedness must not be greater than the principal amount of the refinanced Indebtedness, plus all prepayment premiums or penalties and costs and expenses paid in connection with such refinancing, and (v) the interest rate and other terms must not be more onerous on the Borrower, than the amount and terms of the Indebtedness that was refinanced;"
(n)Section 6.1(e) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"(e)    subject to each Lender's receipt of five (5) days prior written notice (which may be in the form of electronic mail) from Borrower, non-recourse debt (and any related non-recourse guaranties related thereto) incurred or assumed by Borrower or Borrower's Subsidiaries or Affiliates as a portion of Borrower's purchase price of (i) commercial real property, including without limitation land, office, multifamily, residential, industrial, retail, hotel or mixed-use property, or (ii) pools of notes fully secured by liens on commercial real property;"
(o)Section 6.1(f) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
"(f)    subject to each Lender's receipt of five (5) days prior written notice (which may be in the form of electronic mail) from Borrower, debt which is recourse to or guaranteed by Borrower, where such debt is incurred or assumed by Borrower or Borrower's Subsidiaries or Affiliates and fully secured by (a) (i) commercial real property, including without limitation land, office, multifamily, residential, industrial, retail, hotel or mixed-use property, or (ii) pools of notes fully secured by liens on commercial real property, or (b) one hundred percent (100%) of the equity interests in an entity that owns (i) commercial real property, including without limitation land, office, multifamily, residential, industrial, retail, hotel or mixed-use property, or (ii) pools of notes fully secured by liens on commercial real property;"
(p)Section 6.1(g) is hereby deleted in its entirety and replaced with the following:
"(g) Indebtedness arising under any letter of credit, performance or surety bond or completion bond entered into in the ordinary course of business in an aggregate principal amount at any time outstanding not to exceed Ten Million Dollars ($10,000,000)."
(q)The following new Sections 6.1(h), 6.1(i) and 6.1(j) are hereby added to the Loan Agreement:

"(h) Indebtedness arising under any swap contracts entered into in order to cap, collar or exchange (i) interest rates (from fixed to floating rates or from one floating rate to another floating rate or otherwise) with respect to any borrowed money and (ii) currency exchange rates, in each case in connection with the conduct of its business and not for speculative purposes."
"(i) any other Indebtedness not covered by subsections (a) through (h) above, in an amount less than Ten Million Dollars ($10,000,000)."
"(j) All Indebtedness described in subsections (a) through (i) above must also satisfy all other applicable requirements of this Agreement."
(r)Section 6.2 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"6.2    Liens.    Create, incur, or permit to exist, directly or indirectly, any Lien on or with respect to any of its property or assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for (i) Permitted Liens, (ii) Liens given to vendors or lenders to secure Indebtedness
permitted pursuant to Section 6.1(e) or 6.1(f) and the refinancing of such Indebtedness pursuant 

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to Section 6.1(d), with respect to commercial real property or pools of notes secured by commercial real property after the Closing Date and fully secured exclusively by such property, (iii) Liens given to secure obligations under swap contracts permitted under Section 6.1(h), or (iv) Liens securing repayment of obligations of Borrower in an amount less than Ten Million Dollars ($10,000,000)."
(s)Section 6.14 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"6.14    Use of Proceeds.     Use the proceeds of the Advances made hereunder for any purpose other than (i) on the Closing Date, to pay sums due the Lenders for transactional costs and expenses under or in connection with this Agreement, (ii) on the Effective Date (as defined in the Modification Agreement), to pay sums due the Lenders for transactional costs and expenses under or in connection with the Modification Agreement, and (iii) thereafter, consistent with the terms and conditions hereof, in the case of Facility A, to finance Borrower's or its Subsidiaries' or Affiliates' acquisition of commercial real property or pools of notes secured by commercial real property (so long as Borrower has management control over such Subsidiary or Affiliate), and in the case of Facility B, for the general business purposes of Borrower, including working capital needs and equity investments."
(t)Section 6.18 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"6.18    Dividends.     Borrower shall not declare or pay corporate dividends without the prior written consent of Lenders, except for (i) cash dividends on preferred stock of Borrower in an amount in an amount less than of Ten Million Dollars ($10,000,000) per fiscal year or (ii) cash dividends on common stock of Borrower in an amount not more than Thirty Cents ($0.30) per share per fiscal year, provided that any corporate dividends shall also satisfy all other applicable requirements of this Agreement."
(u)Section 6.19 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"6.19    Stock Repurchases.  Other than the purchase or repurchase of corporate stock or warrants for corporate stock of Guarantor in an aggregate amount of Ten Million Dollars ($10,000,000) per fiscal year, Borrower shall not purchase or repurchase any corporate stock of Borrower or Borrower's 
Subsidiaries unless, at the time of any such repurchase (i) there exists no Event of Default, (ii) Borrower is in strict compliance with all covenants contained herein, (iii) Borrower demonstrates, to the reasonable satisfaction of Agent, that Borrower shall remain in compliance with the covenants contained herein for the twelve (12) months following such repurchase, and (iv) Borrower provides the Agent with such updated financial projections as the Agent shall reasonably require, which projections shall be reasonably satisfactory to the Agent in all material respects."
(v)The reference to "Freeman Lyle, EVP/CFO/Secretary" in Section 8.5 of the Loan Agreement is hereby deleted in its entirety and replaced with "Chief Financial Officer". 
 
(w)The reference to "Loeb & Loeb LLP, 10100 Santa Monica Blvd., Suite 2200, Los Angeles, CA  90067, Attn:  Lawrence Venick, Esq., Facsimile:  (310) 919-3807" in Section 8.5 of the Loan Agreement is hereby deleted in its entirety and replaced with "Latham & Watkins LLP, 355 South Grand Avenue, Los Angeles, CA 90071, Attn: Glen B. Collyer, Esq., Facsimile: (213) 891-8763".

(x)The first paragraph of Section 9.5(b) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

"(b)    Application of Recoveries.  Except to the extent otherwise provided in Section 9.7 hereof, all payments and proceeds received by Agent in connection with the Loan and the Note, from any source, shall be applied in the following order of priority (unless Agent otherwise agrees in writing, or, during the existence of an Event of Default, unless Agent and all of the Lenders otherwise agree in writing):"

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(y)The reference to "$35,000,000" in Section 9.9(a) of the Loan Agreement is hereby deleted in its entirety and replaced with "$45,000,000".

(z)No Other Modifications.  Except as expressly set forth in this Agreement, the Loan Documents shall be and remain unmodified and in full force and effect.

7.General Release.  As further inducement to Agent and Lenders to enter into this Agreement, Borrower and Guarantor hereby release Agent and Lenders as follows:

(a)Borrower and Guarantor and their heirs, successors and assigns (collectively, the "Releasing Parties") do hereby release, acquit and forever discharge Agent and Lenders of and from any and all claims, demands, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of action, debts, sums of money, accounts, compensation, contracts, controversies, promises, damages, costs, losses and expenses of every type, kind, nature, description, or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, each as though fully set forth herein at length, which in any way, have, prior to the Effective Date, arisen out of, are connected with or related to the Loan Documents, this 
Agreement or any earlier and/or other agreement or document referred to therein (collectively, the "Released Claims").

(b)The agreement of the Releasing Parties, as set forth in the preceding subparagraph (a) shall inure to the benefit of the successors, assigns, insurers, administrators, agents, employees, and representatives of Agent and Lenders.

(c)The Releasing Parties have read the foregoing release, fully understand the legal consequences thereof and have obtained the advice of counsel with respect thereto.  The Releasing Parties further warrant and represent that they are authorized to make the foregoing release.

(d)Each Releasing Party acknowledges that the foregoing release shall extend to Released Claims which the Releasing Party does not know or suspect to exist in Releasing Party's favor at the time of executing this Agreement, regardless of whether such Released Claims, if known by such Releasing Party, would have materially affected such Releasing Party's decision to enter into this Agreement.  Each Releasing Party acknowledges that they are familiar with Section 1542 of the Civil Code of the State of California which provides as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
Each Releasing Party waives and relinquishes any right or benefit which it has or may have under Section 1542 of the Civil Code of the State of California and any similar provision of the statutory or non-statutory law of any other jurisdiction, to the full extent that it may lawfully waive all such rights and benefits.  In connection with such waiver and relinquishment, each Releasing Party acknowledges that it is aware that it or its attorneys or agents may hereafter discover facts in addition to or different from those which it now knows or believes to exist with respect to the subject matter of this Section 7 or the other parties hereto, but that each Releasing Party intends hereby fully, finally and forever to settle, waive and release all of the Released Claims, known or unknown, suspected or unsuspected, which now exist or may exist hereafter between Releasing Parties and Agent and Lenders in connection with the Loan, except as otherwise expressly provided in this Section 7.  This foregoing release shall be and remain in effect notwithstanding the discovery or existence of any such additional or different facts.
(e)Each Releasing Party warrants and represents that it is the sole and lawful owner of all right, title and interest in and to all of the respective Released Claims released hereby and that it has not heretofore voluntarily, by operation of law or otherwise, assigned or transferred or purported to assign or transfer to any person or entity any such claim or any portion thereof.
(f)This release is not to be construed and does not constitute an admission of liability on the part of Agent or Lenders.  This release shall constitute an absolute bar to any Released Claim of any kind, whether such claim is based on contract, tort, warranty, mistake or any other theory, whether legal, statutory or equitable.  The Releasing Parties specifically agree that any attempt to assert a claim barred hereby shall subject each of them to the provisions of applicable law setting forth the remedies for the bringing of groundless, frivolous or baseless claims or causes of action.
        
	
			
	   MW
	 
	   KM

	Borrower's Initials
	 
	Guarantor's Initials

9

8.Conditions Precedent.  Before this Agreement becomes effective and any party becomes obligated under it, all of the following conditions shall have been satisfied in a manner acceptable to Agent in the exercise of Agent's sole judgment (except as waived or reserved by Agent in writing):

(a)Agent shall have received fully executed originals of this Agreement and any other documents which Agent may require or request in accordance with this Agreement or the other Loan Documents.

(b)Guarantors shall have executed and delivered to Agent the attached Consent of Guarantor.

(c)Borrower shall have paid to U.S. Bank National Association all fees set forth in that certain Fee Letter of even date herewith between Borrower and U.S. Bank National Association.  

(d)Agent and Lenders shall have received reimbursement, in immediately available funds, of all actual, out-of-pocket costs and expenses incurred by Agent and Lenders in connection with the Loan or this Agreement, including the legal fees, charges and expenses of Agent's counsel (determined on the basis of such counsel's generally applicable rates, which may be higher than the rates such counsel charges Agent in certain matters).

(e)Agent shall have received all documents evidencing the formation, organization and valid existence of the Borrower and Guarantor (to the extent such documents have been amended or modified since the original Closing Date) and the authorization for the execution, delivery, and performance of the Agreement.

(f)No change shall have occurred in the financial condition of Borrower or Guarantor, which would have, in Agent's sole judgment, a material adverse effect on Borrower's or Guarantor's ability to repay the Loan or otherwise perform its obligations under the Loan Documents.

(g)Agent shall have received from outside counsel for Borrower an opinion as to Borrower's power and authority to execute, deliver and perform this Agreement, in form and substance acceptable to Agent. 
(h)Borrower's representations and warranties set forth in Section 9 below are  true and correct in all respects.

(i)The conditions precedent shall have been satisfied prior to June 30, 2012 unless waived or reserved by Agent in writing.

9.Borrower's Representations and Warranties.  Borrower represents and warrants to Agent and Lenders as follows:

(a)Loan Documents.  Except as previously disclosed to Agent in writing, all representations and warranties made and given by Borrower in the Loan Documents are true, accurate and correct in all material respects.  Borrower is in compliance with all covenants, terms and conditions in effect and as required under the Loan Documents (as modified by this Agreement).

(b)No Default.  No Event of Default has occurred and is continuing, and no event has occurred and is continuing which, with notice or the passage of time or both, would be an Event of Default.

(c)Borrowing Entity.  Borrower is a corporation which is duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to conduct business, and is in good standing, in the State of California.  Except as previously disclosed in writing by Borrower to Agent, there have been no changes in the organization, composition, ownership structure or formation documents of Borrower since the Closing Date.  Borrower's execution and delivery of this Agreement and the continued performance by Borrower of its obligations under the Loan Documents to which it is a party have been duly authorized by all necessary action on the part of Borrower and any other required parties.  This Agreement has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights.

10.Incorporation.  This Agreement shall form a part of each Loan Document, and all references to a given Loan Document shall mean that document as modified pursuant to this Agreement.  For purposes of this Agreement, the "Effective Date" shall be the date that Agent notifies Borrower that all of the conditions precedent set forth in Section 8 hereof have been satisfied in a manner acceptable to Agent in the exercise of Agent's sole judgment, or waived or reserved by Agent in writing.

10

11.No Prejudice; Reservation of Rights.  Except as expressly set forth herein, this Agreement shall not prejudice any rights or remedies of Agent or Lenders under the Loan Documents.  Agent and Lenders reserve, without limitation, all rights which it has against any endorser of the Note.

12.No Impairment.  Except as specifically hereby amended, the Loan Documents shall each remain unaffected by this Agreement and all such documents shall remain in full force and effect.  
13.Integration.  The Loan Documents, including this Agreement: (a) integrate all the terms and conditions mentioned in or incidental to the Loan Documents; (b) supersede all oral negotiations and prior and other writings with respect to their subject matter; and (c) are intended by the parties as the final expression of the agreement with respect to the terms and conditions set forth in those documents and as the complete and exclusive statement of the terms agreed to by the parties.  If there is any conflict between the terms, conditions and provisions of this Agreement and those of any other agreement or instrument in effect as of the Effective Date, including any of the other Loan Documents, the terms, conditions and provisions of this Agreement shall prevail.

14.Miscellaneous.  This Agreement and any attached consents or exhibits requiring signatures may be executed in counterparts, and all counterparts shall constitute but one and the same document.  If any court of competent jurisdiction determines any provision of this Agreement or any of the other Loan Documents to be invalid, illegal or unenforceable, that portion shall be deemed severed from the rest, which shall remain in full force and effect as though the invalid, illegal or unenforceable portion had never been a part of the Loan Documents.  This Agreement shall be governed by the laws of the State of California, without regard to the choice of law rules of that State.  As used here, the word "include(s)" means "includes(s), without limitation," and the word "including" means "including, but not limited to." 

[Signatures on following page]

11

	
		
	 
	Borrower:
KENNEDY-WILSON, INC.,
a Delaware corporation

By:     /s/ Matt Windisch                   
Name: Matt Windisch                       
Title:   Vice President                        

By:     /s/ Kent Mouton                     
Name: Kent Mouton                         
Title:   Vice President                        

	
		
	Agent:
U.S. BANK NATIONAL 
ASSOCIATION,
as Agent
By:      /s/ Linda Morgan                     
Name: Linda Morgan                          
Title:   Senior Vice President               
	 

	 
	 

	Lender:
U.S. BANK NATIONAL 
ASSOCIATION,
as a Lender
By:     /s/ Linda Morgan                    
Name: Linda Morgan                        
Title:   Senior Vice President             
	 

S-1

	
		
	Lender:
EAST-WEST BANK,
as a Lender

By:     /s/ Kathleen Kwan                        
Name: Kathleen Kwan                            
Title:   Senior Vice President                   

	 

S-2

EXHIBIT E
COMMITMENTS AND COMMITMENT PERCENTAGES 
OF LENDERS

	
			
	Bank
	Facility A 
Commitment
	Facility A Commitment 
Percentage

	U.S. Bank National Association:
	$48,750,000
	65.0%

	 
	Facility B 
Commitment
	Facility B Commitment 
Percentage

	 
	$16,250,000
	65.0%

	 
	 
	 

	East-West Bank:
	Facility A 
Commitment
	Facility A Commitment 
Percentage

	 
	$26,250,000
	35.0%

	 
	 
	 

	 
	Facility B 
Commitment
	Facility B Commitment 
Percentage

	 
	$8,750,000
	35.0%

EXHIBIT Eex10-1.htm

 

Exhibit 10.1

 

AMENDMENT NO. 1 TO

ASSET PURCHASE AGREEMENT

 

 

THIS AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT (this “Amendment”) is made and entered into as of June 25, 2012 by and among Media General, Inc., a Virginia corporation, Media General Operations, Inc., a Delaware corporation, Media General Communications Holdings, LLC, a Delaware limited liability company, and World Media Enterprises Inc., a Delaware corporation (collectively, the “Parties”).

 

WHEREAS, the Parties are party to that certain Asset Purchase Agreement, dated as of May 17, 2012 (the “Original Agreement”); and

 

WHEREAS, the Parties desire to amend the Original Agreement in accordance with the terms herein.

 

NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which the Parties acknowledge, the Parties hereby agree as follows:

 

1.           The definition of “Business Intellectual Property” in Section 1.1 of the Original Agreement shall be amended by deleting the words “, excluding, however, the Excluded Licenses”.

 

2.           The definition of “CBA” in Section 1.1 of the Original Agreement is hereby deleted in its entirety and replaced with the following:

 

““CBA” means the Labor Agreement between Media General Operations, Inc., d/b/a The Richmond Times-Dispatch, and The Richmond Newspapers Professional Association, with a term of August 26, 2010 to March 31, 2012, which has been extended to September 30, 2012, as the same may be extended and/or amended or restated prior to the Hire Date.”

 

3.           The definition of “Adjustment Assets” is hereby deleted in its entirety and replaced with the following:

 

““Adjustment Assets” means the categories of assets set forth on Schedule 2.5.5.”

 

4.           The definition of “Adjustment Liabilities” is hereby deleted in its entirety and replaced with the following:

 

““Adjustment Liabilities” means the categories of liabilities set forth on Schedule 2.5.5, as adjusted by the AP Adjustment and the Software License Adjustment.”

 

5.           Section 2.1.1 of the Original Agreement is hereby deleted in its entirety and replaced with the following:

 

“all of the Business Contracts, excluding the CBA (subject to Section 5.6.2);”

 

  

 

  

 

6.           The third line of Section 2.5.1 of the Original Agreement is hereby amended to replace “Adjustment Assets and Adjustment Liabilities as of the Closing,” with “Adjustment Assets and Adjustment Liabilities as of the Closing, as calculated and adjusted in accordance with Section 2.5.5,”.

 

7.           The second line of Section 2.5.2 of the Original Agreement is hereby amended to replace “and Adjustment Liabilities as of the Closing (the “Adjustment Statement”), which statement” with “and Adjustment Liabilities as of the Closing, as adjusted in accordance with Section 2.5.5 (the “Adjustment Statement”), which statement”.

 

8.           Clauses (i) and (ii) of Section 2.5.5 of the Original Agreement is hereby deleted in its entirety and replaced with the following:

 

“Schedule 2.5.5 sets forth and describes the accounts and line items that will comprise the Adjustment Assets and Adjustment Liabilities.  The parties agree that for purposes of preparing the Estimated Adjustment Statement and the Adjustment Statement (i) such statements shall be presented using the same accounts and line items as set forth on Schedule 2.5.5, except that (X) Adjustment Liabilities shall be reduced (without duplication in the case of the Adjustment Statement) by a separately identified line item adjustment to the Adjustment Liabilities to reflect the accelerated payment of certain accounts payables and carrier payments in June 2012, as discussed with and approved by Buyer (the “AP Adjustment”) and (Y) the Adjustment Statement shall include on its face a separately identified line item adjustment to the Adjustment Liabilities to reflect the amount of funds, if any, paid by Buyer to purchase Software licenses to replace Software licenses that constitute Business Intellectual Property and that should be transferred to Buyer as Transferred Assets but are not so transferred at or after the Closing and before the date on which Buyer is required to deliver the Adjustment Statement to Seller, or if earlier, the date on which Buyer has paid for the applicable Software license (the “Software License Adjustment”), (ii) for purposes of the Estimated Adjustment Statement, Adjustment Assets and Adjustment Liabilities shall be determined as of the last month end preceding the Closing Date, except that the Estimated Adjustment Statement shall include on its face a separately identified line item for the AP Adjustment, (iii) for purposes of the Adjustment Statement, Adjustment Assets and Adjustment Liabilities shall be determined as of 12:01 a.m., local time, on the Closing Date, except that the Adjustment Statement shall include on its face a separately identified line item for the Software License Adjustment and take into account (without duplication) the AP Adjustment payments referenced above, and (iv) Adjustment Assets and Adjustment Liabilities shall be determined in accordance with GAAP, except with respect to the determination of certain non-GAAP accounts and line items specified on Schedule 2.5.5, which shall not be determined in accordance with GAAP but shall be determined in accordance with the principles and methodologies historically used by Seller and its Affiliates in determining such amounts. Buyer will consult with Seller prior to purchasing replacement Software licenses for which it will seek reimbursement.”

 

  

-2-

  

 

9.           The last sentence of Section 3.13.2 of the Original Agreement is hereby deleted in its entirety and replaced with the following sentence:

 

“All obligations under the Other Employee Programs for all periods prior to the Closing Date have been (or prior to the Closing Date will be) satisfied, except for commissions accrued as of Closing, which will be calculated and paid by Seller in accordance with Seller’s normal practices.”

 

10.          The cover page of Schedule 3.14.1 to the Original Agreement is hereby amended to insert the words “, who are also Business Employees” after “(other support staff to be hired”.

 

11.           Section 5.6 of the Original Agreement is hereby deleted in its entirety and replaced with:

 

“5.6           Covenants Regarding Employee Matters.

“5.6.1   Seller shall update the list of Business Employees, including the support staff identified as “Named Employees,” set forth on Schedule 3.14.1 (a) ten (10) Business Days prior to the Closing Date, (b) as of ten (10) Business Days prior to December 24, 2012, which is referred to herein as the “Hire Date,” (the period commencing on the Closing Date and ending on December 23, 2012, the “Lease Period”) and  (c) at such other times during the Lease Period as Buyer may reasonably request, in each case in order to reflect any terminations of employment of Business Employees, new hires approved by Buyer and any other changes in the terms or status of their employment. On or prior to the Hire Date, effective as of the Hire Date, Buyer shall, or shall cause its Affiliates to, offer employment in connection with the Business to substantially all of the Business Employees identified on Schedule 3.14.1 as updated in accordance with this Section 5.6.1.  Each such Business Employee who accepts Buyer’s offer of employment shall be considered a “Transferred Employee” as of the Hire Date; provided, however, that, Buyer shall not be obligated to continue to employ any Transferred Employee for any specific period of time following the Hire Date.  Seller’s and Buyer’s obligations with respect to the Business Employees shall be as set forth in Schedule 5.6, and the terms and conditions of employment offered to each Business Employee shall be consistent with the terms and conditions set forth therein.  

 

  

-3-

  

 

 “5.6.2   As of the Hire Date, Buyer shall assume  the CBA and all obligations under the CBA with respect to periods on or after the Hire Date, subject to any rights of notice, consultation, consent or approval that the relevant union or employees covered by the CBA may have under the CBA or applicable Legal Rules.

             “5.6.3   Each of this Section 5.6 and Schedule 5.6, shall operate exclusively for the benefit of the parties to the Agreement and not for the benefit of any other Person, including any current, former or retired employee of Parent or Seller or spouse or dependents of such Persons.”

12.           Schedule 5.6 to the Original Agreement is hereby deleted in its entirety and replaced with the revised Schedule 5.6 attached hereto as Appendix 1.

 

13.           Section 9.2 of the Original Agreement is hereby amended to insert as a new Section 9.2.5 the following:

 

“9.2.5                      Losses resulting from Parent’s or Seller’s breach of any covenants or agreements in Schedule 5.6.”

14.           Section 9.3 of the Original Agreement is hereby amended to delete Section 9.3.2 and Section 9.3.3 in their entirety and insert in their place:

 

“9.3.2                      Losses resulting from any breach by Buyer of any covenants and agreements contained in this Agreement;

“9.3.3                      Losses resulting from the Assumed Liabilities; and

“9.3.4                      (a) Losses resulting from Buyer’s breach of any covenants and agreements in Schedule 5.6, relating to the provision of services to Buyer by Leased Employees during the Lease Period, or any Schedule 5.6(o) Losses, (b) Losses related to the employment of, or the termination of employment of, or the acts or omissions of, any Leased Employees during the Lease Period, and (c) any Losses incurred or suffered by Parent or Seller that it would not have incurred or suffered if Buyer had hired the Business Employees as of the Closing Date rather than leasing the Business Employees during the Lease Period, except, in the case of clause (b) and clause (c), to the extent such Losses (i) are attributable to Parent’s or Seller’s failure to comply with the covenants and agreements in Schedule 5.6, or (ii) result from intentional wrongful acts on the part of Parent or Seller, any of their Affiliates or any of their respective employees who are not Leased Employees during the Lease Period; provided, that Parent and Seller shall pursue any insurance recovery available for such claimed Losses through applicable insurance policies and, to the extent Buyer already has reimbursed Parent and Seller for cash payments made by Parent or Seller in respect of such claims, Parent and Seller shall pay such third-party insurance proceeds to Buyer.”

 

  

-4-

  

15.           The last sentence of Section 9.5.2 of the Original Agreement is hereby deleted in its entirety and replaced with the following sentence:

 

“For the avoidance of doubt, any liability of Parent or Seller to Buyer, or Buyer to Parent or Seller, pursuant to Section 9.2.2, 9.2.3, 9.2.4, 9.2.5, 9.3.2, 9.3.3 or 9.3.4 shall not be subject to an aggregate maximum amount, nor shall such liability of Parent or Seller to Buyer or Buyer to Parent or Seller be included in the calculation of the aggregate liabilities subject to the maximum amounts set forth in clause (a) and clause (b) of this Section 9.5.2.

 

16.          This Amendment shall be governed by the laws of the State of Delaware without regard to conflicts of law principles.  Except as expressly modified hereby, the provisions of the Original Agreement shall not be affected hereby and shall remain in full force and effect. The provisions of Article 10 of the Original Agreement (as applicable) shall govern this Amendment.

 

17.          This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

 

[Remainder of page intentionally left blank]

 

  

-5-

  

 

IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be executed by its duly authorized representative as of the day and year first above written.

 

BUYER:

 

WORLD MEDIA ENTERPRISES INC.

 

 

By:   /s/Terry Kroeger                                                          

Name: Terry Kroeger                                                           

Title: Chairman______________________________ 

 

 

SELLER:

 

MEDIA GENERAL OPERATIONS, INC.

By:   /s/James F. Woodward                                                

Name: James F. Woodward                                                 

Title: Treasurer                                                                      

 

 

MEDIA GENERAL COMMUNICATIONS HOLDINGS, LLC

By:   /s/James F. Woodward                                                  

Name: James F. Woodward______________________

Title: Treasurer                                                                          

 

 

PARENT:

MEDIA GENERAL, INC.

By:   /s/James F. Woodward                                                   

Name: James F. Woodward                                                    

Title: Vice President, Finance & Chief Financial Officer   

 

  

  

  

 

APPENDIX 1

Schedule 5.6

(Employee Matters)

	
(a)

	
Seller shall, and shall cause its Affiliates to, use reasonable efforts to continue to employ all of the Business Employees set forth on Schedule 3.14.1, as updated in accordance with Section 5.6.1 of the Agreement, on and following the Closing Date and during the Lease Period on the terms and conditions of their employment, except as required by the CBA with respect to any Business Employees covered thereby, in effect immediately prior to the Closing (Business Employees to the extent that they provide services to Buyer during the Lease Period, the “Leased Employees”), consistent with the terms set forth herein; provided, that, subject to this Schedule 5.6, Buyer may from time to time and at any time during the Lease Period elect to cease to receive services from specified Leased Employees (such an election, a “Buyer Election”), and Parent and Seller shall promptly give notice to, and terminate the employment of, such Leased Employees, except (i) as may otherwise be required by the CBA with respect to Leased Employees covered thereby or by an individual contract for employment, (ii) in the case of Leased Employees at the Richmond Site, subject to Schedule 5.6(o), or (iii) in the event that Parent and Seller decide, within five (5) days following the applicable Buyer Election, to retain the Leased Employee’s services for Parent and Seller other than as a Leased Employee, in which case such individual will cease to be a Business Employee or Leased Employee and Buyer shall have no obligations hereunder in respect of such individual after such date except with respect to payment and reimbursement obligations to Parent and Seller that have accrued prior to such date.  During the Lease Period, Buyer shall have the right to direct the general scope, manner and method of services of the Leased Employees, provided, that with respect to employees covered by the CBA such direction complies with the CBA, and provided, further, that Seller and its Affiliates retain the sole right to terminate the employment of any Leased Employee, either in accordance with a Buyer Election or for good cause in accordance with applicable Legal Rules. In the event that Seller or any of its Affiliates decides to terminate the employment of any Leased Employee for good cause, Seller or its relevant Affiliate shall provide Buyer with notice of such termination as far in advance as is reasonably practicable under the circumstances.  The Seller and its Affiliates make no representation or warranty regarding the Leased Employees, except for representations or warranties as were and are otherwise made by Parent and Seller pursuant to the Original Agreement, or the services to be performed by the Leased Employees, which are expressly disclaimed.  Leased Employees whose employment with Seller or its Affiliates is terminated as a result of a Buyer Election, subject to any applicable requirements of advance notice under the CBA with respect to Leased Employees covered thereby or an individual contract for employment, shall hereinafter be referred to as “Terminated Employees.” Without limitation of Section 9.3.4 of the Agreement and the exceptions to Buyer’s indemnification obligations set forth therein, Buyer shall reimburse Seller and its Affiliates, in accordance with Schedule 5.6(t), for (i) all expenses and other amounts associated with the employment of the Leased Employees during the Lease Period and paid by Parent or Seller (excluding the Assumed Seller Severance and Additional Assumed Seller Severance), and (ii) advances or reimbursements made by Seller and its Affiliates to Leased Employees to reimburse business expenses incurred by the Leased Employees. If third party insurance covers any Loss for which Buyer reimburses Parent or Seller, Parent and Seller shall pursue recovery for such Loss under the insurance policy and, to the extent Buyer already has reimbursed Parent and Seller for cash payments made by Parent or Seller in respect of such Losses, Parent and Seller shall pay such third-party insurance proceeds to Buyer.  Seller and its Affiliates shall keep true and accurate records, in accordance with their data retention policies, for all such expenses and other amounts, in such form and manner that the expenses and other amounts may be reasonably determined. Buyer shall have the right, from time to time and at any time, at reasonable times during normal business hours and upon reasonable advance notice, to examine such records of the Seller and its Affiliates as may reasonably be related to the expenses for the purpose of verifying the expenses owed to the Seller and its Affiliates under this Schedule 5.6.

 

  

- A-1-

  

 

	
(b)

	
For purposes of Section 5.6.1 of the Agreement, “substantially all of the Business Employees” shall mean all of the Business Employees listed on Schedule 3.14.1, as updated prior to the Hire Date in accordance with Section 5.6.1. Each offer of employment made to a Business Employee pursuant to Section 5.6.1 of the Agreement shall be for employment at the same salary or rate of pay as the salary or rate of pay of that Business Employee set forth on Schedule 3.14.1, as updated in accordance with Section 5.6.1; provided, that neither Parent nor Seller shall increase, or permit an increase in, the salary or rate of pay of any Business Employee during the Lease Period except as required by the CBA with respect to employees covered thereby or with the prior written approval of Buyer.

	
(c)

	
On and after the Closing Date, Parent and Seller shall be solely responsible for offering and providing “continuation coverage” to all Leased Employees who are “covered employees”, and to any “qualified beneficiary” related to such Leased Employee, who is covered by a “group health plan” of Parent or Seller and who experiences a “qualifying event” after the Closing Date (including in connection with the cessation of the Lease Period), provided, that, Buyer shall reimburse Parent and Seller, for amounts paid by Parent or Seller in respect of claims associated with such Leased Employees and qualified beneficiaries, unless the qualifying event was caused by the Parent or Seller terminating a Leased Employee other than in connection with a Buyer Election (“Post-Closing COBRA Liability”).  With respect to the Post-Closing COBRA Liability, Parent and Seller shall credit Buyer for any premiums paid by such Leased Employees and qualified beneficiaries in connection with such continuation coverage and shall charge Buyer for any claims reimbursed by Parent or Seller under Parent’s or Seller’s group health plan with respect to such continuation coverage for such Leased Employees and qualified beneficiaries; and Parent and Seller shall be reimbursed for any deficit, and/or Buyer will be credited with and paid any surplus, in accordance with Schedule 5.6(t). “Continuation coverage,” “covered employee,” “qualified beneficiary,” “qualifying event” and “group health plan” all shall have the meanings given such terms under Section 4980B of the Code and Section 601 et seq. of ERISA.    Effective as of January 1, 2013, Buyer shall be solely responsible for directly offering and providing “continuation coverage” to employees who are Leased Employees as of immediately prior to the Hire Date, Transferred Employees, former Leased Employees who commenced continuation coverage during the Lease Period, and qualified beneficiaries related to such individuals, and shall assume sole responsibility for all Post-Closing COBRA Liability in respect of such individuals beginning January 1, 2013.

 

  

- A-2-

  

 

	
(d)

	
Prior to the end of the calendar quarter following the calendar quarter which includes the Hire Date, Buyer shall cause a tax-qualified defined contribution plan sponsored by Buyer or an Affiliate of Buyer to accept any participant directed rollover of the cash and promissory notes, if any, distributed to the Business Employees from the MG Advantage 401(k) Plan as a result of their separation from employment at the end of the Lease Period.  From time to time, Parent and Seller shall furnish Buyer with such information as Buyer reasonably requests in connection with any such participant directed rollovers.

	
(e)

	
Except as a result of Parent’s or Seller’s termination of any of its respective Employee Benefit Plans, the termination of a Leased Employee’s employment in accordance with the terms and conditions herein, or the termination by Buyer of a Transferred Employee’s employment, Parent and Seller shall, subject to reimbursement in accordance with this Schedule 5.6, maintain (i) until the close of business on the date preceding the Hire Date, the Leased Employees’ participation in the Employee Benefit Plans of Parent and Seller, and (ii) absent a termination of the Lease Period prior to December 23, 2012 pursuant to Schedule 5.6(v), until the close of business on December 31, 2012, the Transferred Employees’ participation in the Employee Benefit Plans of Parent and Seller that provide group health benefits (including medical, dental, vision, prescription drug, medical spending accounts and employee assistance), life insurance and dependent care reimbursement.  As of the close of business on December 31, 2012, Parent and Seller shall cause all Transferred Employees to cease participation in any of the Employee Benefit Plans.

	
(f)

	
Subject to the payment and reimbursement provisions set forth in Schedule 5.6(t), Parent and Seller shall be responsible for and shall cause to be discharged and satisfied in full all amounts owed to the Business Employees under any Employee Benefit Plan.  Notwithstanding any provision of the Agreement (including this Schedule 5.6) to the contrary, Parent and Seller shall be solely responsible for all Liabilities to Business Employees (including the Leased Employees during the Lease Period and thereafter) under the Media General Advantage Retirement Plan and any Employee Benefit Plan providing health care coverage or benefits following retirement.

 

  

- A-3-

  

 

	
(g)

	
All group health plan Liabilities relating to, arising out of or resulting from any group health plan claim by a Business Employee (and his or her covered dependents) that relates to medical services rendered prior to the Closing Date shall be retained by Parent and Seller. Parent and Seller shall provide group health plan coverage to the Leased Employees during the Lease Period and, absent a termination of the Lease Period prior to December 23, 2012 pursuant to Schedule 5.6(v), to the Transferred Employees until December 31, 2012, and Buyer shall reimburse Parent and Seller, in accordance with Schedule 5.6(t), for all amounts paid by Parent or Seller in respect of group health plan liabilities relating to, arising out of or resulting from any group health plan claim that relates to medical services rendered to such Leased Employees or Transferred Employees, or their qualified beneficiaries, during such periods.

	
(h)

	
All workers’ compensation Liabilities relating to, arising out of or resulting from any claim by a Business Employee that relates to a period prior to the Closing Date shall be retained by Parent and Seller. Buyer shall be solely responsible for workers’ compensation Liabilities owed to Transferred Employees to the extent relating to, arising out of or resulting from a compensable injury that occurs on or after the Hire Date. Parent and Seller shall provide workers’ compensation coverage to the Leased Employees during the Lease Period, and Buyer shall reimburse Parent and Seller for any amounts paid by Parent or Seller in respect of workers’ compensation benefits paid to Leased Employees (including benefits paid to Transferred Employees with respect to compensable injuries that occurred during the Lease Period while Leased Employees) to the extent relating to, arising out of or resulting from a compensable injury that occurs during the Lease Period.  For purposes of this Agreement, a compensable injury shall be deemed to be sustained upon the occurrence of an event or onset of an occupational disease giving rise to eligibility for workers’ compensation benefits. Buyer, Parent and Seller shall cooperate with respect to any notification to appropriate Governmental Authorities of the disposition and the issuance of new, or the transfer of existing, workers’ compensation insurance policies and claims handling contracts.

 

  

- A-4-

  

 

	
(i)

	
Parent and Seller shall be responsible for providing or causing to be provided long-term disability benefits to each Business Employee who is receiving such benefits under an Employee Benefit Plan prior to the Closing Date or has sustained an injury or illness at any time prior to the Closing Date which will qualify such Business Employee for long-term disability benefits at the end of the applicable six-month exclusion period. Parent and Seller shall provide long-term disability coverage to any Leased Employee who sustains an injury or illness during the Lease Period that will qualify such Leased Employee for long-term disability benefits under an Employee Benefit Plan of Parent or Seller, and Buyer shall reimburse Parent or Seller for amounts paid by them in respect of such benefits, in accordance with Schedule 5.6(t).  Buyer shall be responsible for providing long-term disability coverage under Buyer’s program to each Transferred Employee who sustains an injury or illness on or after the Hire Date that qualifies such Transferred Employee for long-term disability benefits under Buyer’s program.

	
(j)

	
For purposes of eligibility for, and vesting under, compensation arrangements, employee benefit plans and seniority benefits sponsored by the Omaha World-Herald Company (such as vacation pay, personal leave, sick leave pay, short term disability pay, and holiday pay, and, subject to Schedule 5.6(r)(I) and (III) below, severance), Buyer shall credit a Transferred Employee for past service credit for such employee’s service with Seller and any of its Affiliates, as well as with any predecessor employer, to the extent that service with the predecessor employer was credited under the comparable Employee Benefit Plan in the ordinary course prior to the Hire Date.

	
(k)

	
Effective as of and following January 1, 2013, or if the Hire Date precedes December 24, 2012 pursuant to Schedule 5.6(v), as of the Hire Date (as applicable, the “Coverage Date”), Buyer shall offer or cause to be offered group health plan coverage to each Transferred Employee (and to the spouse and dependents of such employee) on terms and conditions consistent with those afforded to employees of the Omaha World-Herald Company with comparable seniority and positions under the currently existing policies and programs of the Omaha World-Herald Company. For purposes of providing such coverage, Buyer shall waive all preexisting condition waiting periods and limitations for each Transferred Employee (and for the spouse and dependents of such employee) eligible to participate in the group health care plans of Parent or Seller immediately prior to the Coverage Date (to the extent that such waiting periods and limitations did not apply to such employee, spouse or dependent immediately prior to the Coverage Date) and shall provide such health care coverage effective as of the Coverage Date without the application of any eligibility period for coverage.

	
(l)

	
Buyer will reimburse Parent and Seller (i) for commissions owed to Business Employees under an Other Employee Program and attributable to advertisements published on or after the Closing Date and prior to the Hire Date and (ii) for payments made by Parent or Seller to a Leased Employee during the Lease Period for short-term disability benefits with respect to a disability leave beginning on or after the Closing Date.  Buyer shall be responsible for the payment when due of: (i) any commissions owed to Business Employees under an Other Employee Program and attributable to advertisements published on or after the Hire Date and (ii) any liability to a Transferred Employee on or after the Hire Date for short-term disability benefits with respect to a disability leave which began on or after the Closing Date.

 

  

- A-5-

  

 

	
(m)

	
Subject to Schedule 5.6(n), (o), (p) and (q) below, Seller shall be solely responsible for and shall pay any and all Liabilities, penalties, fines or other sanctions that may be assessed or otherwise due under the Worker Adjustment and Retraining and Notification Act (“WARN”) and similar laws and regulations arising at any time prior to the Hire Date relating to employees of Parent or the Seller (including the Leased Employees), which Liabilities shall be “Retained Liabilities.”  Buyer, Parent and Seller agree that each of the facilities or groups of facilities (each, an “Employment Site”) listed on Exhibit 5.6(m) to this Schedule 5.6 shall constitute an “employment site” within the meaning of WARN for purposes of this Schedule 5.6.

	
(n)

	
Subject to Schedule 5.6(q), Buyer covenants and agrees that it will not make Buyer Elections that would cause the number of Employment Losses at any single Employment Site (including in combination with any Employment Loss prior to Closing), other than the Richmond Site, to equal or exceed the WARN Threshold Number within any ninety (90) day period.  The Employment Losses at each Employment Site during the ninety (90) day period preceding the Closing Date are set forth in Exhibit 5.6(m) to this Schedule 5.6.  For purposes of this Schedule 5.6, an “Employment Loss” shall mean an “employment loss” within the meaning of WARN, and the “WARN Threshold Number” means fifty (50) or, if greater, such other number of Employment Losses as would trigger WARN notice obligations (as reasonably determined by Parent).

	
(o)

	
Buyer covenants and agrees that it will not make Buyer Elections that would cause any Leased Employee at the Richmond Site to experience an Employment Loss without Parent’s consent, which consent shall not be unreasonably withheld.  Parent shall not withhold consent to a Buyer Election at the Richmond Site, except and to the extent that the Employment Loss resulting from such Buyer Election would either:

	
  

	
(A)

	
trigger WARN notice obligations (as reasonably determined by Parent) on account of the closing of a facility, the discontinuance of an operating unit or other “plant closing” (but not “mass layoff”) under WARN; or

	
  

	
(B)

	
cause, in the aggregate, more than thirty-five (35) Leased Employees to experience Employment Losses during the Lease Period.

 

  

- A-6-

  

 

Buyer shall reimburse Parent and Seller for any reasonable out-of-pocket expense, including reasonable attorneys fees, incurred by Parent and Seller in evaluating WARN notice obligations in connection with Buyer Elections.  In the event any claim is filed against Parent or Seller alleging that WARN notice obligations were triggered at the Richmond Site because (i) an Employment Loss pursuant to a Buyer Election triggered WARN notice obligations on account of the closing of a facility, the discontinuance of an operating unit or other “plant closing” under WARN, or (ii) more than thirty-five (35) Leased Employees suffered Employment Losses during the Lease Period pursuant to Buyer Elections, then Buyer shall indemnify and hold harmless Parent and Seller for any Losses resulting from such claim (“Schedule 5.6(o) Losses”).

	
(p)

	
Parent and Seller covenant and agree that they will not cause any Leased Employees at any single Employment Site to experience Employment Losses except as a result of Buyer Elections, except (and solely for the avoidance of doubt) for good cause in accordance with applicable Legal Rules, provided, that Parent and Seller shall provide Buyer with notice of any termination of employment of a Leased Employee for good cause as far in advance of such termination as is reasonably practicable under the circumstances.  Parent, Seller and Buyer agree to consult with each other regarding their respective plans and expectations regarding any reductions in force at the Richmond Site.

	
(q)

	
At any time and from time to time prior to the Hire Date, Buyer shall have the right, but not the obligation, to cause Parent and Seller to provide notices to Leased Employees, and to comply with any other procedures, required under WARN in respect of a “mass layoff” or “plant closing” at the Northern Virginia Group Site, provided that, other than the Assumed Seller Severance and Additional Assumed Seller Severance, Buyer shall reimburse Parent and Seller for any reasonable out-of-pocket expenses, including reasonable attorneys fees, incurred by Parent and Seller in planning and implementing such mass layoff or plant closing to the extent that such expenses and fees relate to the Leased Employees.

 

	
(r)

	
If Buyer makes a Buyer Election with respect to any specified Leased Employees during the Lease Period or terminates the employment of any Transferred Employees, in each case other than for cause:

 

  

- A-7-

  

 

	
  

	
(I)

	
With respect to each of the first one hundred (100) Leased Employees who are either (1) Terminated Employees who receives a notice of termination of employment during the five (5) months after the Closing Date, or (2) in the case of Leased Employees located at the Richmond Site, who is the subject of a Buyer Election during the five (5) months after the Closing Date and, to the extent permitted by Schedule 5.6(o), is terminated prior to December 24, 2012 or to the extent not so permitted by December 24, 2012, is terminated prior to March 31, 2013 (such first one hundred (100) Leased Employees, the “Threshold Group” and the five (5) month period after the Closing Date, “Initial Severance Period”), Parent and Seller shall, at the appropriate time in connection with the employee’s termination, pay in full to the employee (and Buyer shall have no obligation to reimburse Parent or Seller for) the amount of severance such employee  is entitled to receive under Parent’s and Seller’s standard severance pay policy or, for a Business Employee who is a Named Employee, such enhanced severance as Parent or Seller has committed to pay such Named Employee (in each case, such amount, the “Assumed Seller Severance”), provided (A) this clause (I) shall not apply with respect to more than twenty-five (25) Terminated Employees working at the Northern Virginia Group Site, (B) the aggregate amount of Assumed Seller Severance paid or funded by the Parent and Seller under this clause (I) shall not exceed $1,250,000 (“Threshold Severance Liability”), and (C) in determining whether the Threshold Severance Liability has been reached, any amount of severance Parent or Seller committed to pay such employee in excess of the Parent’s and Seller’s standard severance pay policy shall be disregarded.  With respect to any Leased Employee who receives a notice of termination of employment during the Initial Severance Period (or, in the case of a Leased Employee at the Richmond Site, who is the subject of a Buyer Election during the Initial Severance Period), and where the Threshold Group has been passed or the Threshold Severance Liability has been reached, Parent and Seller shall pay in full to the employee (and Buyer shall reimburse Parent or Seller for) the amount of severance such employee is entitled to receive under Parent’s and Seller’s standard severance pay policy, provided, that if such employee is a Named Employee, Parent or Seller shall pay in full (and Buyer shall have no obligation to reimburse Parent or Seller for) the amount by which the severance Parent or Seller committed to pay such employee exceeds the amount payable under Parent’s and Seller’s standard severance policy (such amount, together with the amount payable by Parent and Seller described in clause (III) below, the “Additional Assumed Seller Severance”).  The payment of any severance paid under this clause (I) to an employee shall be conditioned on the employee’s signing a release of claims reasonably acceptable to Buyer and Seller.

	
  

	
(II)

	
With respect to any Terminated Employee who is not a Named Employee and who receives a notice of termination of employment as a result of a Buyer Election during the portion of the Lease Period remaining after the Initial Severance Period, the Buyer shall reimburse Parent or Seller for the amount of severance such Terminated Employee is entitled to receive under Parent’s and Seller’s standard severance policy.  The payment of such severance to an employee shall be conditioned on the employee’s signing a release of claims reasonably acceptable to Buyer and Seller.

 

  

- A-8-

  

 

	
  

	
(III)   

	
With respect to any Terminated Employee or Transferred Employee who is a Named Employee and who receives a notice of termination of employment after the Initial Severance Period and on or prior to the one (1)-year anniversary of the Closing Date, subject to the employee’s signing a release of claims reasonably acceptable to Buyer, Buyer shall pay in full (or shall reimburse Parent or Seller in full for) the amount of severance owed (or that would be owed) to such employee under Buyer’s severance practice, consisting of one week’s salary or wages for each year of service, up to a maximum of 13 weeks’ salary or wages (the “Buyer Severance”), and if the amount of the Buyer Severance is less than the severance Parent or Seller has committed to pay such employee, Parent or Seller shall provide funds to Buyer for the payment in full of (or, at Seller’s election, pay directly in full to the employee) the amount by which the severance Parent or Seller committed to pay such employee exceeds the Buyer Severance (which amount shall also constitute Additional Assumed Seller Severance).

	
  

	
(IV)   

	
With respect to any Transferred Employee who receives a notice of termination on or after the Hire Date and prior to the first anniversary of the Closing Date and for which Parent or Seller is not obligated to provide funds pursuant to clause (III), upon delivery of an appropriate release of claims, Buyer shall pay in full the amount of Buyer Severance to such Transferred Employee.

	
(s)

	
The CBA is scheduled to expire September 30, 2012.  Parent and Seller shall ask the bargaining agent to extend the term of the CBA until March 31, 2013 without any additional modifications.  In the event that the bargaining representative denies such an extension of the CBA, Parent and Seller shall promptly notify Buyer thereof and, to the extent permitted by applicable Legal Rules, reasonably consult with the Buyer regarding next steps.   Buyer shall reimburse Parent and Seller for any reasonable out-of-pocket expenses, including reasonable attorneys fees, incurred by Parent and Seller in negotiating any such extension, amendment or restatement of the CBA.

	
(t)

	
To the extent the Buyer is required to pay or reimburse Seller and Parent in accordance with the terms of this Schedule 5.6, such payment or reimbursement shall be made through ACH (Automated Clearing House) procedures (except to the extent funds specifically are required to be wired), within the applicable time periods, as follows:

	
  

	
(I)

	
With respect to the payroll for the Leased Employees, including base pay, overtime, commissions, short-term disability, sick leave, vacation leave, payroll taxes and the like, Parent or Seller will send Buyer a summary payroll statement on the day the payroll period closes (which is the second Business Day preceding the payroll date), and Buyer will pay (i) the aggregate payroll amount reflected on such statement, in full, if such statement is received by 3:00 p.m. (ET), and (ii) a reasonable, estimated amount based on the summary payroll statement for the payroll period two weeks earlier if such current statement is received after 3:00 p.m. (ET), in each case no later than the close of business on the Business Day prior to the payroll date.  If Buyer pays a reasonable, estimated amount in accordance with clause (ii) of the immediately preceding sentence, on the next payroll payment date, Parent and Seller will credit Buyer for any overpayment, or Buyer will pay Parent and Seller the amount of any deficiency, arising from the difference between such estimated amount paid by Buyer and the actual payroll amount as reflected in the applicable summary payroll statement.  Parent, Buyer and Seller may, from time to time, agree on reasonable, alternate procedures for the funding of the payroll.

 

  

- A-9-

  

 

	
  

	
(II)

	
With respect to the matching contributions for the MG Advantage 401(k) Plan, Parent or Seller will send Buyer a reasonable, estimated amount on Thursday of each week during the Lease Period, and Buyer will reimburse Parent and Seller for such estimated contributions no later than the close of business on the next day (Friday) if such statement is received by 3:00 p.m. (ET) on such Thursday.  Not later than 3:00 p.m. (ET) on the next Thursday, Parent and Seller shall provide a summary statement of the actual matching contributions attributable to the Leased Employees for the prior week, and Parent and Seller will credit Buyer for any overpayment, or Buyer will pay Parent and Seller the amount of any deficiency, arising from the difference between the estimated amount paid by Buyer for the prior week and the actual contributions amount as reflected in the applicable summary statement.  Parent or Seller shall send Buyer, as soon as possible, evidence of payment by them of such matching contributions.

	
  

	
(III)  

	
With respect to group health benefits of medical, dental, health savings account and prescription drug coverages (including Post-Closing COBRA Liability), Parent or Seller will send Buyer a summary statement as and when received from the third party administrator(s) for Parent’s and Seller’s group health plan(s) for claims payable to Leased Employees, Transferred Employees, and their qualified beneficiaries, as contemplated by Schedule 5.6(c) and Schedule 5.6(g), and Buyer will reimburse Parent and Seller for the aggregate claims payable amount reflected in such statement, in full, (i) if such summary statement is received by 3:00 p.m. (ET), by initiating a wire transfer on the same day as receipt of such summary statement for delivery of freely available funds on such day or the immediately following Business Day, as practicable, or (ii) if the summary statement is received after 3:00 p.m. (ET), by wire transfer of freely available funds on the next Business Day following receipt of such summary statement; provided, that Parent and Seller will (A) promptly remit to Buyer by ACH (Automated Clearing House) procedures any payments received by Parent or Seller under any stop-loss insurance policy in respect of group health benefits, and in any event within one (1) Business Days following receipt of such payments under such stop-loss insurance policy, (B) credit Buyer (e.g., through a reduction of the payroll funding described in Schedule 5.6(t)(I) or as an offset on such summary statement), or remit to Buyer by ACH within one (1) Business Day following receipt thereof, any related premiums paid by a Leased Employee or Transferred Employee with respect to such group health plan coverage, and (C) send Buyer, as soon as possible, evidence of payment by them of the amounts shown on such summary statement.

 

  

- A-10-

  

	
  

	
(IV)  

	
With respect to all other amounts to be reimbursed or paid by Seller (including without limitation, administrative services for group health plan administration, COBRA administration, vision benefits, medical flexible spending accounts, employee assistance program premiums, lifestyle management, group term life insurance premiums, travel and accident premiums, legal and financial benefits, long-term care benefits, workers compensation benefits, long-term disability benefits, and reasonable attorneys fees), Parent or Seller will send Buyer an invoice and Buyer will pay such amount, in full, within ten (10) Business Days of receipt.   Parent or Seller shall send Buyer, as soon as possible, evidence of payment by them of such expenses.

	
  

	
(V)   

	
If any day on which Seller is obligated to deliver a statement to Buyer, or Buyer is obligated to make a payment or reimbursement to Parent or Seller, under this Schedule 5.6(t) is not a Business Day, the parties shall reasonably confer in good faith to modify the procedures in this Schedule 5.6(t) accordingly.

In the event that Buyer disputes any summary or invoice in the exercise of its reasonable business judgment and good faith, it shall promptly notify Parent and Seller of such dispute in writing and shall, pending resolution of such dispute, pay that portion of the invoiced or summary amount which it does not dispute.  In the event that Buyer overpays or over reimburses an amount under this Schedule 5.6 or is credited with a surplus, Parent or Buyer will promptly pay such amount to Buyer (or, at Buyer’s election, shall credit it against the next payment(s) due from Buyer pursuant to this Schedule 5.6).

	
(u)

	
Notwithstanding the services provided by the Leased Employees to the Buyer, the parties hereto acknowledge and agree that the Seller and its Affiliates are and shall remain the employer of the Leased Employees, and subject to the provisions of this Schedule 5.6, shall be responsible for the employment of all the Leased Employees in accordance with applicable Legal Rules, including payment of salaries, wages, benefits and other compensation. Parent and Seller shall be responsible for the withholding of and payment of all Federal, foreign, state and local income and payroll taxes on the Leased Employees’ compensation in accordance with applicable Legal Rules.   Buyer covenants that it and its Affiliates will (i) comply in all material respects with all applicable Federal, foreign, state and local laws, rules, regulations and ordinances applicable to the employment of the Leased Employees, including those relating to wages, hours, labor and employment relations, employee health and safety and employment discrimination, and (ii) reasonably cooperate with the Parent and Seller to facilitate their compliance with applicable Federal, foreign, state and local laws, rules, regulations and ordinances applicable to the Leased Employees. Buyer shall be solely responsible for providing general liability, automobile, media liability and crime insurance with respect to the activities of the Leased Employees, and shall directly reimburse business expenses incurred by the Leased Employees during the Lease Period.  Parent, Seller and Buyer shall reasonably cooperate regarding the administration of claims under the Employee Benefit Plans which arise in connection with, or relate to, events which occur in or around the time the Leased Employees transition to Transferred Employees (e.g., with respect to the resolution of pending workers compensation claims).  Buyer shall reasonably cooperate with Seller and its Affiliates with respect to communications with the Leased Employees during the Lease Period.  In the event any party receives any government inquiry relating to the employment of the Leased Employees during the Lease Period, the recipient shall promptly notify the other parties, and the parties shall discuss in good faith how to respond to such inquiry; provided, however, that if Buyer, on the one hand, or Parent or Seller, on the other hand, fails to reasonably cooperate, the other party(ies) may respond.

 

  

- A-11-

  

 

	
(v)

	
In the event that any party materially breaches the provisions of this Schedule 5.6 relating to the Leased Employees, and such party has not cured such breach within fifteen (15) Business Days of having received written notice of such material breach, the other party may terminate the Lease Period on at least fifteen (15) Business Days advance notice, and the date following the termination of the Lease Period shall become the Hire Date for all purposes under this Schedule 5.6.

	
(w)

	
Buyer shall pay to Parent and Seller any transition, excise, sales, use or any similar Tax charged to, assessed on or incurred by Parent or Seller in connection with leasing the Leased Employees in accordance with Schedule 5.6(t), and Buyer shall reimburse Parent and Seller for the reasonable expenses it incurs in identifying whether any such Tax is applicable.  Any Losses resulting or arising from Parent’s or Seller’s failure to remit such amounts shall be solely the responsibility of Parent and Seller, and Buyer shall have no obligation to indemnify, defend or otherwise hold harmless Parent or Seller or any of their respective Affiliates in respect of such Losses.

 

 

 

- A-12-

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