Document:

EXHIBIT 10.1

 

ASSET PURCHASE AGREEMENT

 

dated as of September 8, 2011

 

by and among

 

FOUR POINTS MEDIA GROUP OF WEST PALM BEACH, INC.,
 FOUR POINTS MEDIA GROUP OF SALT LAKE CITY, INC.,
 FOUR POINTS MEDIA GROUP OF PROVIDENCE, INC.,
 FOUR POINTS MEDIA GROUP OF AUSTIN, INC.,
 FOUR POINTS MEDIA GROUP SERVICES, INC.,
 WPB TV LICENSEE CORP.,
 SLC TV LICENSEE CORP.,
 PROVIDENCE TV LICENSEE CORP.,
 AUSTIN TV LICENSEE CORP.,
 FOUR POINTS MEDIA GROUP LLC

 

and

 

SINCLAIR TELEVISION GROUP, INC.

 

 

TABLE OF CONTENTS

 

	
ARTICLE   I DEFINITIONS
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.01
    	
Definitions
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.02
    	
Other Defined Terms
    	
8
    
	
 
    	
 
    	
 
    
	
Section 1.03
    	
Terms Generally
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE   II PURCHASE AND SALE
    	
10
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Purchase and Sale
    	
10
    
	
 
    	
 
    	
 
    
	
Section 2.02
    	
Excluded Assets
    	
11
    
	
 
    	
 
    	
 
    
	
Section 2.03
    	
Assumed Liabilities
    	
12
    
	
 
    	
 
    	
 
    
	
Section 2.04
    	
Excluded Liabilities
    	
13
    
	
 
    	
 
    	
 
    
	
Section 2.05
    	
Assignment of Contracts and   Rights
    	
14
    
	
 
    	
 
    	
 
    
	
Section 2.06
    	
Purchase Price
    	
14
    
	
 
    	
 
    	
 
    
	
Section 2.07
    	
Escrow
    	
14
    
	
 
    	
 
    	
 
    
	
Section 2.08
    	
Closing
    	
14
    
	
 
    	
 
    	
 
    
	
Section 2.09
    	
General Proration
    	
16
    
	
 
    	
 
    	
 
    
	
Section 2.10
    	
Effect of LMA
    	
19
    
	
 
    	
 
    	
 
    
	
ARTICLE   III REPRESENTATIONS AND WARRANTIES OF SELLER
    	
20
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Corporate Existence and   Power
    	
20
    
	
 
    	
 
    	
 
    
	
Section 3.02
    	
Corporate Authorization
    	
20
    
	
 
    	
 
    	
 
    
	
Section 3.03
    	
Governmental Authorization
    	
21
    
	
 
    	
 
    	
 
    
	
Section 3.04
    	
Noncontravention
    	
21
    
	
 
    	
 
    	
 
    
	
Section 3.05
    	
Contracts
    	
21
    
	
 
    	
 
    	
 
    
	
Section 3.06
    	
Intangible Property
    	
22
    
	
 
    	
 
    	
 
    
	
Section 3.07
    	
Real Property
    	
23
    
	
 
    	
 
    	
 
    
	
Section 3.08
    	
Financial Information
    	
24
    

 

i

 

	
Section 3.09
    	
Absence of Certain Changes   or Events
    	
25
    
	
 
    	
 
    	
 
    
	
Section 3.10
    	
Absence of Litigation
    	
26
    
	
 
    	
 
    	
 
    
	
Section 3.11
    	
Compliance with Laws
    	
26
    
	
 
    	
 
    	
 
    
	
Section 3.12
    	
FCC Matters; Qualifications
    	
26
    
	
 
    	
 
    	
 
    
	
Section 3.13
    	
Cable and Satellite Matters
    	
27
    
	
 
    	
 
    	
 
    
	
Section 3.14
    	
Employees; Labor Matters
    	
27
    
	
 
    	
 
    	
 
    
	
Section 3.15
    	
Employee Benefit Plans
    	
28
    
	
 
    	
 
    	
 
    
	
Section 3.16
    	
Environmental Matters
    	
29
    
	
 
    	
 
    	
 
    
	
Section 3.17
    	
Equipment
    	
29
    
	
 
    	
 
    	
 
    
	
Section 3.18
    	
Brokers
    	
30
    
	
 
    	
 
    	
 
    
	
Section 3.19
    	
Taxes
    	
30
    
	
 
    	
 
    	
 
    
	
Section 3.20
    	
Purchased Assets
    	
31
    
	
 
    	
 
    	
 
    
	
ARTICLE   IV REPRESENTATIONS AND WARRANTIES OF BUYER
    	
31
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Existence and Power
    	
31
    
	
 
    	
 
    	
 
    
	
Section 4.02
    	
Corporate Authorization
    	
31
    
	
 
    	
 
    	
 
    
	
Section 4.03
    	
Governmental Authorization
    	
31
    
	
 
    	
 
    	
 
    
	
Section 4.04
    	
Noncontravention
    	
31
    
	
 
    	
 
    	
 
    
	
Section 4.05
    	
Absence of Litigation
    	
32
    
	
 
    	
 
    	
 
    
	
Section 4.06
    	
FCC Qualifications
    	
32
    
	
 
    	
 
    	
 
    
	
Section 4.07
    	
Brokers
    	
32
    
	
 
    	
 
    	
 
    
	
Section 4.08
    	
Financing
    	
32
    
	
 
    	
 
    	
 
    
	
Section 4.09
    	
Projections and Other   Information
    	
32
    
	
 
    	
 
    	
 
    
	
ARTICLE   V COVENANTS OF SELLER
    	
33
    
	
 
    	
 
    	
 
    
	
Section 5.01
    	
Operations Pending Closing
    	
33
    
	
 
    	
 
    	
 
    
	
Section 5.02
    	
Access to Information
    	
35
    

 

ii

 

	
Section 5.03
    	
Title Commitments, Surveys
    	
36
    
	
 
    	
 
    	
 
    
	
Section 5.04
    	
Risk of Loss
    	
36
    
	
 
    	
 
    	
 
    
	
Section 5.05
    	
Intentionally Omitted
    	
37
    
	
 
    	
 
    	
 
    
	
Section 5.06
    	
Management Agreement
    	
37
    
	
 
    	
 
    	
 
    
	
Section 5.07
    	
No Negotiation
    	
37
    
	
 
    	
 
    	
 
    
	
ARTICLE   VI COVENANTS OF BUYER
    	
37
    
	
 
    	
 
    	
 
    
	
Section 6.01
    	
Access to Information
    	
37
    
	
 
    	
 
    	
 
    
	
Section 6.02
    	
Accounts Receivable
    	
38
    
	
 
    	
 
    	
 
    
	
Section 6.03
    	
Letters of Credit
    	
39
    
	
 
    	
 
    	
 
    
	
ARTICLE   VII COVENANTS OF BUYER AND SELLER
    	
39
    
	
 
    	
 
    	
 
    
	
Section 7.01
    	
Commercially Reasonable   Efforts; Further Assurances
    	
39
    
	
 
    	
 
    	
 
    
	
Section 7.02
    	
Confidentiality
    	
40
    
	
 
    	
 
    	
 
    
	
Section 7.03
    	
Certain Filings; Further   Actions
    	
40
    
	
 
    	
 
    	
 
    
	
Section 7.04
    	
Control Prior to Closing
    	
40
    
	
 
    	
 
    	
 
    
	
Section 7.05
    	
Public Announcements
    	
41
    
	
 
    	
 
    	
 
    
	
Section 7.06
    	
Notices of Certain Events
    	
41
    
	
 
    	
 
    	
 
    
	
ARTICLE   VIII PENSION, EMPLOYEE AND UNION MATTERS
    	
42
    
	
 
    	
 
    	
 
    
	
Section 8.01
    	
Employment
    	
42
    
	
 
    	
 
    	
 
    
	
Section 8.02
    	
Savings Plan
    	
42
    
	
 
    	
 
    	
 
    
	
Section 8.03
    	
Employee Welfare Plans
    	
43
    
	
 
    	
 
    	
 
    
	
Section 8.04
    	
Vacation
    	
43
    
	
 
    	
 
    	
 
    
	
Section 8.05
    	
Sick Leave
    	
43
    
	
 
    	
 
    	
 
    
	
Section 8.06
    	
No Further Rights
    	
43
    
	
 
    	
 
    	
 
    
	
ARTICLE   IX TAX MATTERS
    	
44
    
	
 
    	
 
    	
 
    
	
Section 9.01
    	
Bulk Sales
    	
44
    

 

iii

 

	
Section 9.02
    	
Transfer Taxes
    	
44
    
	
 
    	
 
    	
 
    
	
Section 9.03
    	
FIRPTA Certificate
    	
44
    
	
 
    	
 
    	
 
    
	
Section 9.04
    	
Taxpayer Identification   Numbers
    	
44
    
	
 
    	
 
    	
 
    
	
Section 9.05
    	
Taxes and Tax Returns
    	
44
    
	
 
    	
 
    	
 
    
	
Section 9.06
    	
Purchase Price Allocation
    	
44
    
	
 
    	
 
    	
 
    
	
ARTICLE   X CONDITIONS TO CLOSING
    	
45
    
	
 
    	
 
    	
 
    
	
Section 10.01
    	
Conditions to Obligations of   Buyer and Seller
    	
45
    
	
 
    	
 
    	
 
    
	
Section 10.02
    	
Conditions to Obligations of   Seller
    	
45
    
	
 
    	
 
    	
 
    
	
Section 10.03
    	
Conditions to Obligations of   Buyer
    	
46
    
	
 
    	
 
    	
 
    
	
ARTICLE   XI TERMINATION
    	
47
    
	
 
    	
 
    	
 
    
	
Section 11.01
    	
Termination
    	
47
    
	
 
    	
 
    	
 
    
	
Section 11.02
    	
Effect of Termination
    	
48
    
	
 
    	
 
    	
 
    
	
ARTICLE   XII SURVIVAL; INDEMNIFICATION
    	
49
    
	
 
    	
 
    	
 
    
	
Section 12.01
    	
Survival
    	
49
    
	
 
    	
 
    	
 
    
	
Section 12.02
    	
Indemnification by Buyer
    	
49
    
	
 
    	
 
    	
 
    
	
Section 12.03
    	
Indemnification by Seller   and FPMG LLC
    	
50
    
	
 
    	
 
    	
 
    
	
Section 12.04
    	
Indemnification Holdback
    	
51
    
	
 
    	
 
    	
 
    
	
Section 12.05
    	
Notification of Claims
    	
53
    
	
 
    	
 
    	
 
    
	
Section 12.06
    	
Net Losses; Subrogation;   Mitigation
    	
54
    
	
 
    	
 
    	
 
    
	
Section 12.07
    	
Computation of Indemnifiable   Losses
    	
54
    
	
 
    	
 
    	
 
    
	
Section 12.08
    	
Exclusive Remedies
    	
55
    
	
 
    	
 
    	
 
    
	
Section 12.09
    	
Specific Performance
    	
55
    
	
 
    	
 
    	
 
    
	
ARTICLE   XIII GENERAL PROVISIONS
    	
55
    
	
 
    	
 
    	
 
    
	
Section 13.01
    	
Expenses
    	
55
    
	
 
    	
 
    	
 
    
	
Section 13.02
    	
Notices
    	
55
    

 

iv

 

	
Section 13.03
    	
Headings
    	
56
    
	
 
    	
 
    	
 
    
	
Section 13.04
    	
Severability
    	
56
    
	
 
    	
 
    	
 
    
	
Section 13.05
    	
Entire Agreement
    	
56
    
	
 
    	
 
    	
 
    
	
Section 13.06
    	
Successors and Assigns
    	
56
    
	
 
    	
 
    	
 
    
	
Section 13.07
    	
No Recourse
    	
57
    
	
 
    	
 
    	
 
    
	
Section 13.08
    	
No Third-Party Beneficiaries
    	
57
    
	
 
    	
 
    	
 
    
	
Section 13.09
    	
Amendments and Waivers
    	
57
    
	
 
    	
 
    	
 
    
	
Section 13.10
    	
Governing Law; Jurisdiction
    	
58
    
	
 
    	
 
    	
 
    
	
Section 13.11
    	
WAIVER OF JURY TRIAL
    	
58
    
	
 
    	
 
    	
 
    
	
Section 13.12
    	
Counterparts
    	
58
    
	
 
    	
 
    	
 
    
	
Section 13.13
    	
No Presumption
    	
58
    
	
 
    	
 
    	
 
    
	
Section 13.14
    	
Disclosure Schedules
    	
58
    

 

v

 

ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (this “Agreement”) dated as of September 8, 2011 is between Four Points Media Group of West Palm Beach, Inc., a Delaware corporation (“West Palm”), Four Points Media Group of Salt Lake City, Inc., a Delaware corporation (“Salt Lake”), Four Points Media Group of Providence, Inc., a Delaware corporation (“Providence”), Four Points Media Group of Austin, Inc., a Delaware corporation (“Austin”), Four Points Media Group Services, Inc., a Delaware corporation (“FPMG Service”), WPB TV Licensee Corp, a Delaware corporation (“WPB”), SLC TV Licensee Corp., a Delaware corporation (“SLC”), Providence TV Licensee Corp, a Delaware corporation (“Providence TV”), and Austin TV Licensee Corp, a Delaware corporation (“Austin TV”, together with West Palm, Salt Lake, Providence, Austin, FPMG Service, SLC, WPB and Providence TV, the “Seller”), Four Points Media Group LLC, a Delaware limited liability company (“FPMG LLC”) (solely with respect to Article XII) on the one hand, and Sinclair Television Group, Inc., a Maryland corporation (“Buyer”), on the other hand.

 

RECITALS

 

Seller is the owner and licensee of the following broadcast television stations (each a “Station” and collectively, the “Stations”), pursuant to licenses issued by the Federal Communications Commission (the “FCC”):

 

	
Austin
    	
KEYE-TV, Austin, Texas, Facility ID No. 33691
    
	
Salt Lake
    	
KUTV(TV), Salt Lake City, Utah, Facility ID   No. 35823
    
	
Salt Lake
    	
KMYU(TV), St. George, Utah, Facility ID No.   35822
    
	
Providence
    	
WLWC(TV), New Bedford, Massachusetts,   Facility ID No. 3978
    
	
West Palm
    	
WTCN-CA, Palm Beach, Florida, Facility ID No.   70865
    
	
West Palm
    	
WTVX(TV), Fort Pierce, Florida, Facility ID   No. 35575
    
	
West Palm
    	
WWHB-CA, Stuart, Florida, Facility ID No.   63557
    

 

Buyer desires to purchase from Seller substantially all of the assets and assume certain of the liabilities, and Seller desires to sell to Buyer substantially all of the assets and transfer certain of the liabilities, related to, used or held for use in the conduct of each Station on the terms and subject to the conditions hereinafter set forth; and

 

Seller and Buyer are, simultaneously with the execution and delivery of this Agreement, entering a local marketing agreement pursuant to which Buyer shall purchase time from Seller on the Stations to present Buyer’s programming and to sell advertising time for inclusion in such programming (the “LMA”) pending and through the closing of the transactions contemplated in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements to be derived from this Agreement, Buyer and Seller hereby agree as follows:

 

1

 

ARTICLE I
 DEFINITIONS

 

Section 1.01          Definitions.  As used in this Agreement, the following terms shall have the following meanings:

 

“Accounting Firm” means (a) an independent certified public accounting firm in the United States of national recognition mutually acceptable to Seller and Buyer or (b) if Seller and Buyer are unable to agree upon such a firm, then the regular independent auditors for Seller and Buyer shall mutually agree upon a third independent certified public accounting firm, in which event, “Accounting Firm” shall mean such third firm.

 

“Accounts Receivable” means all accounts receivable (other than accounts receivable relating to Tradeout Agreements or film and program barter agreements), and all rights to receive payments under any notes, bonds and other evidences of indebtedness and all other rights to receive payments, arising out of sales occurring in the conduct of the Business prior to the earlier of the LMA Commencement Date and the Effective Time for services performed (e.g., the actual broadcast of commercials sold) or delivered by the Business prior to the earlier of the LMA Commencement Date and the Effective Time.

 

“Action” means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by or under common Control with such other Person.

 

“Ancillary Agreements” means the LMA, the Escrow Agreement and any other certificate, agreement, document or other instrument to be executed and delivered in connection with the transactions contemplated by this Agreement.

 

“Antitrust Laws” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other federal, state and foreign, if any, Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.

 

“Balance Sheet Date” means December 31, 2010.

 

“Business” means the conduct and operation of the Stations.

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed (or actually closed) in the City of New York.

 

“Cash and Cash Equivalents” means those items which are required by GAAP to be included as “cash” or “cash equivalents” on the Financial Statements as of the Effective Time (plus interest, if any, accruing on such amount at the prime rate (as reported by The Wall Street 

 

2

 

Journal or, if not reported thereby, by another authoritative source) from such date until the Closing Date).

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Communications Act” means collectively, the Communications Act of 1934, as amended, the Telecommunications Act of 1996, the Children’s Television Act of 1990, and the rules and regulations promulgated under the foregoing, in each case, as in effect from time to time.

 

“Confidentiality Agreement” means the confidentiality agreement between Cerberus Capital Management, L.P., and Sinclair Television Group, Inc., dated as of April 29, 2011.

 

“Contracts” means contracts, agreements, leases, non-governmental licenses, sales and purchase orders and other agreements (including Leases, Real Property Leases and employment agreements), written or oral (including any amendments or modifications thereto).

 

“Control” means, as to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.  The terms “Controlled” and “Controlling” shall have a correlative meaning.

 

“Copyrights” means all copyrights and copyright applications and registrations therefor used exclusively by Seller in connection with the Business.

 

“Effective Time” means 12:01 a.m., New York City time, on the Closing Date.

 

“Employees” means the full-time, part-time and per diem employees employed by the Seller.

 

“Employee Plan” means any (a) employee benefit plan, arrangement or policy subject to ERISA, including any retirement, pension, deferred compensation, severance, profit sharing, savings, group health, dental, life insurance, disability or cafeteria plan, policy or arrangement; (b) any equity or equity-based compensation plan; (c) any bonus or incentive arrangement; and (d) any severance or termination agreements, policies or arrangements that are not covered by ERISA; in each case, maintained or contributed to or required to be maintained or contributed to by Seller for the benefit of any current or former Employee.

 

“Environmental Laws” means any Law in effect on the date of this Agreement whether local, state, or federal relating to: (a) Releases or threatened Releases of Hazardous Materials into the environment; (b) the use, treatment, storage, disposal, handling, discharging or shipment of Hazardous Material; (c) the regulation of storage tanks; or (d) otherwise relating to pollution or protection of human health, occupational safety and the environment.

 

“Equipment” means all machinery, equipment, computers, motor vehicles, furniture, fixtures, furnishings, towers, antennas, transmitters, tools, toolings, parts, blank films and tapes and other items of tangible personal property owned or leased by Seller (other than

 

3

 

 

such items that are no longer in use at the Stations as a result of obsolescence or having been replaced by other property).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

 

“Estimated Adjustment” shall mean, with respect to the Estimated Settlement Statement, an amount equal to the Buyer Prorated Amount minus the Seller Prorated Amount, which amount shall be expressed as a positive or negative number.

 

“Final Adjustment” shall mean, with respect to the Final Settlement Statement, an amount equal to the Buyer Prorated Amount minus the Seller Prorated Amount, which amount shall be expressed as a positive or negative number.

 

“FCC Consent” means the FCC’s grant of its consent to the assignment of each of the FCC Licenses identified on Disclosure Schedule Section 3.12(a)(1) from Seller to Buyer.

 

“FCC Licenses” means the FCC licenses, permits and other authorizations issued by the FCC for use in the operation of the Stations, each of which is identified on Disclosure Schedule Section 3.12(a)(1), and any other license, permit or other authorization, including any temporary waiver or special temporary authorization and any renewals thereof or any transferable pending application therefor.

 

“Final Order” means an action by the FCC (a) that has not been vacated, reversed, stayed, enjoined, set aside, annulled or suspended; (b) with respect to which no request for stay, motion or petition for rehearing, reconsideration or review, or application or request for review or notice of appeal or sua sponte review by the FCC is pending; and (c) as to which the time for filing any such request, motion, petition, application, appeal or notice, and for the entry of orders staying, reconsidering or reviewing on the FCC’s own motion has expired.

 

“GAAP” means United States generally accepted accounting principles as in effect on the Balance Sheet Date, consistently applied.

 

“Governmental Authority” means any federal, state or local or any foreign government, legislature, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

 

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

“Hazardous Material” means hazardous or toxic wastes, chemicals, substances, constituents, pollutants or related material, whether solids, liquids, or gases, defined or regulated under § 101(14) of CERCLA; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300(f) et seq.; the Clean Air Act, as amended, 42 U.S.C. §§ 7401 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Occupational Safety

 

4

 

and Health Act of 1970, 29 U.S.C. §§ 651 et seq. or any similar applicable federal, state or local Environmental Laws.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.

 

“Indebtedness” means, with regard to any Person, any liability or obligation, whether or not contingent, (i) in respect of borrowed money or evidenced by bonds, monies, debentures, or similar instruments or upon which interest payments are normally made, (ii) for the payment of any deferred purchase price of any property, assets or services (including pursuant to capital leases) but excluding trade payables, (iii) guaranties, direct or indirect, in any manner, of all or any part of any Indebtedness of any Person, (iv) all obligations under acceptance, standby letters of credit or similar facilities, (v) all matured obligations to purchase, redeem, retire, defease or otherwise make any payment in respect of any membership interests, shares of capital stock or other ownership or profit interest or any warrants, rights or options to acquire such membership interests, shares or such other ownership or profit interest, (vi) all accrued interest of all obligations referred to in (i) — (v) and (vii) all obligations referred to in (i) — (vi) of a third party secured by any Lien on property or assets; provided, that in no event shall any Indebtedness between or among the entities within Seller be considered “Indebtedness” for purposes of this Agreement.

 

“Intangible Property” means (a) Copyrights; (b) Trademarks, including all of the rights, if any, of Seller in and to the Stations’ call letters and any derivative thereof; (c) Trade Secrets; (d) all domain leases and names used exclusively by Seller; and (e) all goodwill, if any, associated therewith.

 

“Knowledge of Seller” means the actual knowledge, after due inquiry, of the chief financial officer and the controller of FPMG LLC, and the general manager and chief engineer (or person holding a similar position) of each Station.

 

“Law” means any United States (federal, state, local) or foreign law, constitution, treaty statute, ordinance, regulation, rule, code, order, judgment, injunction, writ or decree.

 

“Leases” means those leases, subleases, licenses or other occupancy agreements (including any and all assignments, amendments and other modifications of such leases, subleases, licenses and other occupancy agreements), pertaining to the use or occupancy of the Real Property where Seller holds an interest as landlord, licensor, sublandlord or sub-licensor.

 

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, easement, right of way, restrictive covenant, encroachment, security interest or encumbrance of any kind whatsoever, whether voluntarily incurred or arising by operation of Law or otherwise, in respect of such property or asset.

 

“LMA Commencement Date” shall have the definition as provided in the LMA.

 

“Market” means, as applicable, (a) the Austin, Texas Nielsen Designated Market Area, (b) the Providence, Rhode Island Nielsen Designated Market Area, (c) the Salt Lake City,

 

5

 

Utah Nielsen Designated Market Area, or (d) the West Palm Beach, Florida Nielsen Designated Market Area.

 

“Material Adverse Effect” means any effect or change that would, individually or in the aggregate, have a material adverse effect on (a) the financial condition, assets or results of operations of (i) KEYE-TV, WLWC(TV), WTVX(TV), WTCN-CA and WWHB-CA, considered together, and/or (ii) KUTV(TV) and KMYU(TV), considered together, and/or (iii) Seller taken as a whole or (b) the ability of Seller to perform its obligations under this Agreement; provided, however, that any material adverse effect primarily attributable to (i) an event or series of events or circumstances affecting the United States or global economy generally or capital or financial markets generally, including changes in interest or exchange rates, (ii) any event, state of facts or circumstances or development affecting television programming services generally or the television broadcast industry generally (including legislative or regulatory matters), (iii) general economic conditions, including any downturn caused by acts of war or terrorism or a natural disaster, such as an earthquake or hurricane, (iv) the announcement of this Agreement, (v) any failure to meet internal or published financial or rating projections, estimates or forecasts of revenues, earnings, or other measures of financial or operating performance for any period (provided, that the underlying causes of such failure (subject to the other provisions of this definition) shall not be excluded), (vi) changes in Law or GAAP or the interpretation thereof, (vii) the ratings or performance of any network with which a Station is affiliated or (viii) actions or inactions taken by or on behalf of Buyer under the LMA, in each case shall not constitute a Material Adverse Effect.

 

“Material Contract” means any Contract required to be listed on Disclosure Schedule Section 3.05(a).

 

“MVPDs” means any multi-channel video programming distributor, including cable systems, telephone companies and DBS systems.

 

“Permitted Liens” means, as to any property or asset of any member of Four Points Media Group, (a) liens for Taxes, assessments and governmental charges not yet due and payable or which are being contested in good faith and for which appropriate reserves exist on the Financial Statements, (b) terms and conditions of any Leases, (c) zoning laws and ordinances and similar Laws that are not violated by any existing improvement or that do not prohibit the use of the Real Property as currently used in the operation of the Business; (d) any right reserved to any Governmental Authority to regulate the affected property (including restrictions stated in any permits); (e) in the case of any leased asset, (i) the rights of any lessor under the applicable lease agreement or any Lien granted by any lessor, (ii) any statutory Lien for amounts that are not yet due and payable or are being contested in good faith, (iii) any subleases and (iv) the rights of the grantor of any easement or any Lien granted by such grantor on such easement property; (f) easements, rights of way, restrictive covenants and other encumbrances, encroachments or other similar matters affecting title that do not materially adversely affect title to the property subject thereto or materially impair the continued use of the property in the ordinary course of the business of the Stations; (g) inchoate materialmens’, mechanics’, workmen’s, repairmen’s or other like Liens arising in the ordinary course of business; (h) Liens that will be discharged prior to Closing; (i) any state of facts an accurate survey would show, provided same does not render title unmarketable or prevent the Real Property being utilized in

 

6

 

substantially the same manner as currently used; (j) pledges or deposits to secure obligations under workers’ compensation Laws or similar Laws or to secure public or statutory obligations and which pledges or deposits are reflected in the Financial Statements to the extent required by GAAP; and (k) any other Lien, other than a Lien securing a monetary obligation, that does not detract from, interfere with or impair the use of or value of any such property or asset as currently used.

 

“Person” means any natural person, general or limited partnership, corporation, limited liability company, firm, association, trust or other legal entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

“Post-Closing Tax Period” means any Tax period (or portion thereof) beginning and ending after the Effective Time.

 

“Pre-Closing Tax Period” means any Tax period (or portion thereof) ending on or prior to the Effective Time.

 

“Program Rights” means all rights of the Stations to broadcast television programs or shows as part of the Stations’ programming, including all film and program barter agreements, sports rights agreements, news rights or service agreements, affiliation agreements and syndication agreements.

 

“Real Property” means the real property owned, leased, subleased or licensed by or to Seller, together with all right, title and interest of Seller in all buildings, towers, improvements, fixtures and structures located thereon.

 

“Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture.

 

“Tax” or “Taxes” means all federal, state, local or foreign income, excise, gross receipts, ad valorem, sales, use, employment, franchise, profits, gains, property, transfer, use, payroll, intangible or other taxes, fees, stamp taxes, duties, charges, levies or assessments of any kind whatsoever (whether payable directly or by withholding) imposed by a Governmental Authority, together with any interest and any penalties, additions to tax or additional amounts imposed by any Tax authority with respect thereto.

 

“Tax Returns” means all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes.

 

“Trademarks” means all trade names, trademarks, service marks, jingles, slogans, logos, trademark and service mark registrations and trademark and service mark applications owned, used, licensed by or leased by Seller, including those set forth on Disclosure Schedule Section 3.06(a), and the goodwill appurtenant thereto.

 

7

 

“Tradeout Agreement” means any Contract, other than film and program barter agreements, pursuant to which Seller has agreed to sell or trade commercial air time or commercial production services of a Station in consideration for any property or service in lieu of or in addition to cash.

 

“Trade Secrets” means all proprietary information of Seller that is not generally known and is used exclusively in the operation of the Business, as to which reasonable efforts have been made to prevent unauthorized disclosure, and which provides a competitive advantage to those who know or use it.

 

“Transfer Taxes” means all excise, sales, use, value added, registration stamp, recording, documentary, conveyancing, franchise, property, transfer, gains and similar Taxes, levies, charges and fees.

 

Section 1.02          Other Defined Terms.  The following terms have the meanings defined for such terms in the Sections set forth below:

 

	
Active Employees
    	
Section 8.01(a)(i)
    
	
Assumed Contracts
    	
Section 2.01(c)
    
	
Assumed Liabilities
    	
Section 2.03(a)
    
	
Audited Financial Statements
    	
Section 3.09(a)
    
	
Average Unit Rate
    	
Section 2.09(f)
    
	
Buyer
    	
Preamble
    
	
Buyer Indemnified Parties
    	
Section 12.03(a)
    
	
Buyer Prorated Amount
    	
Section 2.09(a)
    
	
Buyer Warranty Breach
    	
Section 12.02(a)(i)
    
	
Buyer’s 401(k) Plan
    	
Section 8.02
    
	
Cap
    	
Section 12.02(b)
    
	
Capital Leases
    	
Section 2.03(e)
    
	
Closing
    	
Section 2.08
    
	
Closing Date
    	
Section 2.08
    
	
Closing Transactions
    	
Section 2.05(b)
    
	
Collection Period
    	
Section 6.02(a)
    
	
Commercial Spots Threshold
    	
Section 2.09(f)
    
	
Damaged Asset
    	
Section 5.06
    
	
De-Minimis Amount
    	
Section 12.02(b)
    
	
DOJ
    	
Section 7.01(d)
    
	
Employment Commencement Date
    	
Section 8.01(a)
    
	
Escrow Agent
    	
Section 2.06(b)
    
	
Escrow Agreement
    	
Section 2.06(b)
    
	
Escrow Deposit
    	
Section 2.06(b)
    
	
Estimated Settlement Statement
    	
Section 2.09(g)
    
	
Excluded Assets
    	
Section 2.02
    
	
Excluded Contracts
    	
Section 2.02(n)
    
	
Excluded Liabilities
    	
Section 2.04
    
	
Excluded Section 2.02(m) Agreements
    	
Section 2.02(m)
    
	
Excluded Section 2.02(n) Agreements
    	
Section 2.02(n)
    

 

8

 

	
FCC
    	
Recitals
    
	
FCC Applications
    	
Section 7.01(c)
    
	
Final Determination
    	
Section 12.04(b)
    
	
Final Settlement Statement
    	
Section 2.09(k)
    
	
Financial Statements
    	
Section 3.09(a)
    
	
Final Indemnification Holdback Payment Date
    	
Section 12.04(a)
    
	
Final Remaining Holdback Amount
    	
Section 12.04(a)
    
	
FPMG LLC
    	
Preamble
    
	
FTC
    	
Section 7.01(d)
    
	
Inactive Employees
    	
Section 8.01(a)
    
	
Indemnification Holdback Amount
    	
Section 12.04(a)
    
	
Initial Indemnification Holdback Payment Date
    	
Section 12.04(a)
    
	
Initial Remaining Holdback Amount
    	
Section 12.04(a)
    
	
Indemnified Party
    	
Section 12.05(a)
    
	
Indemnifying Party
    	
Section 12.05(a)
    
	
Latest Unaudited Balance Sheet
    	
Section 3.09(a)
    
	
LMA
    	
Recitals
    
	
Losses
    	
Section 12.02(a)
    
	
Notice of Disagreement
    	
Section 2.08(k)
    
	
Owned Real Property
    	
Section 3.07
    
	
Permits
    	
Section 3.11
    
	
Prorated Assumed Liabilities
    	
Section 2.09(a)
    
	
Prorated Purchased Assets
    	
Section 2.09(a)
    
	
Purchased Assets
    	
Section 2.01
    
	
Purchase Price
    	
Section 2.06(a)
    
	
Remaining Holdback Amount
    	
Section 12.04(a)
    
	
Second Indemnification Holdback Payment Date
    	
Section 12.04(a)
    
	
Second Remaining Holdback Amount
    	
Section 12.04(a)
    
	
Seller
    	
Preamble
    
	
Seller Indemnified Parties
    	
Section 12.02(a)
    
	
Seller Parties
    	
Section 13.06
    
	
Seller Prorated Amount
    	
Section 2.09(a)
    
	
Seller Warranty Breach
    	
Section 12.03(a)(i)
    
	
Settlement Statement
    	
Section 2.09(h)
    
	
SLC Debt
    	
Section 2.03(c)
    
	
Station
    	
Recitals
    
	
Stations
    	
Recitals
    
	
Termination Date
    	
Section 11.01(b)(i)
    
	
Threshold
    	
Section 12.02(b)
    
	
Transferred Employees
    	
Section 8.01(a)
    
	
Unaudited Financial Statements
    	
Section 3.09(a)
    

 

Section 1.03          Terms Generally.  Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (b) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including the 

 

9

 

Disclosure Schedules and exhibits hereto) and not to any particular provision of this Agreement, and Article, Section, paragraph, Exhibit and Disclosure Schedule references are to the Articles, Sections, paragraphs, Exhibits and Disclosure Schedules to this Agreement unless otherwise specified, (c) the word “including” and words of similar import when used in this Agreement means “including, without limitation,” unless otherwise specified, and (d) the word “or” shall not be exclusive.

 

ARTICLE II
 PURCHASE AND SALE

 

Section 2.01          Purchase and Sale.  Pursuant to the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from Seller and Seller agrees to sell, convey, transfer, assign and deliver, or cause to be sold, conveyed, transferred, assigned and delivered, to Buyer at the Closing, free of all Liens other than Permitted Liens, all of Seller’s right, title and interest in, to and under all of its assets, other than the Excluded Assets, including the following assets, Contracts, and properties (tangible or intangible), as the same shall exist on the date of this Agreement and not disposed of in accordance with Section 5.01, and all similar assets of the Business acquired by Seller between the date hereof and the Closing, as follows (the “Purchased Assets”):

 

(a)           all Real Property;

 

(b)           all Equipment;

 

(c)           all rights under all Contracts relating to the Business that (i) are listed or referenced on Disclosure Schedule Section 3.05(a) or Disclosure Schedule Section 3.13(a) (but not including, for the avoidance of doubt, the Excluded Section 2.02(m) Agreements and the Excluded Section 2.02(n) Agreements), (ii) are not required by the terms thereof to be listed on Disclosure Schedule Section 3.05(a), (iii) may result from the television broadcasting industry wide negotiations with SESAC, ASCAP and BMI, (iv) are referenced in other subsections to this Section 2.01 or the corresponding Section in the Disclosure Schedules, or (v) are entered into after the date hereof by Seller pursuant to the terms and subject to the conditions of Section 5.01 (collectively, the “Assumed Contracts”); provided, however, that Assumed Contracts shall in no event include Excluded Contracts;

 

(d)           all prepaid expenses and deposits (other than prepaid Taxes) and ad valorem Taxes, leases and rentals;

 

(e)           all of Seller’s rights, claims, credits, causes of action or rights of set-off against third parties relating to the Purchased Assets, including unliquidated rights under manufacturers’ and vendors’ warranties, in each case only to the extent Buyer incurs Losses relating thereto;

 

(f)            all Intangible Property;

 

(g)           all Internet web sites and related agreements, content and databases and domain name registrations, as set forth on Disclosure Schedule Section 2.01(g);

 

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(h)           all FCC Licenses and all transferable municipal, state and federal franchises, licenses, permits or other governmental authorizations relating to the Stations;

 

(i)            all prepayments under advertising sales contracts for committed air time for advertising on any Station that has not been aired prior to the earlier of the LMA Commencement Date and the Closing Date;

 

(j)            all information and data, FCC logs and other compliance records, sales and business records, books of account, files, invoices, inventory records, general, financial, accounting and real and personal property Tax records (but excluding all other Tax records), personnel and employment records for Transferred Employees (to the extent permitted by Law) and all engineering information, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers and lists of present and former customers, quality control records and manuals, blueprints, litigation and regulatory files, and all other books, documents and records;

 

(k)           Ninety-Five Thousand Dollars ($95,000) in cash; and

 

(l)            all management and other systems (including computers and peripheral equipment), databases, computer software, computer disks and similar assets, as and to the extent used primarily in the operation of the Business, and all licenses and rights in relation thereto.

 

Section 2.02          Excluded Assets.  Buyer expressly understands and agrees that the following assets and properties of Seller (the “Excluded Assets”) shall not be acquired by Buyer and are excluded from the Purchased Assets:

 

(a)           all of Seller’s Cash and Cash Equivalents (except for the amount of cash referenced in clause (k) of Section 2.01);

 

(b)           all bank and other depository accounts of Seller;

 

(c)           insurance policies relating to the Stations and the Business, and all claims, credits, causes of action or rights, including rights to insurance proceeds, thereunder;

 

(d)           all interest in and to refunds of Taxes relating to Pre-Closing Tax Periods;

 

(e)           any cause of action or claim relating to any event or occurrence prior to the Effective Time (other than as specified in Section 2.01(e));

 

(f)            all Accounts Receivable;

 

(g)           intercompany accounts receivable and intercompany accounts payable of Seller;

 

(h)           all (i) books, records, files and papers, whether in hard copy or computer format, relating to the preparation of this Agreement or the transactions contemplated 

 

11

 

hereby, (ii) all minute books and corporate records of Seller and its Affiliates and (iii) duplicate copies of records of the Stations;

 

(i)            all rights of Seller arising under this Agreement, the Ancillary Agreements or the transactions contemplated hereby and thereby;

 

(j)            any Purchased Asset sold or otherwise disposed of prior to Closing as permitted hereunder;

 

(k)           Contracts that are not Assumed Contracts, including any contract with any Employee listed on Disclosure Schedule Section 8.01, the Management and Sales Agreement, dated as of March 19, 2009, by and between West Palm, Salt Lake, Providence, Austin, FPMG Service and Nexstar Broadcasting, Inc., and TV Stations Investors LLC (with respect to certain provisions therein) (the “Management Agreement” and together with the other Contracts that are not Assumed Contracts, the “Excluded Contracts”);

 

(l)            other than as specifically set forth in Article VIII, any Employee Plan and any assets of any Employee Plan sponsored by Seller or any of its Affiliates including any amounts due to such Employee Plan from Seller or any of its Affiliates;

 

(m)          the agreements set forth on Disclosure Schedule Section 2.02(m) (collectively, the “Excluded Section 2.02(m) Agreements”);

 

(n)           the agreements set forth on Disclosure Schedule Section 2.02(n) (collectively, the “Excluded Section 2.02(n) Agreements”); and

 

(o)           all Tax records, other than real and personal property Tax records.

 

Section 2.03          Assumed Liabilities.  Upon the terms and subject to the conditions of this Agreement, Buyer agrees, effective at the Effective Time, to assume, pay and perform only the following liabilities of Seller (the “Assumed Liabilities”):

 

(a)           all liabilities set forth on the Financial Statements as of the Balance Sheet Date, other than the Indebtedness (except the Indebtedness set forth in clauses (c) and (d) below);

 

(b)           the liabilities and obligations arising with respect to the operation of the Business on and after the Effective Time (excluding any liability or obligation arising from, or relating to the performance or non-performance thereof, prior to the Effective Time and except as provided in the LMA);

 

(c)           to the extent Buyer receives a credit in the prorations pursuant to Section 2.09, the liabilities and obligations arising under the Loan Agreement, dated May 23, 2003, between Salt Lake City Corporation, as lender, and KUTV Holdings, Inc., as borrower, and related security agreement and note.  (the “SLC Debt”);

 

(d)           to the extent Buyer receives a credit in the prorations pursuant to Section 2.09, the liabilities and obligations arising under (i) the Agreement to Lease Equipment 

 

12

 

dated February 2, 2009 between Cisco Systems Capital Corporation and Four Points Media Group of Salt Lake City, Inc. and agreements related thereto and (ii) Agreement to Lease Equipment dated February 2, 2009 between Cisco Systems Capital Corporation and Four Points Media Group of West Palm Beach, Inc. and agreements related thereto (collectively, the “Capital Leases”);

 

(e)           any liability or obligation to the extent of the amount of credit received by Buyer under Section 2.09(a); and

 

(f)            all liabilities and obligations relating to the Business or the Purchased Assets arising out of Environmental Laws, whether or not presently existing, except for liabilities and obligations that are required to be disclosed on Disclosure Schedule Section 3.16, but which are not so disclosed.

 

Section 2.04          Excluded Liabilities.  Notwithstanding any provision in this Agreement, Buyer is assuming only the Assumed Liabilities and is not assuming any other liability or obligation of Seller or any of its Affiliates of whatever nature, whether presently in existence or arising hereafter.  All such other liabilities and obligations shall be retained by and remain obligations and liabilities of Seller (all such liabilities and obligations not being assumed being herein referred to as the “Excluded Liabilities”), and, notwithstanding anything to the contrary in Section 2.03, none of the following shall be Assumed Liabilities for the purposes of this Agreement:

 

(a)           any liability or obligation under or with respect to any Assumed Contract, Permit, Governmental Order, Real Property Lease or Lease required by the terms thereof to be discharged prior to the Effective Time;

 

(b)           any liability or obligation for which Seller has already received or will receive the partial or full benefit of the asset to which such liability or obligation relates, but only to the extent of such benefit received;

 

(c)           the liability related to the Indebtedness, including, without limitation, as set forth on Disclosure Schedule Section 2.04(c), except any liability or obligation relating to or arising under the SLC Debt or the Capital Leases;

 

(d)           any liability or obligation relating to or arising out of any of the Excluded Assets or any Employee Plan (other than an Employee Plan included as a Purchased Asset pursuant to Section 2.01(c));

 

(e)           any Tax liability or obligation (except as expressly provided in Section 2.08(b) or Section 9.02);

 

(f)            any liability to indemnify, reimburse or advance amounts to any officer, director, employee or agent of Seller or FPMG, LLC;

 

(g)           the liabilities and obligations arising with respect to the operation of the Business prior to the Effective Time (excluding any liability or obligation expressly assumed by Buyer hereunder or as provided in the LMA); and

 

13

 

(h)           any liability of Seller under this Agreement or any document executed in connection therewith, including the Ancillary Agreements.

 

Section 2.05          Assignment of Contracts and Rights.  Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Purchased Asset or any claim or right or any benefit arising thereunder or resulting therefrom if such assignment, without the consent of a third party thereto, would constitute a breach or other contravention of such Purchased Asset or in any way adversely affect the rights of Buyer or Seller thereunder.  Seller and Buyer shall use their commercially reasonable efforts to obtain such consents after the execution of this Agreement until each such consent is obtained.  If any such consent is not obtained prior to the Closing Date, Seller and Buyer shall use their commercially reasonable efforts to obtain such consent as soon as possible after the Closing Date.  In addition, Seller and Buyer will cooperate in a mutually agreeable arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including sub-contracting, sub-licensing, occupancy and/or use agreements or sub-leasing to Buyer and enforcement by Seller for the benefit of Buyer of any and all rights of such Seller against a third party thereto.  Notwithstanding the foregoing, neither Seller, Buyer nor any of their Affiliates shall be required to pay consideration to any third party to obtain any consent.

 

Section 2.06          Purchase Price.  In consideration for the sale of the Purchased Assets, Buyer shall, at the Closing, in addition to assuming the Assumed Liabilities, pay to Seller the sum of Two Hundred Million Dollars ($200,000,000) (the “Purchase Price”) by wire transfer of immediately available federal funds pursuant to wire instructions that Seller shall provide to Buyer.

 

Section 2.07          Escrow.  Simultaneous with the execution of this Agreement, Buyer has delivered to JPMorgan Chase, National Association (the “Escrow Agent”) $20,000,000 to be held as an earnest money deposit (“Escrow Deposit”) pursuant to an Escrow Agreement of even date herewith (the “Escrow Agreement”).  The Escrow Deposit (together with interest earned thereon) shall be paid to Seller as partial payment of the cash Purchase Price due at Closing to Seller, or shall otherwise be made available to Seller or released to Buyer at Closing unless earlier released to Seller in accordance with Section 11.02(b) and Section 11.02(d) hereof.

 

Section 2.08          Closing.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, at 10:00 a.m. on the fifth Business Day to occur following full satisfaction or waiver of all of the closing conditions set forth in Article X hereof (other than those required to be satisfied at the Closing) or on such other date or at such other location as is mutually agreeable to Buyer and Seller.  The date and time of the Closing are herein referred to as the “Closing Date.”  Subject to the terms and conditions set forth in this Agreement, the parties hereto shall consummate the following “Closing Transactions” at the Closing:

 

(a)           Buyer shall deliver to Seller:

 

(i)            the certificate described in Section 10.02(a);

 

14

 

(ii)           the documents described in Section 10.02(b); and

 

(iii)          the Purchase Price in accordance with Section 2.06 by wire transfer; and

 

(iv)          such other documents and instruments as the Seller has determined to be reasonably necessary to sell the Purchased Assets and for the Buyer to assume the Assumed Liabilities.

 

(b)           Seller shall deliver to Buyer:

 

(i)            the certificate described in Section 10.03(a);

 

(ii)           the documents described in Section 10.03(b);

 

(iii)          a duly executed Bill of Sale, substantially in the form of Exhibit A-1 from the appropriate Seller entity;

 

(iv)          a duly executed Assignment for the FCC Licenses, substantially in the form of Exhibit A-2 from the appropriate Seller entity;

 

(v)           a duly executed Assignment for the Intangible Property, substantially in the form of Exhibit A-3 from the appropriate Seller entity, if any owned and registered Intangible Property is included in the Purchased Assets; and

 

(vi)          a duly executed special warranty deed for each Owned Real Property, as defined below, substantially in the form of Exhibit A-4 from the appropriate Seller entity;

 

(vii)         such other documents and instruments as the Buyer has determined to be reasonably necessary to for it acquire the Purchased Assets and assume the Assumed Liabilities; and

 

(c)           Seller and Buyer shall enter into and deliver to each other:

 

(i)            a duly executed Assignment and Assumption Agreement, substantially in the form of Exhibit A-5;

 

(ii)           a duly executed Assignment and Assumption Agreement for the Leases and the Real Property Leases, substantially in the form of Exhibit A-6 from the appropriate Seller entity, or, in the event that necessary consents to assignment have not been obtained prior to the Closing, appropriate subleases, occupancy or use agreements pursuant to Section 2.05 hereof; and

 

(iii)          such other documents as set forth in Section 10.02 and Section 10.03.

 

15

 

Section 2.09          General Proration.

 

(a)           All Purchased Assets that would be classified as current assets in accordance with GAAP, and all Assumed Liabilities that would be classified as liabilities in accordance with GAAP, shall be prorated between Buyer and Seller as of the earlier of the LMA Commencement Date and the Effective Time, including by taking into account the elapsed time or consumption of an asset during the month in which the LMA Commencement Date or the Effective Time, as the case may be, occurs (respectively, the “Prorated Purchased Assets” and the “Prorated Assumed Liabilities”).  Such Prorated Purchased Assets and Prorated Assumed Liabilities relating to the period prior to the earlier of the LMA Commencement Date and the Effective Time shall be for the account of Seller and those relating to the period on and after the earlier of the LMA Commencement Date and the Effective Time for the account of Buyer and shall be prorated accordingly.  In accordance with this Section 2.09, (i) Buyer shall be required to pay to Seller the amount of any Prorated Purchased Asset previously paid for by Seller, to the extent Buyer will receive a current benefit on and after the earlier of the LMA Commencement Date and the Effective Time, provided that such amount should not have been recognized as an expense in accordance with GAAP prior to the earlier of the LMA Commencement Date and the Effective Time (the “Buyer Prorated Amount”); and (ii) Seller shall be required to pay to Buyer the amount of any Prorated Assumed Liabilities to the extent they arise with respect to the operation of the Business prior to the earlier of the LMA Commencement Date and the Effective Time and are not assumed or paid for by Seller (the “Seller Prorated Amount”).  Such payment by Buyer or Seller, as the case may be, shall be made within 10 Business Days after the Final Settlement Statement (as defined below) becomes final and binding upon the parties.

 

(b)           Such prorations shall include all ad valorem and other property Taxes, FCC regulatory fees, utility expenses, liabilities and obligations under Contracts, rents and similar prepaid and deferred items, reimbursable expenses and all other expenses and obligations, such as deferred revenue and prepayments and sales commissions, attributable to the ownership and operation of the Stations that straddle the period before and after the Effective Time.  Notwithstanding anything in this Section 2.09 to the contrary, (i) except as set forth in this clause (b), with respect to Tradeout Agreements for the sale of time for goods or services assumed by Buyer, if at the earlier of the Effective Time or the LMA Commencement Date, the Stations have an aggregate negative barter balance (i.e., the amount by which the value of air time to be provided by the Stations after the earlier of the Effective Time or LMA Commencement Date exceeds the fair market value of corresponding goods and services to be received after such date), there shall be no proration or adjustment, unless the aggregate negative barter balance of the Stations (including any in-kind obligation required under the SLC Debt) exceeds $100,000, in which event such excess shall be treated as prepaid time sales of Seller, and adjusted for as a proration in Buyer’s favor.  In determining barter balances, the value of air time shall be based upon Seller’s rates as of the earlier of the Effective Time or LMA Commencement Date, and corresponding goods and services shall include those to be received by the Stations after the earlier of the Effective Time or LMA Commencement Date plus those received by the Stations before the earlier of the Effective Time or LMA Commencement Date to the extent conveyed by Seller to Buyer as part of the Purchased Assets, (ii) there shall be no proration under this Section 2.09 to the extent there is an aggregate positive barter balance with respect to Tradeout Agreements and (iii) there shall be no proration under this Section 2.09 for Program Rights agreements except to the extent that any payments or performance due under such Program Rights agreements relate to a payment period that straddles the Effective Time.

 

16

 

(c)           Accrued vacation and sick leave for Transferred Employees shall be included in the prorations.

 

(d)           There shall be a proration in Buyer’s favor to the extent that Buyer assumes any remaining liability under the SLC Debt and/or the Capital Leases; provided that, except as provided in clause (b) of this Section 2.09, with respect to the SLC Debt, the proration in Buyer’s favor shall only be with respect to any cash amounts outstanding and shall not include or reflect any payments in kind (such as advertising spots) either (i) made after the earlier of the LMA Commencement Date and the Effective Time or (ii) which remain outstanding as of the earlier of such dates in connection with the SLC Debt.

 

(e)           There shall be a proration in Buyer’s favor with respect to a pro rata portion of any Inducement Payments made to Seller and FPMG LLC by TeleRep LLC pursuant to (and as such term is defined in) the letter agreement between such parties dated as of June 25, 2007.

 

(f)            There shall be a proration in Buyer’s favor to the extent that the value of the commercial spots for bonus weight advertising and ADUs as of the end of business of the date immediately preceding the LMA Commencement Date as set forth in a report generated as of the end of business on such date is greater than 125% of the value of such commercial spots set forth in the schedule (the “Commercial Spots Threshhold”) delivered by Seller to Buyer in conjunction with the execution of this Agreement, which proration shall be with respect to the value of the commercial spots in excess of the Commercial Spots Threshold.  For purposes of this Section 2.09(f), commercial spots shall be valued at the Average Unit Rate realized by Seller in the applicable market for the year to date through the end of October 2011 as measured as of the close of business on the last day of October 2011.  “Average Unit Rate” means 75% of a number equal to (a) the total booked net revenue for commercial spots in a period divided by (b) the total number of commercial spots booked (including in such number bonus weight advertising spots granted in connection with such booked commercial spots) by third party advertising customers in such period.

 

(g)           At least five Business Days prior to the Closing Date, Seller shall provide Buyer with a good faith estimate of the prorations contemplated by this Section 2.09 (the “Estimated Settlement Statement”).  Any payment required to be made by either party pursuant to such preliminary estimate shall be made by the appropriate party at the Closing in accordance therewith, absent manifest error.  Seller will afford Buyer reasonable access to all records and work papers used in preparing the Estimated Settlement Statement, and Buyer shall notify Seller of any good faith disagreement with such calculation within two Business Days of receiving the Estimated Settlement Statement.  At the Closing, (i) Buyer shall be required to pay to Seller the amount equal to the Estimated Adjustment if the Estimated Adjustment is a positive number or (ii) Seller shall be required to pay to Buyer the amount equal to the Estimated Adjustment if the Estimated Adjustment is a negative number.

 

(h)           Within 60 days after the Closing Date, Buyer shall prepare and deliver to Seller a proposed proration of assets and liabilities in the manner described in this Section 2.09 (the “Settlement Statement”) setting forth the Seller Prorated Amount and the Buyer 

 

17

 

Prorated Amount, together with a schedule setting forth, in reasonable detail, the components thereof.

 

(i)            Seller shall provide reasonable access to such employees, books, records, financial statements, and its independent auditors as Buyer reasonably believes is necessary or desirable in connection with its preparation of the Settlement Statement.

 

(j)            During the 30-day period following the receipt of the Settlement Statement (i) Seller and its independent auditors shall be permitted to review and make copies reasonably required of, (w) the financial statements relating to the Settlement Statement, (x) the working papers relating to the Settlement Statement, (y) the books and records relating to the Settlement Statement and, (z) any supporting schedules, analyses and other documentation relating to the Settlement Statement.

 

(k)           The Settlement Statement shall become final and binding (the “Final Settlement Statement”) upon the parties on the 45th day following delivery thereof, unless Seller gives written notice of its disagreement with the Settlement Statement (the “Notice of Disagreement”) to Buyer prior to such date.  The Notice of Disagreement shall specify in reasonable detail the nature of any disagreement so asserted.  If a Notice of Disagreement is given to Buyer in the period specified, then the Final Settlement Statement (as revised in accordance with clause (i) or (ii) below) shall become final and binding upon the parties on the earlier of (i) the date Buyer and Seller resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement or (ii) the date any disputed matters are finally resolved in writing by the Accounting Firm.

 

(l)            Within ten Business Days after the Final Settlement Statement becomes final and binding upon the parties, (i) Buyer shall be required to pay to Seller the amount, if any, by which the Final Adjustment is higher than the Estimated Adjustment or (ii) Seller shall be required to pay to Buyer the amount, if any, by which the Estimated Adjustment is higher than the Final Adjustment, as the case may be.  All payments made pursuant to this Section 2.09(l) must be made via wire transfer in immediately available funds to an account designated by the recipient party, together with interest thereon at the prime rate (as reported by The Wall Street Journal or, if not reported thereby, by another authoritative source) as in effect from time to time from the Effective Time to the date of actual payment.

 

(m)          Notwithstanding the foregoing, in the event that Seller delivers a Notice of Disagreement, Seller or Buyer shall be required to make a payment of any undisputed amount to the other regardless of the resolution of the disputed items contained in the Notice of Disagreement.  Seller or Buyer, as applicable, shall within ten Business Days of the receipt of the Notice of Disagreement make payment to the other by wire transfer in immediately available funds of such undisputed amount owed by Seller or Buyer to the other, as the case may be, together with interest thereon, calculated as described above.

 

(n)           During the 30-day period following the delivery of a Notice of Disagreement to Buyer that complies with the preceding paragraphs, Buyer and Seller shall seek in good faith to resolve in writing any differences they may have with respect to the matters specified in the Notice of Disagreement.  During such period (i) Buyer and its independent 

 

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auditors, at Buyer’s sole cost and expense, shall be, and Seller and its independent auditors, at Seller’s sole cost and expense, shall be, in each case permitted to review and make copies reasonably required of (w) the financial statements of Seller, in the case of Buyer, and Buyer, in the case of Seller, relating to the Notice of Disagreement, (x) the working papers of Seller, in the case of Buyer, and Buyer, in the case of Seller, and such other party’s auditors, if any, relating to the Notice of Disagreement, (y) the books and records of Seller, in the case of Buyer, and Buyer, in the case of Seller, relating to the Notice of Disagreement, and (z) any supporting schedules, analyses and documentation relating to the Notice of Disagreement; and (ii) Seller, in the case of Buyer, and Buyer, in the case of Seller, shall provide reasonable access, upon reasonable advance notice and during normal business hours, to such employees of such other party and such other party’s independent auditors, as such first party reasonably believes is necessary or desirable in connection with its review of the Notice of Disagreement.

 

(o)           If, at the end of such 30-day period, Buyer and Seller have not resolved such differences, Buyer and Seller shall submit to the Accounting Firm for review and resolution any and all matters that remain in dispute and that were properly included in the Notice of Disagreement.  Within 60 days after selection of the Accounting Firm, Buyer and Seller shall submit their respective positions to the Accounting Firm, in writing, together with any other materials relied upon in support of their respective positions.  Buyer and Seller shall use commercially reasonable efforts to cause the Accounting Firm to render a decision resolving the matters in dispute within 30 days following the submission of such materials to the Accounting Firm.  Buyer and Seller agree that judgment may be entered upon the determination of the Accounting Firm in any court having jurisdiction over the party against which such determination is to be enforced.  Except as specified in the following sentence, the cost of any arbitration (including the fees and expenses of the Accounting Firm) pursuant to this Section 2.09 shall be borne by Buyer and Seller in inverse proportion as they may prevail on matters resolved by the Accounting Firm, which proportional allocations shall also be determined by the Accounting Firm at the time the determination of the Accounting Firm is rendered on the matters submitted.  The fees and expenses (if any) of Buyer’s independent auditors and attorneys incurred in connection with the review of the Notice of Disagreement shall be borne by Buyer, and the fees and expenses (if any) of Seller’s independent auditors and attorneys incurred in connection with their review of the Settlement Statement shall be borne by Seller.

 

Section 2.10           Effect of LMA.

 

(a)           Simultaneously with the execution of this Agreement, Seller and Buyer are executing and delivering the LMA.  To the extent that any Purchased Assets are assigned, any Assumed Liabilities are assumed or assets and liabilities are prorated under the LMA, any obligation of (i) Seller under this Agreement to assign such Purchased Assets, (ii) Buyer to assume such Assumed Liabilities or (iii) the parties to prorate such Purchased Assets and Assumed Liabilities, shall be deemed satisfied.  Notwithstanding anything contained herein to the contrary, Seller shall not be deemed to have breached any of its representations, warranties, covenants or agreements contained herein or to have failed to satisfy any condition precedent to Buyer’s obligation to perform under this Agreement (nor shall Seller have any liability or responsibility to Buyer in respect of any such representations, warranties, covenants, agreements or conditions precedent), in each case, to the extent that the inaccuracy of any such representations, the breach of any such warranty, covenant or agreement or the inability to satisfy 

 

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any such condition precedent arises out of or otherwise relates to (i) any actions taken by or under the authorization of Buyer or its Affiliates (or any of their respective officers, directors, employees, agents or representatives) in connection with Buyer’s performance of its obligations under the LMA or otherwise, or (ii) the failure of Buyer to perform any of its obligations under the LMA.  Buyer acknowledges and agrees that Seller shall not be deemed responsible for or have authorized or consented to any action or failure to act on the part of Buyer or its Affiliates (or any of their respective officers, directors, employees, agents or representatives) in connection with the LMA solely by reason of the fact that prior to Closing, Seller directly or indirectly shall have the legal right to control, manage, and supervise the operation of the Stations and the conduct of the Business, except to the extent Seller actually exercises control, management or supervision of the operation of the Stations or the conduct of the Business.

 

(b)           The Estimated Settlement Statement, the Settlement Statement and the Final Settlement Statement prepared in accordance with Section 2.09 shall include, in addition to the items identified in Section 2.09, (i) a proration as of the Effective Time of the monthly LMA fee as provided in paragraph 1 of Schedule 1.5 of the LMA, and (ii) any unreimbursed Station Expenses (as defined in the LMA) as of the Effective Time.

 

ARTICLE III
 REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller, jointly and severally, represents and warrants to Buyer as follows:

 

Section 3.01           Corporate Existence and Power.  Each Seller is duly organized, validly existing and in good standing under the laws of the state of its organization.  Each Seller is qualified to do business and is in good standing in each jurisdiction where such qualification is necessary, except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect.  Each Seller has the requisite power and authority to own and operate the Stations as currently operated.

 

Section 3.02           Corporate Authorization.

 

(a)           The execution and delivery by Seller of this Agreement and the Ancillary Agreements (to which Seller is or will be a party), the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller of the transactions contemplated hereby and thereby are within Seller’s corporate powers and have been duly authorized by all requisite corporate action on the part of Seller.

 

(b)           This Agreement has been, and the Ancillary Agreements (to which Seller is or will be a party) will be, duly executed and delivered by Seller.  This Agreement (assuming due authorization, execution and delivery by Buyer) constitutes, and each Ancillary Agreement (to which Seller is or will be a party) will constitute when executed and delivered by Seller, the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar Laws affecting or relating to enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity).

 

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Section 3.03           Governmental Authorization.  The execution, delivery and performance by Seller of this Agreement and each Ancillary Agreement (to which Seller is or will be a party) and the consummation of the transactions contemplated hereby and thereby require no action by or in respect of, or filing with or notification to, any Governmental Authority other than (a) compliance with any applicable requirements of the HSR Act, and (b) compliance with the Communications Act and with the rules and regulations of the FCC.

 

Section 3.04           Noncontravention.  Except as disclosed in Disclosure Schedule Section 3.04, the execution, delivery and performance of this Agreement and each Ancillary Agreement (to which Seller is or will be a party) by Seller and the consummation of the transactions contemplated hereby and thereby do not and will not (a) violate or conflict with the organizational documents of Seller; (b) assuming compliance with the matters referred to in Section 3.03, conflict with or violate, in any material respect, any material Law or Governmental Order applicable to Seller or any of the Purchased Assets; (c) require any consent or other action by or notification to any Person under, constitute a material default under, give to any Person any rights of termination, amendment, acceleration, cancellation of any right or obligation of Seller under, any provision of any material Assumed Contract; or (d) result in the creation or imposition of any Lien on any of the Purchased Assets, except for Permitted Liens.

 

Section 3.05           Contracts.

 

(a)           Disclosure Schedule Section 3.05(a) sets forth all of the following Contracts (other than Contracts which are Excluded Assets) to which Seller is a party related to the Business as of the date hereof:

 

(i)            any Contract for the sale of broadcast time for advertising or other purposes for cash that was not made in the ordinary course of business consistent with past practices;

 

(ii)           any Contract relating to Program Rights;

 

(iii)          any Contract involving the purchase or sale of Real Property;

 

(iv)          any Contract relating to the acquisition or disposition of any material portion of the Business (whether by merger, sale of stock, sale of assets or otherwise);

 

(v)           any Contract involving construction, architecture, engineering or other agreements relating to uncompleted construction projects, in each case that involve payments in excess of $100,000;

 

(vi)          any mortgage, pledge or security agreement, deed of trust or other instrument granting a Lien (other than Permitted Liens) upon any Purchased Asset;

 

(vii)         any Contract involving a partnership, joint venture or similar agreement with another party;

 

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(viii)        any Contract involving compensation to any employee, independent contractor, or consultant in excess of $50,000;

 

(ix)           any Contract involving any labor agreement or collective bargaining agreement of Seller;

 

(x)            any Contract that contains a covenant restricting the ability of Seller to compete in any business or with any Person or in any geographic area;

 

(xi)           any Contract with any Affiliate of Seller (other than among members of Sellers and other than employment or compensation-related Contracts);

 

(xii)          any Contract that is a local marketing agreement, joint sales agreement or similar agreement;

 

(xiii)         any Contract with a Governmental Authority (other than ordinary course Contracts with Governmental Authorities as a customer) which imposes any material obligation or restriction on Seller;

 

(xiv)        any Contract pursuant to which any Indebtedness for borrowed money of Seller is outstanding or may be incurred or pursuant to which Seller has guaranteed any Indebtedness for borrowed money of any other Person (other than a member of Seller and excluding trade payables arising in the ordinary course of business);

 

(xv)         any Contract relating to the non-broadcast use of the Station’s digital bit stream; and

 

(xvi)        all other Contracts (including all programming contracts)  that (A) involve the payment or potential payment, pursuant to the terms of any such Contract, by or to Seller of more than $100,000 annually and (B) cannot be terminated within one hundred and eighty (180) days after giving notice of termination without resulting in any material cost or penalty to Seller.

 

(b)           No Seller and, to the Knowledge of Seller, no other party, is in material breach or default under any material Assumed Contract.

 

(c)           Each material Assumed Contract is in full force and effect and constitutes a legal, valid and binding obligation of Seller and, to the Knowledge of Seller, of each other party thereto (except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other Laws from time to time in effect relating to creditors’ rights and remedies generally and general principles of equity).

 

Section 3.06           Intangible Property.

 

(a)           All material owned and registered Copyrights, Trademarks and domain names used in connection with the Business are described, listed or set forth on Disclosure Schedule Section 3.06(a).

 

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(b)           Except as set forth on Disclosure Schedule Section 3.06(b), Seller has received no notice of any material claims, demands or proceedings pending by any third party challenging Seller’s right to use any of the Intangible Property or that any Intangible Property or any services provided or process used by Seller conflict with, infringe or otherwise violate the material rights of third parties.

 

(c)           The Purchased Assets include all material Intangible Property, including rights in and to call letters used in the operation of the Stations and to Seller’s Knowledge no third party has infringed or is infringing on any of the Intangible Property.

 

(d)           Seller has not received any written notice that any of the owned Intangible Property is the subject of an outstanding judicial or administrative finding, opinion or office action materially restricting the use thereof by Seller or has been adjudged invalid, unenforceable or unregistrable in whole or in part.

 

Section 3.07           Real Property.

 

(a)           The Seller entity set forth on Disclosure Schedule Section 3.07(a)(i) has valid fee simple title to the owned Real Property identified therein, which constitutes each parcel of real property which is owned by the Seller and such real property, together with all buildings, structures, fixtures and other improvements thereon, (the “Owned Real Property”) free and clear of all Liens other than Permitted Liens.  Disclosure Schedule Section 3.07(a)(ii) includes a list of each Lease.  Each applicable Seller has a valid leasehold interest in, or a valid license to occupy, the Real Property conveyed by the Leases and the Real Property Leases as of the date of this Agreement.  The Real Property includes sufficient access to the Stations’ facilities.  Seller (i) has received no notice of any material violation of material law affecting the Real Property or the Seller’s use thereof, (ii) is not in material default under any Lease or Real Property Lease, (iii) has received no notice of material default under or termination of any Leases or Real Property Leases and (iv) has no knowledge of any material default by any third party under any Lease or Real Property Lease.  Seller has made available to Buyer true and correct copies of the Leases and Real Property Leases, together with all amendments thereto.

 

(b)           Seller has not received written notice of any existing plan or study by any Governmental Authority or by any other Person that challenges or otherwise adversely affects the continuation of the use or operation of any Real Property and has no Knowledge of any such plan or study with respect to which it has not received written notice.  Except as set forth in the Leases to the Knowledge of Seller there is no Person in possession of any Owned Real Property other than Seller.  Except as identified in Disclosure Schedule Section 3.07(b), no Person has any right to acquire the interests in any of the Owned Real Property.

 

(c)           Except as disclosed on Disclosure Schedule Section 3.07(c) and Disclosure Schedule Section 3.17(b), with respect to the Owned Real Property, all material improvements, installations, equipment and facilities utilized in connection with the business of each applicable Station, including material studios, towers and transmission equipment, are (i) located entirely on the Owned Real Property, (ii) maintained on the Owned Real Property in compliance in all material respects with all applicable material Laws, Permits or other 

 

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arrangements or requirements and (iii) in condition sufficient in all material respects for the current use thereof.

 

(d)           Disclosure Schedule 3.07(d) includes a list of each lease, sublease, license, or similar agreement (including any and all assignments, amendments, and other modifications of such leases, subleases, licenses and other occupancy agreements) pertaining to the use or occupancy of the Real Property in which Seller has an interest as a tenant, licensee, subtenant or sub-licensee (“Real Property Leases”).

 

(e)           Except as disclosed on Disclosure Schedule Section 3.07(e), to the Knowledge of Seller, the Owned Real Property is in material compliance with all applicable material building, zoning, subdivision, health and safety and other land use Laws, including The Americans with Disabilities Act of 1990, as amended.

 

(f)            (i) each parcel of Owned Real Property has access (e.g. ingress and egress) to a public street adjoining such parcel of Owned Real Property, or has ingress and egress to a public street via Real Property Leases or easements, and (ii) such access is not dependent on any land or other real property interest which is not included in the Real Property.

 

(g)           To the Knowledge of the Seller the current use and occupancy of the Owned Real Property and the operation of the business of the Seller as currently conducted thereon does not violate in any material respect any easement, covenant, condition, restriction or similar provision in any instrument of record or other unrecorded agreement affecting such Owned Real Property or Seller’s use and occupancy thereof.

 

Section 3.08           Financial Information.

 

(a)           Seller has furnished Buyer with copies of:  (i) the audited consolidated balance sheets as of December 31, 2009 and December 31, 2010 of FPMG LLC the indirect parent of Seller and the related audited statements of operations and cash flow for the fiscal years ended December 31, 2009 and December 31, 2010 (such statements, the “Audited Financial Statements”) and (ii) the unaudited consolidated balance sheet as of June 30, 2011 of FMPG LLC and Seller (the “Latest Unaudited Balance Sheet”) and the related statements of operations and cash flow for the six months ended June 30, 2011 (such statements, together with the Latest Unaudited Balance Sheet, the “Unaudited Financial Statements”).  Except as set forth in Disclosure Schedule Section 3.08(a), the Audited Financial Statements and the Unaudited Financial Statements (collectively, the “Financial Statements”) have been based upon the information contained in the books and records of FMPG LLC and Seller have been prepared in accordance with GAAP applied on a consistent basis and fairly present in all material respects the consolidated financial condition and the consolidated results of operations of FMPG LLC and Seller as of the dates and for the periods referred to therein, subject, in the case of Unaudited Financial Statements, to normal, year-end adjustments, the lack of footnotes and other presentation items.  The books and records of Seller and FMPG LLC have been, and are being, maintained in all material respects in accordance with applicable accounting requirements, and the Financial Statements are consistent in all material respects with such books and records.

 

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(b)           Except as set forth on Disclosure Schedule Section 3.08(b), neither FMPG LLC or the Seller has any liabilities that relate to the Business or to which the Purchased Assets would be subject which would be required to be reflected or reserved against on a consolidated balance sheet of the FPMG LLC prepared in accordance with GAAP or the notes thereto, except liabilities (i) reflected or reserved against on the consolidated audited balance sheet of FPMG LLC as of December 31, 2010, (ii) incurred after December 31, 2010 in the ordinary course of business, (iii) that are Excluded Liabilities, (iv) liabilities to be performed after the date hereof pursuant to the Material Contracts or (v) as contemplated by this Agreement.

 

Section 3.09           Absence of Certain Changes or Events.

 

(a)           Except as disclosed in Disclosure Schedule Section 3.09(a), since the Balance Sheet Date, Seller has operated the Stations in the ordinary course of business consistent with past practices.

 

(b)           Since the Balance Sheet Date through the date hereof, and except as set forth in Disclosure Schedule Section 3.09(b) or as contemplated by this Agreement, there has not been:

 

(i)            any Material Adverse Effect;

 

(ii)           any damage, destruction or loss, whether or not covered by insurance, with respect to any of its property and assets having a replacement cost of more than $100,000 per Market;

 

(iii)          any individual transaction over $50,000 or individual commitment over $75,000 made, or any individual contract or agreement over $75,000 entered into by Seller (including the acquisition or disposition of any assets), or any relinquishment by Seller of any contract or other right valued at over $100,000, in either case, other than transactions and commitments in the ordinary course of business, including renewals or amendments to existing contracts, and those contemplated by this Agreement;

 

(iv)          any material change in the programming policies of the Stations;

 

(v)           the creation or other incurrence by Seller of any Lien on any Purchased Asset other than Permitted Liens;

 

(vi)          any (x) establishment of any bonus, employment, severance, deferred compensation, retirement or other employee benefit plan (or any amendment to any such existing agreement), (y) grant of any severance or termination pay to any officer or employee of Seller, or (z) increase or change to the rate or nature of the compensation (including wages, salaries and bonuses) payable to any Person employed by Seller, except in each case, (A) as may be required by Law or existing contracts or applicable collective bargaining agreements and (B) in the ordinary course of business consistent with past practices;

 

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(vii)         any labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of Seller, which employees were not subject to a collective bargaining agreement at the Balance Sheet Date, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or with respect to any employees of Seller;

 

(viii)        any sale of Owned Real Property, Leases or other transfer, conveyance or termination of leasehold rights in, such Owned Real Property or Real Property Leases;

 

(ix)           any change in any method of accounting or accounting practice by Seller except for any such change required by reason of a concurrent change in GAAP; or

 

(x)            any agreement or commitment to do anything set forth in this Section 3.09(b).

 

Section 3.10           Absence of Litigation.  Except as set forth on Disclosure Schedule Section 3.10, there is no material Action pending against or, to the Knowledge of Seller, threatened against or affecting Seller, any of the Stations or the Businesses, that would be reasonably expected to restrain, enjoin or otherwise prevent the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements or that would, as of the date of this Agreement, reasonably be expected to result in damages in excess of $100,000.

 

Section 3.11           Compliance with Laws.  Except as set forth in Disclosure Schedule Section 3.11, Seller is not in material violation of, and, to the Knowledge of Seller, is not under investigation with respect to and has not been threatened in writing to be charged with, any material violation of any material applicable Law or Governmental Order.  Seller holds all material licenses, franchises, permits, certificates, approvals and authorizations from Governmental Authorities necessary for the lawful conduct of its business (collectively, “Permits”), and all such Permits are valid and in full force and effect.  Except as set forth in Disclosure Schedule Section 3.11, Seller is in material compliance with the terms of such Permits.

 

Section 3.12           FCC Matters; Qualifications.  With respect to the main station FCC Licenses:

 

(a)           Disclosure Schedule Section 3.12(a)(1) contains a true and complete list of all FCC Licenses, including antenna structure registrations of towers owned by Seller.  Seller has made available true, correct and complete copies of the FCC Licenses to Buyer, including any and all amendments and modifications thereto.  The FCC Licenses are validly held by Seller and are in full force and effect.  The FCC Licenses have been issued for the full terms customarily issued to a broadcast television station in the state in which the Station’s community of license is located, and the FCC Licenses are not subject to any condition except for those conditions appearing on the face of the FCC Licenses and conditions applicable to broadcast television licenses generally or otherwise disclosed in Disclosure Schedule Section 3.12(a)(2).

 

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(b)           Except as set forth on Disclosure Schedule Section 3.12(b), Seller has no applications pending before the FCC relating to the operation of the Stations.

 

(c)           Except as set forth on Disclosure Schedule Section 3.12(c)(1), Seller has operated each Station in compliance with the Communications Act and the FCC Licenses in all material respects, has timely filed all material registrations and reports and has paid all FCC regulatory fees due in respect to each Station and has completed the construction of all facilities or changes contemplated by any of the FCC Licenses or construction permits issued to the Stations.  Except as set forth in Disclosure Schedule Section 3.12(c)(2), there are no applications, petitions, complaints, proceedings, investigations or other actions pending or to the Knowledge of Seller, threatened before the FCC relating to the Stations, other than proceedings affecting broadcast television stations generally.  Neither Seller nor any of the Stations has entered into a tolling agreement or otherwise waived any statute of limitations during which the FCC may assess any fine or forfeiture or take any other action or agreed to any extension of time with respect to any FCC investigation or proceeding.

 

(d)           Seller is qualified under the Communications Act to assign the FCC Licenses to Buyer.  To the Knowledge of Seller, there is no fact or circumstance relating to the Stations or Seller or any of its Affiliates that would cause the FCC to deny the FCC Applications.  Except as set forth on Disclosure Schedule Section 3.12(d), Seller has no reason to believe that the FCC Applications might be challenged or might not be granted by the FCC in the ordinary course due to any fact or circumstance relating to Seller’s operation of the Stations or Seller or any of its Affiliates.

 

Section 3.13           Cable and Satellite Matters.

 

(a)           Disclosure Schedule Section 3.13(a) contains a list of all retransmission consent or copyright indemnification agreements with MVPDs with more than 5,000 subscribers with respect to each Station as of the date of this Agreement.  Seller has timely made must-carry elections or entered into retransmission consent agreements with respect to each MVPD with more than 5,000 subscribers in any of the Markets.  Since January 1, 2011, no such MVPD has provided written notice to Seller of any signal quality issue or failed to respond to a request for carriage or to the Knowledge of Seller sought any form of relief from carriage of the Station from the FCC.  Since January 1, 2010, Seller has not received any written notice of any MVPD’s intention to delete a Station from carriage or to change a Station’s channel position.

 

(b)           Disclosure Schedule Section 3.13(b) contains a list as of the date hereof, including the channel position where known, of the MVPDs that, to the Knowledge of Seller, carry any Station outside such Station’s market.

 

Section 3.14           Employees; Labor Matters.

 

(a)           Seller has made available to Buyer a list, dated as of a date no earlier than five (5) days prior to the date of this Agreement, attached as Disclosure Schedule Section 3.14(a), of all Employees, including the names, date of hire, current rate of compensation, employment status (i.e., active, disabled, on authorized leave and reason therefor), 

 

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department, title, whether covered by a collective bargaining agreement and whether full-time, part-time or per-diem.

 

(b)           Except as set forth in Disclosure Schedule Section 3.14(b), none of the Stations are subject to or bound by any labor agreement or collective bargaining agreement.  To the Knowledge of Seller, there is no activity involving any Employee seeking to certify a collective bargaining unit or engaging in any other organizational activity.

 

Section 3.15           Employee Benefit Plans.  With respect to Employee Plans that are applicable to any individual who is or has been employed by or provided services to any of the Stations:

 

(a)           Disclosure Schedule Section 3.15(a) identifies each material Employee Plan immediately prior to the date of this Agreement.

 

(b)           The Employee Plans are in compliance with all applicable requirements of ERISA, the Code, and other applicable laws and have been administered in accordance with their terms and such laws, disregarding for this purpose any failure to so comply or administer that does not:  (i) have a Material Adverse Effect, or (ii) impose upon Buyer any carryover or other liability with respect thereto.  Each Employee Plan that is intended to be qualified within the meaning of Section 401(a) of the Code has received a favorable determination letter as to its qualification, and nothing has occurred that could reasonably be expected to adversely affect such qualification.

 

(c)           Except as set forth on Disclosure Schedule Section 3.15(c), there is no contract, plan or arrangement (written or otherwise) covering any employee or former employee of the Stations that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G of the Code.

 

(d)           Except as set forth in Disclosure Schedule Section 3.15(d), there is no pending or, to the Knowledge of Seller, threatened legal action, suit or claim relating to the Employee Plans (other than routine claims for benefits) that could reasonably be expected to have a Material Adverse Effect.

 

(e)           No Employee Plan that is, or has ever been, maintained or contributed to (or required to be contributed to) by Seller is:  (i) a defined benefit pension plan within the meaning of Section 414(j) of the Code, or (ii) subject to Title IV of ERISA or to the minimum funding standard within the meaning of Section 412 of the Code or Section 302 of ERISA, and Seller has no liability under any such plan.

 

(f)            With respect to each material Employee Plan, Seller has provided or made available to Buyer true and complete copies of the following documents:  (i) the most recent Employee Plan document and all amendments thereto; (ii) the most recent summary plan description; and (iii) with respect to any Employee Plan to which Section 401(a) of the Code is applicable, the most recent determination letter issued by the IRS.

 

(g)           Except as set forth on Disclosure Schedule Section 3.15(g), the consummation of the transactions contemplated by this Agreement will not result in the 

 

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acceleration of the vesting or timing of payment of any compensation or benefits payable under any Employee Plan to or in respect of any employee of Seller.

 

(h)           Except as set forth in Disclosure Schedule Section 3.15(h), (i) Seller is not engaged in any unfair labor practice that would reasonably be expected to result in a Material Adverse Effect; (ii) there are no labor strikes, material labor disputes, concerted work stoppages or lockouts pending or, to the Knowledge of Seller, threatened; (iii) there are no grievances, complaints or other legal proceedings pending, or to the Knowledge of Seller, threatened, against Seller in connection with the employment of their respective employees, except that would not reasonably be expected to result in a material liability; and (iv) Seller is in compliance with all applicable labor and employment laws in connection with the employment of their respective employees, except for any failure to comply that would not reasonably be expected to result in a material liability.

 

Section 3.16           Environmental Matters. Except as otherwise disclosed on Disclosure Schedule Section 3.16:

 

(a)           no citation, written notice, request for information, order, complaint or penalty has been received, and, to the Knowledge of Seller, no Action has been brought by any Governmental Authority alleging a material violation of, or liability under, any Environmental Laws for Releases at any Real Property owned, leased or operated by the Company;

 

(b)           Seller holds all environmental permits, registrations or other authorizations necessary for the operation of Seller to comply with applicable material Environmental Laws in all material respects and Seller is in material compliance with the terms of such Environmental Permits;

 

(c)           Seller is in compliance with Environmental Laws in all material respects, including those relating to generation, storage, treatment, recycling, removal, cleanup, transport or disposal of Hazardous Materials;

 

(d)           to the Knowledge of Seller, there have been no Releases of Hazardous Materials at, from, to, on or under any Owned Real Property that give rise to an affirmative reporting or cleanup obligation under Environmental Law; and

 

(e)           to the Knowledge of Seller, there are no underground storage tanks at the Owned Real Property and Seller does not utilize any underground storage tanks at the Real Property subject to the Real Property Leases.

 

Section 3.17           Equipment.  Disclosure Schedule Section 3.17(a) lists all material items of Equipment included in the Purchased Assets.  Except as otherwise set forth in Disclosure Schedule Section 3.17(b), all such material items of Equipment are in normal operating condition (ordinary wear and tear excepted), and to the Knowledge of Seller, are free from material defects (patent or latent) and have been maintained in accordance with normal industry practice.  Seller owns or leases all Equipment included in the Purchased Assets, free and clear of all Liens, except Permitted Liens.  No Person other than a Seller has any rights to use any of the Equipment or other tangible personal property included in the Purchased Assets, whether 

 

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by lease, sublease, license or other instrument, other than set forth on Disclosure Schedule Section 3.17(c).

 

Section 3.18           Brokers.  There is no broker, finder, investment banker or other intermediary that has been retained by or is authorized to act on behalf of Seller who or that might be entitled to any fee or commission from Buyer or any of its Affiliates in connection with the transactions contemplated by this Agreement or the Ancillary Agreements.

 

Section 3.19           Taxes.

 

(a)           With respect to Taxes, other than Taxes based on net income, relating primarily to the Purchased Assets or the Business, Seller has filed (or was included in ) or will have filed on a timely basis all material Tax Returns in connection with any such material federal, state or local Tax required to be filed by it, all such Tax Returns are or will be, correct and complete in all material respects and prepared in substantial compliance with all applicable laws and regulations, and Seller has or will have timely paid all such Taxes due (whether or not shown thereon) except as contested upon audit by appropriate proceedings and which either (i) constitute Excluded Liabilities or (ii) are disclosed on Disclosure Schedule Section 3.19(a).  None of the Purchased Assets is subject to any lien in favor of the United States pursuant to Section 6321 of the Code for nonpayment of federal Taxes, or any Tax lien in favor of any state or locality pursuant to any comparable provision of state or local Law, or, except for the SLC Debt, any other U.S. federal, state or local Tax Law under which transferee liability might be imposed upon Buyer as a buyer of such Purchased Assets.

 

(b)           The transactions contemplated by this Agreement will not give rise to (i) the creation of any Liens against the Purchased Assets or the Business in respect of any Taxes or (ii) the assertion of any additional Taxes against the Purchased Assets or the Business, other than Transfer Taxes.

 

(c)           There is no material action or proceeding or unresolved claim for assessment or collection, pending or threatened by any Governmental Authority for assessment or collection from Seller of any Taxes of any nature affecting the Purchased Assets or the Business.

 

(d)           Except for the SLC Debt, none of the Purchased Assets have been financed with, or directly or indirectly secures, any industrial revenue bonds or debt, the interest on which is tax exempt under Section 103(a) of the Code.  None of the Purchased Assets consists of stock in a corporation.  None of the Purchased Assets are tax-exempt use property within the meaning of Section 168(h) of the Code.

 

(e)           Except as set forth on Disclosure Schedule Section 3.19(e), none of the Sellers currently is the beneficiary of any extension of time within which to file any material Tax Return relating primarily to the Purchased Assets or the Business.

 

(f)            There is no material dispute or claim concerning any Tax liability of any of the Sellers relating primarily to the Purchased Assets or the Business either (A) claimed or raised by any Governmental Authority in writing or (B) as to which Sellers has Knowledge.

 

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(g)           None of the Sellers has waived any statute of limitations in respect of material Taxes relating primarily to the Purchased Assets or the Business or agreed to any extension of time with respect to a material Tax assessment or deficiency which extension is currently in effect relating primarily to the Purchased Assets or the Business.

 

Section 3.20           Purchased Assets.  The Purchased Assets include all assets that are owned or leased by Seller and used or held for use in the operation of the Stations in all material respects as currently operated, except for the Excluded Assets.

 

ARTICLE IV
 REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Seller as follows:

 

Section 4.01           Existence and Power.  Buyer is a corporation duly formed, validly existing and in good standing under the Laws of the State of Maryland and has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted.

 

Section 4.02           Corporate Authorization.

 

(a)           The execution and delivery by Buyer of this Agreement and the Ancillary Agreements (to which Buyer will be a party), the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated hereby and thereby are within Buyer’s corporate powers and have been duly authorized by all requisite organizational action on the part of Buyer.

 

(b)           This Agreement has been, and each Ancillary Agreement (to which Buyer is or will be a party) will be, duly executed and delivered by Buyer.  This Agreement (assuming due authorization, execution and delivery by Seller) constitutes, and each Ancillary Agreement (to which Buyer is or will be a party) will constitute when executed and delivered by Buyer, the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar Laws affecting or relating to enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity).

 

Section 4.03           Governmental Authorization.  The execution, delivery and performance by Buyer of this Agreement and each Ancillary Agreement and the consummation of the transactions contemplated hereby and thereby require no action by or in respect of, or filing with or notification to, any Governmental Authority other than (a) compliance with any applicable requirements of the HSR Act and (b) compliance with the Communications Act and with the rules and regulations of the FCC.

 

Section 4.04           Noncontravention.  The execution, delivery and performance of this Agreement by Buyer and each Ancillary Agreement to which Buyer will be a party and the consummation of the transactions contemplated hereby and thereby do not and will not (a) violate or conflict with the organizational documents of Buyer, (b) assuming compliance with the 

 

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matters referred to in Section 4.03, conflict with or violate any Law or Governmental Order applicable to Buyer, (c) require any consent or other action by or notification to any Person under, constitute a default under, or give to any Person any rights of termination, amendment, acceleration or cancellation of any right or obligation of Buyer or to a loss of any benefit relating to Seller to which Buyer is entitled under, any provision of any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other agreement or instrument to which Buyer is a party or by which any of Buyer’s assets is or may be bound or (d) result in the creation or imposition of any Lien on any asset of Buyer, except for Permitted Liens, except, in the cases of clauses (b), (c) and (d), for any such violations, consents, actions, defaults, rights or losses as could not have, individually or in the aggregate, a material adverse effect on Buyer or on Buyer’s ability to perform its obligations under this Agreement or the Ancillary Agreements.

 

Section 4.05           Absence of Litigation.  There are no Actions pending against or, to Buyer’s knowledge, threatened against Buyer before any Governmental Authority that in any manner challenges or seeks to prevent, enjoin, alter or delay materially the transactions contemplated by this Agreement.

 

Section 4.06           FCC Qualifications.  Buyer is legally, financially and otherwise qualified under the Communications Act (as in effect on the date hereof) to acquire the FCC Licenses and own and operate each Station and to be the programmer of the Stations under the LMA.  There are no facts known to Buyer, after due inquiry, that would disqualify Buyer as the assignee of the FCC Licenses or as owner and operator of the Stations or as programmer under the LMA, and no waiver or exemption, whether temporary or permanent of the Communications Act is necessary for the FCC Consent to be obtained.  Except as set forth on Disclosure Schedule Section 4.06, Buyer has no reason to believe, after due inquiry, that (a) the FCC Applications might be challenged or might not be granted by the FCC in the ordinary course due to any fact or circumstance relating to Buyer or any of its Affiliates or any of their respective officers, directors, shareholder, members or partners or (b) the parties hereto will not be able to obtain early termination of the applicable waiting period under the HSR Act without any request for additional information from the FTC or the DOJ.  No waiver of or exemption, whether temporary or permanent, from any provision of the Communications Act is necessary for the FCC Consent to be obtained.

 

Section 4.07           Brokers.  There is no broker, finder, investment banker or other intermediary that has been retained by or is authorized to act on behalf of Buyer who or that might be entitled to any fee or commission from either Buyer or any of its Affiliates upon consummation of the transactions contemplated by this Agreement and the Ancillary Agreements for which Seller could become liable.

 

Section 4.08           Financing.  At Closing Buyer will have sufficient cash, available lines of credit or other sources of immediately available funds to enable it to make payment of the Purchase Price, all related fees and expenses in connection with the transactions contemplated by this Agreement and any other amounts to be paid by it in accordance with the terms of this Agreement.

 

Section 4.09           Projections and Other Information.  Buyer acknowledges that, with respect to any projections, forecasts, business plans, budget information and similar

 

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documentation or information relating to Seller and the Business that Buyer has received from Seller or any of its Affiliates, (a) there are uncertainties inherent in attempting to make such projections, forecasts, plans and budgets, (b) Buyer is familiar with such uncertainties, (c) Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections, forecasts, plans and budgets so furnished to it, and (d) Buyer does not have, and will not assert, any claim against Seller or any of its directors, officers, employees, Affiliates or representatives, or hold Seller or any such persons liable, with respect thereto.  Buyer represents that neither of Seller nor any of its Affiliates nor any other Person has made any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding Seller, or the transactions contemplated by this Agreement not expressly set forth in this Agreement, and neither Seller nor any of its Affiliates or any other Person will have or be subject to any liability to Buyer or any other Person resulting from the distribution to Buyer or its representatives or Buyer’s use of, any such information, including any confidential memoranda distributed on behalf of Seller relating to Seller or other publications or data room information provided to Buyer or its representatives, or any other document or information in any form provided to Buyer or its representatives in connection with the sale of the Purchased Assets and the transactions contemplated hereby.  Notwithstanding anything herein to the contrary, nothing in this Section 4.09 will in any way limit Buyer’s rights (including under Section 10.03(a) and Article XII) with respect to representations and warranties of Seller explicitly included herein.

 

ARTICLE V
 COVENANTS OF SELLER

 

Section 5.01                                Operations Pending Closing.  Except as otherwise set forth in this Agreement or in the LMA, or with the prior written consent of Buyer, which consent may not be unreasonably withheld in the case of clauses (g), (h), (i), (l), or as it relates to the foregoing (s)) and may otherwise be withheld in Buyer’s sole discretion, and subject to the provisions of Section 7.03 regarding control of each Station, from and after the date of this Agreement until the Closing, Seller shall, subject to the LMA and Section 2.10 hereof:

 

(a)                                  operate the Business in compliance in all material respects with the Communications Act, the FCC Licenses, the FCC rules and regulations and all applicable Laws;

 

(b)                                 not cause or permit, or agree or commit to cause or permit, by act or failure to act, any of the FCC Licenses to expire or to be revoked, suspended or adversely modified, or take or fail to take any action that would cause the FCC or any other Governmental Authority to institute proceedings for the suspension, revocation or adverse modification of any of the FCC Licenses listed on Disclosure Schedule Section 3.12(a)(1);

 

(c)                                  not sell, lease, license or otherwise dispose of or encumber any assets of the Business except (i) pursuant to existing contracts or commitments set forth on Disclosure Schedule Section 3.05(a) or (ii) immaterial assets in the ordinary course of business consistent with past practices;

 

(d)                                 except as set forth on Disclosure Schedule Section 5.01(d), operate the Business in the ordinary course consistent with past practices (except where such conduct

 

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would conflict with the following covenants or with Seller’s other obligations under this Agreement) and use commercially reasonable efforts to preserve substantially intact the relationships of Seller with its respective customers, employees, suppliers, licensors, licensees, distributors and others with whom Seller deals;

 

(e)                                  not make any change in any method of accounting or accounting practice utilized in the preparation of the Audited Financial Statements except for any such change required by reason of a concurrent change in GAAP;

 

(f)                                    maintain the Equipment in normal operating condition in conformity in all material respects with all applicable FCC technical regulations, ordinary wear and tear excepted;

 

(g)                                 (i) not increase the rate or nature of, or prepay, the compensation (including wages, salaries and bonuses) or severance that is paid or payable to any Employee, except in the ordinary course of business consistent with past practices or pursuant to existing compensation and fringe benefit plans, Employee Plans, practices and arrangements; (ii) not enter into, renew or allow the renewal of or entering into, any employment or consulting agreement or other contract or arrangement with respect to the performance of personal services for a Station that is not terminable at will except in the ordinary course of business consistent with past practice; and (iii) not agree or commit to do any of the foregoing;

 

(h)                                 except as set forth on Disclosure Schedule Section 5.01(h), not enter into, or become obligated under, any agreement or commitment except for: (x) any individual Program Rights agreement with a term of one year or less or that involve payments or receipts of $100,000 or less; provided, however, that in no event may Seller enter into Program Rights agreements that in the aggregate involve payments or receipts of $250,000 or more; and (y) any other agreement or commitment (other than advertising sales contracts for cash only) with a term of one year or less or that involve payments or receipts of $75,000 or less; provided, however, that in no event may Seller enter into such other agreements or commitments that in the aggregate involve payments or receipts of $250,000 or more; and (z) any exercise of a renewal option under a Lease or Real Property Lease that would otherwise terminate or expire, or where the deadline to exercise such renewal option would lapse, within one year of the anticipated date of Closing;

 

(i)                                     not enter into or agree or commit to enter into any new Tradeout Agreement relating to a specific Station with a value in excess of $40,000 individually, and, $100,000 in the aggregate, prior to Closing that will not be fully performed prior to the Closing;

 

(j)                                     (i) utilize the Program Rights only in the ordinary course of business consistent with past practices and (ii) not sell or otherwise dispose of any such Program Rights;

 

(k)                                  promptly notify Buyer of any attempted or actual collective bargaining organizing activity with respect to the applicable Employees;

 

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(l)                                     except as set forth on Disclosure Schedule Section 5.01(l), not make or agree or commit to make any capital expenditure greater than $40,000 in connection with any particular project relating to a Station, or greater than $200,000 in total per Station;

 

(m)                               keep in full force and effect insurance comparable in amount and scope of coverage to that now maintained;

 

(n)                                 not enter into any arrangement or Contract with any Affiliate of Seller;

 

(o)                                 except as set forth on Disclosure Schedule Section 5.01(o), not enter into or become obligated under any new Contract which would be required to be listed on Disclosure Schedule Section 3.05(a) by virtue of Section 3.05(a) hereof or amend, modify, terminate or waive any material right under any Assumed Contract (including any Lease, Real Property Lease or employment Contract), other than as expressly permitted hereunder;

 

(p)                                 not extend credit to advertisers other than in accordance with the Stations’ usual and customary policy with respect to extending credit for the sale of broadcast time and collecting accounts receivable;

 

(q)                                 promote the programming of the Stations (both on-air and using third party media) in a manner consistent with historical practice;

 

(r)                                    timely make retransmission consent elections with all MVPDs located in or serving the Stations’ Markets; and

 

(s)                                  not agree or commit, whether in writing or otherwise, to take any of the actions specified in the foregoing clauses.

 

Section 5.02                                Access to Information.

 

(a)                                  From the date hereof until the Closing Date, upon reasonable notice, Seller shall (i) subject to Section 5.05, give Buyer, its counsel, financial advisors, auditors and other authorized representatives reasonable access during normal business hours to the offices, properties, books and records of each Station, including access to conduct Phase I Environmental Site Assessments of the properties, provided Buyer and its representatives may not conduct any environmental sampling or other intrusive investigation unless permitted by Seller in its sole discretion, (ii) furnish to Buyer, its counsel, financial advisors, auditors, and other authorized representatives such financial and operating data and other information relating to each Station with respect to the periods prior to the Closing Date as such Persons may reasonably request and (iii) instruct the employees, counsel and financial advisors of Seller to cooperate with Buyer in its investigation of each Station; provided, however, that Buyer may not communicate with Employees other than each Station’s general manager, chief engineer, chief financial officer and the Person primarily responsible for employment and labor matters, in each case, without Seller’s prior written consent, not to be unreasonably withheld or delayed.  Any investigation pursuant to this Section 5.02(a) shall be conducted in such manner as not to unreasonably interfere with the conduct of the Business or any of the businesses or operations of Seller or any of its Affiliates.

 

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(b)                                 For a period of two years after the Closing Date, Seller and its Affiliates will hold, and will use their commercially reasonable efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning the Stations and the Business.

 

(c)                                  On and after the Closing Date, Seller will afford promptly to Buyer and its agents reasonable access to its books of account, financial and other records (including accountant’s work papers), information, employees and auditors to the extent necessary for Buyer in connection with any audit, investigation, dispute or litigation or any other reasonable business purpose relating to the Stations; provided that any such access by Buyer shall not unreasonably interfere with the conduct of the businesses or operations of Seller or any of its Affiliates.

 

(d)                                 After Closing, Buyer shall cooperate with Seller in the investigation, defense or prosecution of any action which is pending or threatened against Seller or its Affiliates with respect to the Stations or Seller, whether or not any party has notified the other of a claim for indemnification with respect to such matter.  Without limiting the generality of the foregoing, Buyer shall make available its employees to give depositions or testimony and shall preserve and furnish all documentary or other evidence that Seller may reasonably request.

 

Section 5.03                                Title Commitments, Surveys.  Seller shall deliver to Buyer, within 30 days of the date of this Agreement, title commitments on the Owned Real Property sufficient in form to allow Buyer to obtain, at Buyer’s sole cost and expense, a standard form of title insurance policy insuring the fee simple interest in the Owned Real Property, subject only to Permitted Liens and those matters set forth in Disclosure Schedule Section 5.03.  If Buyer elects to obtain a title insurance policy, the premiums for such policy, including the attorney fees for examination of the abstract and survey (if required by the company issuing the title insurance policy) shall be paid 100% by Buyer, and all abstracting costs in excess of the title insurance abstracting cost shall be paid by Buyer.  Seller shall reasonably cooperate with Buyer (provided that Seller shall not be required to pay any consideration to Buyer or any third party) so that Buyer can promptly obtain, at its sole cost and expense, surveys of the Owned Real Property as of a date subsequent to the date hereof which shall evidence that (i) there are no encroachments upon the Owned Real Property or adjoining parcels by buildings, structures or improvements which would materially adversely affect title or materially interfere with or impair the use of the Owned Real Property for the purpose for which it is currently used and (ii) there is access to the Owned Real Property from a public street or indirect access to a public street over recorded easements or pursuant to Real Property Leases.

 

Section 5.04                                Risk of Loss.  Seller shall bear the risk of casualty loss or damage to any of the Purchased Assets prior to the earlier of the LMA Commencement Date and the Effective Time, and Buyer shall bear such risk on and after the earlier of the LMA Commencement Date and Closing Date.  In the event of any casualty loss or damage to the Purchased Assets prior to the earlier of the LMA Commencement Date and the Closing Date, Seller shall use commercially reasonable efforts to repair or replace (as appropriate under the circumstances) any lost or damaged Purchased Asset (the “Damaged Asset”) unless such 

 

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Damaged Asset was obsolete and unnecessary for the continued operation of the Stations consistent with Seller’s past practice and the FCC Licenses.  If Seller is unable to repair or replace a Damaged Asset by the LMA Commencement Date or the Closing Date, as applicable, Seller shall reimburse Buyer for all reasonable out-of-pocket costs incurred by Buyer in repairing or replacing the Damaged Assets or assign to Buyer the applicable portion of any insurance proceeds not previously expended by Seller to repair or replace the damaged or destroyed property, after the LMA Commencement Date or the Closing Date, as the case may be.

 

Section 5.05                                Intentionally Omitted.

 

Section 5.06                                Management Agreement.  Sellers will terminate the Management Agreement effective on or prior to the earlier of the LMA Commencement Date and the Closing Date, without any liability to Buyer thereunder or hereunder; provided that the provisions regarding Termination Assistance Services (as defined in the Management Agreement) shall continue to the extent requested by Buyer in writing in accordance with the terms of the Management Agreement.

 

Section 5.07                                No Negotiation.  Until such time as this Agreement shall be terminated pursuant to Section 11.01, neither Seller nor FPMG LLC shall directly or indirectly solicit, initiate, encourage or entertain any inquiries or proposals from, discuss or negotiate with, provide any nonpublic information to or consider the merits of any inquiries or proposals from any Person (other than Buyer) relating to any business combination transaction involving Seller, including the sale of any of Seller’s stock or FPMG LLC membership interests, the merger or consolidation of Seller or the sale of Seller’s business or any of the Assets (other than in the ordinary course of business or as provided by this Agreement); provided that this Section 5.07 will cease to apply in the event that (a) Buyer determines in good faith that any further reasonable efforts of Buyer requested by Seller to prosecute the FCC Applications pursuant Section 7.01(c) should not be made, (b) Seller determines in good faith that the FCC Consent is not likely to be granted or (c) Seller determines in good faith that any other condition to the Closing in Article X is not likely to be satisfied (other than as a result of Seller’s breach).  Seller and FPMG LLC shall notify Buyer of any such inquiry or proposal within twenty-four (24) hours of receipt or awareness of the same by Seller or FPMG LLC.

 

ARTICLE VI
 COVENANTS OF BUYER

 

Section 6.01                                Access to Information.  As soon as practicable after the Closing Date, upon reasonable notice, Buyer will afford promptly to Seller and its agents reasonable access to its properties, books, records, employees and auditors to the extent necessary to permit Seller to determine any matter relating to its rights and obligations (or those of its Affiliates) hereunder or to any period ending on or before the Closing Date; provided, that Seller will hold, and will cause its agents to hold, in confidence, all confidential or proprietary information to which it has had access to pursuant to this Section 6.01 and provided further such access shall not unreasonably interfere with Buyer’s business or operations.

 

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Section 6.02                                Accounts Receivable.

 

(a)                                  Seller shall deliver to Buyer, promptly after the commencement of the Collection Period, a statement of the Accounts Receivable.  Buyer shall use commercially reasonable efforts to collect the Accounts Receivable during the period (the “Collection Period”) beginning on the earlier of the LMA Commencement Date or the Closing Date and ending on the 120th day thereafter, in the ordinary course of business; provided, that Buyer shall be under no obligation to commence or not to commence litigation or legal action to effect collection.  Any payment received by Buyer from a customer of the Stations that was or is also a customer of Seller and that is obligated with respect to any Accounts Receivable and that is not specifically designated in writing as a payment of a particular invoice or invoices shall be presumptively applied to the accounts receivable for such customer outstanding for the longest amount of time and, if such accounts receivable is an Accounts Receivable, remitted to Seller in accordance with Section 6.02(b); provided further, however, that if, prior to the date hereof, Seller or, after earlier of the LMA Commencement Date or the Closing Date, Seller or Buyer received or receives a written notice of dispute from a customer with respect to an Accounts Receivable that has not been resolved, then Buyer shall apply any payments from such customer to such customer’s oldest, non-disputed accounts receivable, whether or not an Accounts Receivable.  Any amounts relating to the Accounts Receivable that are paid directly to Seller shall be retained by Seller.  Buyer and its Affiliates shall not discount, adjust or otherwise compromise any Accounts Receivable and Buyer shall promptly refer any disputed Accounts Receivable to Seller.

 

(b)                                 On or before the fifth day following the end of each calendar month in the Collection Period, Buyer shall deposit into an account identified by Seller the amounts collected during the preceding month of the Collection Period with respect to the Accounts Receivable (without offset) in immediately available funds by wire transfer.  Buyer shall furnish Seller with a list of the amounts collected during such calendar month and in any prior calendar months with respect to the Accounts Receivable and a schedule of the amount remaining outstanding under each particular account.  Seller shall be entitled during the 60-day period following the Collection Period to inspect and/or audit the records maintained by Buyer pursuant to this Section 6.02, upon reasonable advance notice and during normal business hours.

 

(c)                                  Following the expiration of the Collection Period, Buyer shall have no further obligations under this Section 6.02, except that Buyer shall immediately pay over to Seller any amounts subsequently paid to it with respect to any Accounts Receivable.  Following the Collection Period, Seller may pursue collections of all the Accounts Receivable, and Buyer shall deliver to Seller all files, records, notes and any other materials relating to the Accounts Receivable and shall otherwise cooperate with Seller for the purpose of collecting any outstanding Accounts Receivable.

 

(d)                                 Buyer acknowledges that Seller may maintain all established cash management lockbox arrangements in place at the Effective Time for remittance until such time as Seller deems appropriate to close such lockboxes.  Buyer agrees to update the Accounts Receivable aging reports to reflect all Seller lockbox receipts, and Seller agrees to cooperate with Buyer to keep the Accounts Receivable age reports current.  In addition, Seller shall, on or before the fifth Business Day following the end of the calendar month in which any of Buyer’s receivables are received by Seller through its lockbox, remit to Buyer such receivable collections.

 

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(e)                                  If Buyer fails to remit any amounts collected pursuant to this Section 6.02, such amount shall bear interest at the prime rate (as reported by The Wall Street Journal or, if not reported thereby, by another authoritative source) as in effect from time to time from the date such amount was due until the date of actual payment.

 

(f)                                    All amounts received by Seller pursuant to this Section 6.02 shall not be required to be refunded or repaid by Seller for any circumstance including, but not limited to, any termination of this Agreement pursuant to Section 11.01.

 

Section 6.03                                Letters of Credit.  As of the Closing Date, Buyer shall assume all obligations of reimbursement under each letter of credit set forth in Disclosure Schedule Section 6.03 and use its commercially reasonable efforts to, effective as of the Closing Date, terminate or cause to be terminated, or cause Buyer or one of its Affiliates to be substituted in all respects for Seller in respect of all obligations of the Seller under such letters of credit.  In the event the actions provided for in the foregoing clause are not completed by the Closing Date, then Buyer shall indemnify and hold harmless Seller from and against all Losses incurred by Seller as a result of such failure and from and against any continuing obligations and liabilities under such letters of credit.

 

ARTICLE VII
 COVENANTS OF BUYER AND SELLER

 

Section 7.01                                Commercially Reasonable Efforts; Further Assurances.

 

(a)                                  Subject to the terms and conditions of this Agreement, Buyer and Seller will each use their commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary or desirable under applicable Law to consummate the transactions contemplated by this Agreement.

 

(b)                                 In furtherance and not in limitation of Section 7.01(a), Buyer and Seller agree to make appropriate filings pursuant to applicable Antitrust Laws, including a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby within five Business Days after the date hereof and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and to take all other commercially reasonable actions (but not involving the sale of any assets) necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable.  Buyer and Seller shall each pay one-half (1/2) of all HSR Act filing fees, irrespective of whether the transactions contemplated by this Agreement are consummated.

 

(c)                                  Also in furtherance and not in limitation of Section 7.01(a), Buyer and Seller each shall prepare and file with the FCC as soon as practicable but in no event later than five Business Days after the execution of this Agreement, the requisite applications (the “FCC Applications”) and other necessary instruments or documents requesting the FCC Consent and thereupon prosecute such applications with all reasonable diligence to obtain the requisite FCC Consent; provided, however, except as provided in the following sentence, neither Buyer nor Seller shall be required to pay consideration to any third party to obtain the FCC Consent.

 

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Buyer and Seller shall each pay one-half (1/2) of the FCC filing fees relating to the transactions contemplated hereby, irrespective of whether the transactions contemplated by this Agreement are consummated.  Buyer and Seller each shall oppose any petitions to deny or other objections filed with respect to the FCC Applications to the extent such petition or objection relates to such party.  Neither Seller nor Buyer shall take any intentional action that would, or intentionally fail to take any action the failure of which to take would, reasonably be expected to have the effect of materially delaying the receipt of the FCC Consent.  Seller shall promptly enter into customary tolling arrangements if necessary and requested by the FCC to resolve any complaints with the FCC relating to any of the FCC Licenses.  If the Closing shall not have occurred for any reason within the original effective period of the FCC Consent, and neither party shall have terminated this Agreement under Article XI, Buyer and Seller shall jointly request an extension of the effective period of the FCC Consent.  No extension of the FCC Consent shall limit the right of either party to exercise its rights under Article XI.

 

(d)                                 In connection with the efforts referenced in Section 7.01(a), Section 7.01(b), and Section 7.01(c) to obtain (i) all requisite approvals and authorizations for the transactions contemplated by this Agreement under the HSR Act or any other Antitrust Law and (ii) the FCC Consent, Buyer and Seller shall use its commercially reasonable efforts to (x) cooperate in all respects with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party, (y) keep the other party informed in all material respects of any material communication received by such party from, or given by such party to, the Federal Trade Commission (the “FTC”), the Antitrust Division of the Department of Justice (the “DOJ”), the FCC or any other Governmental Authority and of any material non-confidential portions of any communication received or given in connection with any proceeding by a private party and (z) permit the other party to review any material non-confidential portions of any communication given by it to, and consult with each other in advance of and be permitted to attend any meeting or conference with, the FTC, the DOJ, the FCC or any such other Governmental Authority or, in connection with any proceeding by a private party, with any other Person, in each case regarding any of the transactions contemplated by this Agreement.

 

Section 7.02                                Confidentiality.  Nothing in this Agreement should be deemed to negate or limit Seller’s rights or any obligations under the Confidentiality Agreement, which is incorporated herein by reference.

 

Section 7.03                                Certain Filings; Further Actions.  Seller and Buyer shall cooperate with one another (a) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material Assumed Contracts, in connection with the consummation of the transactions contemplated by this Agreement and (b) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers; provided, however, that Seller and Buyer shall not be required to pay consideration to obtain any such consent, approval or waiver.

 

Section 7.04                                Control Prior to Closing.  The parties acknowledge and agree that, for the purposes of the Communications Act, this Agreement and, without limitation, the

 

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covenants in Article V, are not intended to and shall not be construed to transfer control of any Station or to give Buyer any right to, directly or indirectly, control, supervise or direct, or attempt to control, supervise or direct, the programming, operations, or any other matter relating to any Station prior to the Closing Date, and Seller shall have complete control and supervision of the programming, operations, policies and all other matters relating to each Station up to the time of the Closing.

 

Section 7.05                                Public Announcements.  The parties shall agree on the terms of the press release that announces the transactions contemplated hereby and thereafter agree to obtain the other party’s prior written consent before issuing any press release or making any public announcement with respect to this Agreement or the transactions contemplated hereby; provided, either party shall be permitted without the consent of the other to issue any press releases or public statements the making of which may be required by applicable Law or any listing agreement with any national securities exchange; provided that prior to the issuance of such press release or public statement, the other party shall be provided notice and an opportunity to comment on such press release or public statement.  Notwithstanding the foregoing, the Parties acknowledge that this Agreement and the terms hereof will be filed with the FCC Applications and thereby become public.

 

Section 7.06                                Notices of Certain Events.  From the date hereof until the earlier to occur of the Closing Date and such time as this Agreement is terminated in accordance with Article XI, Seller, on the one hand, and Buyer, on the other hand, shall each promptly notify the other of:

 

(a)                                  any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement;

 

(b)                                   in the case of Seller, (i) the occurrence or non-occurrence of any event which, to its knowledge, has caused any representation or warranty made by it herein to be untrue or inaccurate in any material respect at any time on or after the date hereof and prior to the Closing and (ii) any material failure on the part of Seller to comply with or satisfy any covenant, condition or agreement set forth herein to be complied with or satisfied by Seller hereunder on or after the date hereof and prior to the Closing, other than due to Buyer’s actions or inactions under the LMA; and

 

(c)                                  in the case of Buyer, (i) the occurrence or non-occurrence of any event which, to its knowledge, has caused any representation or warranty made by it herein to be untrue or inaccurate, in any material respect, at any time on or after the date hereof and prior to the Closing and (ii) any material failure on the part of Buyer to comply with or satisfy any covenant, condition or agreement set forth herein to be complied with or satisfied by Buyer hereunder on or after the date hereof and prior to the Closing.

 

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ARTICLE VIII
 PENSION, EMPLOYEE AND UNION MATTERS

 

Section 8.01                                Employment.

 

(a)                                  On or prior to the earlier of LMA Commencement Date and the Closing Date, Buyer shall offer employment to each Employee employed immediately prior to such date who is listed on the list included as Disclosure Schedule Section 3.14(a) or who is hired after the date of such list with the prior, written consent of Buyer (such consent not to be unreasonably withheld or delayed), except the Employees listed on Section 4.1 of the LMA and on Disclosure Schedule Section 8.01, who (i) is not on authorized leave of absence, sick leave, short or long term disability leave, military leave or layoff with recall rights (“Active Employees”); or (ii) is on authorized leave of absence, sick leave, short or long term disability leave, military leave or layoff with recall rights and who returns to active employment immediately following such absence and within six months of the Closing Date, or such later date as required under applicable law (“Inactive Employees”).  On the Closing Date, Buyer shall offer employment to each Employee listed on Schedule 4.1 of the LMA.  For the purposes hereof, all Active Employees or Inactive Employees who accept Buyer’s offer of employment and commence employment on the applicable Employment Commencement Date are hereinafter referred to collectively as the “Transferred Employees,” and the “Employment Commencement Date” as referred to herein shall mean (x) as to those Transferred Employees who are Active Employees hired upon commencement of the LMA, the LMA Commencement Date, (y) as to those Transferred Employees who are Active Employees hired pursuant to the second sentence of this Section 8.01, the Closing Date, and (z) those Transferred Employees who are Inactive Employees, the date on which the Transferred Employee begins employment with Buyer.  Buyer shall employ at-will those Transferred Employees who do not have employment agreements with Seller initially at a monetary compensation (consisting of base salary, commission rate and normal bonus opportunity) at least as favorable as those provided by Seller immediately prior to the Employment Commencement Date.  The initial terms and conditions of employment for those Transferred Employees who have employment agreements with Seller shall be as set forth in such employment agreements (other than terms related to severance in connection with a change in control of Nexstar Broadcasting Group, Inc).  Buyer agrees so long as such Transferred Employees remain employed by Buyer, Buyer shall provide each Transferred Employee with compensation, that, in the aggregate, is no less favorable than the compensation provided to the Transferred Employees immediately prior to the Effective Time and employee benefits that are no less favorable to the employee benefits provided to similarly situated employees of Buyer; provided, that sales commissions and bonuses based on performance may be less to the extent of changes in performance.  Buyer agrees that Buyer shall provide severance benefits to the Transferred Employees on terms that are at least as favorable as those provided to similarly situated employees of Buyer.  To the extent permitted by law, Buyer shall give Transferred Employees full credit for purposes of eligibility and vesting and benefit accrual (other than benefit accrual under a defined benefit pension plan) under the employee benefit plans or arrangements maintained by the Buyer or its Affiliates in which such Transferred Employees participate for such Transferred Employees’ service with the Seller or its Affiliates or predecessors.

 

Section 8.02                                Savings Plan.  Buyer shall cause a tax-qualified defined contribution plan established or designated by Buyer (a “Buyer’s 401(k) Plan”) to accept rollover contributions from the Transferred Employees of any account balances distributed to them by the Seller’s 401(k) Plan.  Buyer shall allow any such Transferred Employees’ outstanding plan loan to be rolled into Buyer’s 401(k) Plan.  The distribution and rollover described herein shall comply with applicable Law, and each party shall make all filings and take any actions required

 

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of such party by applicable Law in connection therewith.  Buyer’s 401(k) Plan shall credit Transferred Employees with service credit for eligibility and vesting purposes for service recognized for the equivalent purposes under Seller’s 401(k) Plan.

 

Section 8.03                                Employee Welfare Plans.  Seller shall retain responsibility for and continue to pay all medical, life insurance, disability and other welfare plan expenses and benefits for each Transferred Employee with respect to claims incurred by such Employees or their covered dependents prior to the Employment Commencement Date.  Expenses and benefits with respect to claims incurred by Transferred Employees or their covered dependents on or after the Employment Commencement Date shall be the responsibility of Buyer.  For purposes of this paragraph, a claim is deemed incurred when the services that are the subject of the claim are performed; in the case of life insurance, when the death occurs, in the case of long-term disability benefits, when the disability occurs and, in the case of a hospital stay, when the employee first enters the hospital.  With respect to any welfare benefit plans maintained by Buyer for the benefit of Transferred Employees on and after the Employment Commencement Date, to the extent permitted by law, Buyer shall (i) cause there to be waived any eligibility requirements or pre-existing condition limitations to the same extent waived generally by Buyer with respect to its employees and (ii) give effect, in determining any deductible and maximum out-of-pocket limitations, amounts paid by such Transferred Employees with respect to similar plans maintained by Seller.

 

Section 8.04                                Vacation.  To the extent Buyer has received a credit in the prorations, Buyer will assume all liabilities for unpaid, accrued vacation of each Transferred Employee as of the Employment Commencement Date, giving credit under Buyer’s vacation policy for service with Seller, and shall permit Transferred Employees to use their vacation entitlement accrued as of the Closing Date in accordance with Buyer’s policy for carrying over unused vacation.  To the extent that, following the Closing Date, Buyer’s policies do not permit a Transferred Employee to use any accrued and unused vacation for which Buyer has assumed the liabilities hereunder (other than as a result of such Transferred Employee’s failure to use such vacation despite his or her eligibility to do so, without adverse consequences, under Buyer’s policies), Buyer will pay such Transferred Employee for any such vacation.  Service with both Seller and Buyer shall be taken into account in determining Transferred Employees’ vacation entitlement under Buyer’s vacation policy after the Closing Date.

 

Section 8.05                                Sick Leave.  To the extent Buyer has received a credit in the prorations, Buyer shall grant credit for all unused sick leave accrued by Transferred Employees on the basis of their service during the current calendar year as employees of Seller.

 

Section 8.06                                No Further Rights.  Nothing in this Article VIII, express or implied, is intended to confer on any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Article VIII.

 

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ARTICLE IX
 TAX MATTERS

 

Section 9.01                                Bulk Sales.  Seller and Buyer hereby waive compliance with the provisions of any applicable bulk sales law and no representations, warranty or covenant contained in this Agreement shall be deemed to have been breached as a result of such non-compliance; provided, Seller shall be liable for any liability arising from such non-compliance solely in accordance with Buyer’s right to indemnification in accordance with Article XII.

 

Section 9.02                                Transfer Taxes.  All Transfer Taxes arising out of or in connection with the transactions effected pursuant to this Agreement shall be shared equally by Seller and Buyer.  The party which has the primary responsibility under applicable law for the payment of any particular Transfer Tax, shall prepare the relevant Tax Return and notify the other party in writing of the Transfer Taxes shown on such Tax Return.  Such other party shall pay the party that paid the Transfer Tax an amount equal to fifty percent (50%) of such Transfer Taxes in immediately available funds no later than the date that is the later of (i) five Business Days after the date of such notice or (ii) two Business Days prior to the due date for such Transfer Taxes.  Seller and Buyer shall cooperate in the preparation, execution and filing of all Transfer Tax Returns and shall cooperate to seek and to secure any available exemptions from such Transfer Taxes.

 

Section 9.03                                FIRPTA Certificate.  Seller shall deliver to Buyer on the Closing Date, duly completed and executed certificates of non-foreign status pursuant to section 1.1445-2(b)(2) of the Treasury regulations sufficient to exempt Buyer from the requirements of Code Section 1445(a).  The sole remedy, including for purposes of Section 10.03 and Article XI or Article XII for failure to provide any such certificate shall be to permit Buyer to make any withholding as are required pursuant to Section 1445 of the Code.

 

Section 9.04                                Taxpayer Identification Numbers.  The taxpayer identification numbers of Buyer and Seller are set forth on Disclosure Schedule Section 9.04.

 

Section 9.05                                Taxes and Tax Returns.  Subject to Section 2.09, Seller shall be liable for payment of and shall prepare and properly file on a timely basis true, complete and accurate Tax Returns and other documentation, for any and all Taxes incurred with respect to the Purchased Assets and the Business for any Pre-Closing Tax Period.  Subject to Section 2.09, Buyer shall be liable for and payment of and shall prepare and properly file on a timely basis true, complete and accurate Tax Returns and other documentation for any and all Taxes incurred with respect to the Purchased Assets and the Business for any Post-Closing Tax Period.

 

Section 9.06                                Purchase Price Allocation.  The Buyer and Seller agree that the Purchase Price shall be allocated among the Seller entities as set forth in Disclosure Schedule Section 9.06.  Buyer will allocate the applicable portions of the Purchase Price paid to each Seller entity among the Purchased Assets, of such Seller entity in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder (and any similar provisions of state, local, or foreign Law, as appropriate) and will prepare a draft schedule documenting such allocation and shall provide such draft schedule to Seller.  Seller shall be entitled to review and comment on such schedule for ten (10) business days, and Buyer shall consider such comments

 

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in good faith.  Thereafter, Buyer shall provide Seller with Buyer’s final allocation schedule.  Neither Buyer nor Seller shall take any position (whether in audits, Tax Returns or otherwise) that is inconsistent with Buyer’s final allocation schedule.

 

ARTICLE X
 CONDITIONS TO CLOSING

 

Section 10.01                          Conditions to Obligations of Buyer and Seller.  The obligations of Buyer and Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver, at or prior to the Closing, of each of the following conditions:

 

(a)                                  Any applicable waiting period, clearance, approval or filing under the HSR Act or any other Antitrust Law or regulation relating to the transactions contemplated hereby shall have expired or been terminated or shall have been obtained or made.

 

(b)                                 No provision of any applicable Law and no Governmental Order shall prohibit the consummation of the Closing.

 

(c)                                  The FCC Consent shall have been granted and shall be in full force and effect and shall have become a Final Order.

 

Section 10.02                          Conditions to Obligations of Seller.  The obligation of Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver, at or prior to the Closing, of each of the following further conditions:

 

(a)                                  The representations and warranties of Buyer made in this Agreement shall be true and correct, disregarding all qualifiers and exceptions relating to materiality or Material Adverse Effect, as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date, in which case such representations and warranties shall have been true and correct, disregarding all qualifiers and exceptions relating to materiality or Material Adverse Effect, as of such earlier date) as of the Closing Date as though made on and as of the Closing Date except, in both cases, (A) for changes expressly contemplated by this Agreement, or (B) where the failures to be true and correct, individually or in the aggregate, have not resulted in and would not reasonably be expected to result in a material adverse effect on the ability of Buyer to perform its obligations under this Agreement or any Ancillary Agreement.  Buyer shall have performed in all material respects all obligations required to be performed by it under this Agreement on or prior to the Closing Date.  Seller shall have received a certificate dated as of the Closing Date from Buyer, executed by an authorized officer of Buyer, to the effect that the conditions set forth in this Section 10.02(a) have been satisfied.

 

(b)                                 Seller shall have received the following documents:

 

(i)                                     the certificate of incorporation (or equivalent organizational document) for Buyer, certified as of a recent date by the Secretary of State of the applicable jurisdiction of organization;

 

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(ii)                                  a certificate of the Secretary of State as to the good standing as of a recent date of Buyer in such jurisdiction;

 

(iii)                               a certificate of an officer of Buyer, given by such officer on behalf of Buyer and not in such officer’s individual capacity, certifying as to the bylaws (or equivalent governing document) of Buyer and as to resolutions of the board of directors (or equivalent governing body) of Buyer authorizing this Agreement and the transactions contemplated hereby and thereby.

 

(c)                                  Buyer shall have made, or stand ready at Closing to make the deliveries contemplated in Section 2.08(a) and Section 2.08(c) and each Ancillary Agreement.

 

Section 10.03                          Conditions to Obligations of Buyer.  The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver, at or prior to the Closing, of each of the following further conditions:

 

(a)                                  The representations and warranties of Seller made in this Agreement shall be true and correct, disregarding all qualifiers and exceptions relating to materiality or Material Adverse Effect, as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date, in which case such representations and warranties shall have been true and correct, disregarding all qualifiers and exceptions relating to materiality or Material Adverse Effect, as of such earlier date) as of the Closing Date as though made on and as of the Closing Date, except, in both cases, (v) for changes expressly contemplated or permitted by this Agreement, (w) for changes that take place after the LMA Commencement Date unless such changes result from Seller’s breach of this Agreement or the LMA or were under Seller’s control, (x) casualty losses or damages that are reimbursable pursuant to Section 5.06, (y) for changes as a result of any act or omission of Buyer or its agents under the LMA or (z) where the failures to be true and correct, individually or in the aggregate, have not resulted in and would not reasonably be expected to result in a Material Adverse Effect.  Seller shall have performed in all material respects all obligations required to be performed by it under this Agreement on or prior to the Closing Date, unless such nonperformance was a result of any act or omission of Buyer or its agents under the LMA.  Buyer shall have received a certificate dated as of the Closing Date from Seller, executed by an authorized officer of Seller, to the effect that the conditions set forth in this Section 10.03(a) have been satisfied.

 

(b)                                 Buyer shall have received the following documents:

 

(i)                                     the certificate of incorporation (or equivalent organizational document) for each Seller, certified as of a recent date by the Secretary of State of the applicable jurisdiction of organization;

 

(ii)                                  a certificate of the Secretary of State of each jurisdiction in which any Seller is organized or qualified to do business as to the good standing as of a recent date of such Seller in such jurisdiction;

 

(iii)                               a certificate of an officer of each Seller, given by each such officer on behalf of such Seller and not in such officer’s individual capacity, certifying as to the

 

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bylaws (or equivalent governing document) of such Seller and as to resolutions of the board of directors (or equivalent governing body) of Sellers authorizing this Agreement and the transactions contemplated hereby and thereby; and

 

(iv)                              opinions of counsel to Seller opining as to the corporate matters set forth on Disclosure Schedule Section 10.03(b).

 

(c)                                  Seller shall have obtained and (in the case of an affirmative consent) delivered the consents to assignment listed on Disclosure Schedule Section 10.03(c).

 

(d)                                 Seller shall have delivered to Buyer (A) pay-off letters or similar documents evidencing the discharge or payment in full of the Indebtedness of Seller duly executed by each lender of the Indebtedness of Seller and (B) termination statements on Form UCC-3, or other appropriate releases, which when filed will release and satisfy any and all Liens relating to the Indebtedness of Seller, together with proper authority to file such termination statements or other releases at and following the Closing.

 

(e)                                  Buyer shall have received title commitments that comply with the requirements set forth in Section 5.03.

 

(f)                                    Seller shall have made, or stand ready at Closing to make, the deliveries contemplated in Section 2.07(b) and Section 2.07(c) and each Ancillary Agreement.

 

ARTICLE XI
 TERMINATION

 

Section 11.01                          Termination.  This Agreement may be terminated at any time prior to the Closing as follows:

 

(a)                                  by the mutual written consent of Seller and Buyer;

 

(b)                                 either by Seller or by Buyer:

 

(i)                                     if the Closing shall not have occurred on or before the twelve (12) month anniversary of the date of this Agreement (the “Termination Date”) so long as the terminating party is not then in breach of any of its representations, warranties, covenants or agreements contained in this Agreement to the extent that would give the other party the right not to close pursuant to Section 10.01 or Section 10.02, as the case may be;

 

(ii)                                  if there shall be any Law that prohibits consummation of the transactions contemplated by this Agreement or if a Governmental Authority of competent jurisdiction shall have issued a Government Order enjoining or otherwise prohibiting consummation of the transactions contemplated by this Agreement; or

 

(iii)                               if the FCC denies the FCC Applications with respect to the transactions contemplated by this Agreement.

 

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(c)                                  by Seller upon a breach of any representation, warranty, covenant or agreement on the part of Buyer set forth in this Agreement, or if any representation or warranty of Buyer shall have become untrue, in either case such that the condition set forth in Section 10.02(a) would not be satisfied, unless such breach or untruth can be cured prior to Closing and after receipt of notice thereof, Buyer proceeds in good faith to cure such breach or untruth as promptly as practicable; provided that Seller shall not have the right to terminate this Agreement pursuant to this Section 11.01(c) if Seller is then in breach of any of its representations, warranties, covenants or agreements contained in this Agreement to an extent which would give Buyer the right not to close pursuant to Article X;

 

(d)                                 by Buyer upon a breach of any representation, warranty, covenant or agreement on the part of Seller set forth in this Agreement, or if any representation or warranty of Seller shall have become untrue, in either case such that the condition set forth in Section 10.03(a) would not be satisfied, unless such breach or untruth can be cured prior to Closing and after receipt of notice thereof, Seller proceeds in good faith to cure such breach or untruth as promptly as practicable; provided that Buyer shall not have the right to terminate this Agreement pursuant to this Section 11.01(d) if Buyer is then in breach of any of its representations, warranties, covenants or agreements contained in this Agreement to an extent which would give Seller the right not to close pursuant to Article X.

 

(e)                                  The party desiring to terminate this Agreement pursuant to this Section 11.01 (other than pursuant to Section 11.01(a)) shall give written notice of such termination to the other party.

 

Section 11.02                          Effect of Termination.

 

(a)                                  In the event of a valid termination of this Agreement pursuant to Section 11.01, this Agreement (other than Section 7.02, this Article XI, and Article XIII, which shall remain in full force and effect) shall forthwith become null and void, and no party hereto (nor any of their respective Affiliates, directors, officers or employees) shall have any liability or further obligation, except as provided in Section 11.02(b) and Section 11.02(c) below.  A termination of this Agreement shall not terminate the Confidentiality Agreement, nor, in each case, affect the parties’ rights and obligations thereunder.

 

(b)                                 If this Agreement is terminated by Seller pursuant to Section 11.01(c) due to Buyer’s default or breach of this Agreement, then Seller shall be entitled to the Escrow Deposit as liquidated damages, and the parties shall immediately deliver joint written instructions to the Escrow Agent directing such disbursement.  Seller shall, in addition, be entitled to prompt payment on demand from Buyer of the reasonable attorneys’ fees actually incurred by Seller in enforcing its rights under this Agreement.  The parties understand and agree that the amount of liquidated damages represents Seller’s and Buyer’s reasonable estimate of actual damages and does not constitute a penalty.  Notwithstanding any other provision of this Agreement to the contrary, in the event that Seller terminates this Agreement pursuant to Section 11.01(c) due to Buyer’s material default or breach of this Agreement, the payment of the Escrow Deposit, together with any attorneys’ fees, pursuant to this Section 11.02(b), shall be Seller’s sole and exclusive remedy for damages of any nature or kind that Seller may suffer as a result of Buyer’s breach or default under this Agreement.  The parties hereto acknowledge and agree that

 

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the liquidated damages amount is reasonable in light of the substantial but indeterminate harm anticipated to be caused by material breach or default under this Agreement, the difficulty of proof of loss and damages, the inconvenience and non-feasibility of otherwise obtaining an adequate remedy, and the value of the transactions to be consummated hereunder.

 

(c)                                  If this Agreement is terminated by Buyer pursuant to Section 11.01 due to Seller’s default or breach of this Agreement, Seller shall be liable for any and all Losses incurred or suffered by Buyer in an aggregate amount not to exceed Twenty Million Dollars ($20,000,000).

 

(d)                                 If this Agreement is terminated under the provisions of this Article XI for any reason other than by Seller due to Buyer’s default or breach of this Agreement under Section 11.01(c), then the Parties shall deliver joint written instructions to the Escrow Agent directing the disbursement of the Escrow Deposit to Buyer.

 

ARTICLE XII
 SURVIVAL; INDEMNIFICATION

 

Section 12.01                          Survival.  The representations and warranties of the parties hereto contained in or made pursuant to this Agreement or in any certificate or other writing furnished pursuant hereto or in connection herewith shall survive in full force and effect until the first anniversary of the Closing Date; provided, that the representations and warranties in the first sentence of Section 3.01, the first sentence of Section 4.01, and the representations and warranties in Section 3.02 and Section 4.02 shall survive in perpetuity; provided  further that the representations and warranties in Section 3.19 shall survive until the expiration of the applicable statute of limitations and the representations and warranties in Section 3.16 shall survive until thirty-six (36) months after the Closing Date.  None of the covenants and agreements shall survive the Closing except to the extent such covenants and agreements contemplate performance after the Closing, in which case such covenants and agreements shall survive until performed.  No claim may be brought under this Agreement unless written notice describing in reasonable detail the nature and basis of such claim is given on or prior to the last day of the applicable survival period.  In the event such notice is given, the right to indemnification with respect thereto shall survive the applicable survival period until such claim is finally resolved and any obligations thereto are fully satisfied.

 

Section 12.02                          Indemnification by Buyer.

 

(a)                                  Subject to Section 12.01 and the LMA, Buyer shall indemnify against and hold harmless Seller, and its Affiliates and their respective employees, officers and directors (collectively, the “Seller Indemnified Parties”) from, and agrees to promptly defend any Seller Indemnified Party from and reimburse any Seller Indemnified Party for, any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind (including any Action brought by any Governmental Authority or Person and including reasonable attorneys’ fees and expenses reasonably incurred) (collectively, “Losses”), which such Seller Indemnified Party may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

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(i)                                     Buyer’s breach of any of its representations or warranties contained in this Agreement (each such breach, a “Buyer Warranty Breach”);

 

(ii)                                  any breach or nonfulfillment of any agreement or covenant of Buyer under the terms of this Agreement;

 

(iii)                               the Assumed Liabilities; and

 

(iv)                              the failure by Buyer to assume any Excluded Section 2.02(m) Agreement.

 

(b)                                 Notwithstanding any other provision to the contrary, Buyer shall not be required to indemnify and hold harmless any Seller Indemnified Party pursuant to Section 12.02(a): (A) unless such Seller Indemnified Party has asserted a claim with respect to such matters within the applicable survival period set forth in Section 12.01 and (B) until the aggregate amount of Seller Indemnified Parties’ Losses resulting from Buyer Warranty Breaches exceeds Two Million Dollars ($2,000,000) (the “Threshold”) and then only to the extent of such Losses in excess of One Million Dollars ($1,000,000); provided,  however, that the cumulative indemnification obligation of Buyer under this Article XII shall in no event exceed 22.5% of the Purchase Price (the “Cap”);  provided further, however, neither the Threshold nor the Cap shall apply in the case of any indemnification under clauses (ii), (iii) and (iv) of Section 12.02(a).

 

Section 12.03                          Indemnification by Seller and FPMG LLC.

 

(a)                                  Subject to Section 12.01 and the LMA, Seller and FPMG LLC, jointly and severally, shall indemnify against and hold harmless Buyer, its Affiliates and their respective employees, officers and directors (collectively, the “Buyer Indemnified Parties”) from, and agrees to promptly defend any Buyer Indemnified Party from and reimburse any Buyer Indemnified Party for, any and all Losses which such Buyer Indemnified Party may at any time suffer or incur, or become subject to, as a result of or in connection with:

 

(i)                                     Seller’s breach of any of the representations or warranties contained in this Agreement (each such breach, a “Seller Warranty Breach”);

 

(ii)                                  any breach or nonfulfillment of any agreement or covenant of Seller under the terms of this Agreement;

 

(iii)                               the Excluded Liabilities or any failure to comply with laws relating to bulk sales; and

 

(iv)                              the Excluded Assets.

 

(b)                                 Notwithstanding any other provision to the contrary, Seller and FPMG LLC shall not be required to indemnify and hold harmless any Buyer Indemnified Party pursuant to Section 12.03(a): (A) unless such Buyer Indemnified Party has asserted a claim with respect to such matters within the applicable survival period set forth in Section 12.01 and (B) until the aggregate amount of Buyer Indemnified Parties’ Losses resulting from Seller Warranty Breaches exceeds the Threshold, and then only to the extent of such Losses in excess of One

 

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Million Dollars ($1,000,000); provided,  however, that the cumulative indemnification obligation of Seller under this Section 12.03(b) shall in no event exceed the Cap, or such lesser amount as may be specified in Section 12.04 from time to time; provided further, however, neither the Threshold nor the Cap shall apply in the case of any indemnification under clauses (ii), (iii) and (iv) of Section 12.03(a).

 

Section 12.04                          Indemnification Holdback.

 

(a)                                  FPMG LLC shall hold back an amount equal to the Cap (the “Indemnification Holdback Amount”) from the Purchase Price and shall not distribute the Indemnification Holdback Amount to its members except as set forth in this Section 12.04.  Except for claims relating to fraud, the Indemnification Holdback Amount shall be the sole and exclusive source for effecting the payment and discharge of any and all amounts to which any Buyer Indemnified Party shall be entitled to indemnification pursuant to this Article XII and shall not be used for any other purpose (except for distributions permitted hereby).  Such Indemnification Holdback Amount shall be held at a money market account (or similar type of account that allows for immediately available cash) at JPMorgan Chase Bank.

 

(i)                                     On the date which is the first anniversary of the Closing Date (the “Initial Indemnification Holdback Payment Date”), FPMG LLC shall be entitled to distribute to its members an amount equal to the excess, if any, of 70% of the Indemnification Holdback Amount over the sum of (x) the aggregate amount of any reductions of the Indemnification Holdback Amount made in accordance with Section 12.04(b) and (y) the maximum amount payable under any unresolved claims made by any Buyer Indemnified Party pursuant to this Article XII (the amount of the Indemnity Holdback Amount remaining after distribution, the “Initial Remaining Holdback Amount”).  Except for claims relating to fraud, the Initial Remaining Holdback Amount shall, from and after the Initial Indemnification Holdback Payment Date, be the sole and exclusive source for effecting the payment and discharge of any and all amounts to which any Buyer Indemnified Party shall be entitled to indemnification pursuant to this Article XII.

 

(ii)                                  On the date which is the third anniversary of the Closing Date (the “Second Indemnification Holdback Payment Date”), FPMG LLC shall be entitled to distribute to its members an amount equal to the excess, if any, of 90% of the Indemnification Holdback Amount over the sum of (x) the amount previously distributable on the Initial Indemnification Holdback Date pursuant to Section 12.04(a)(i), (y) the aggregate amount of any reductions of the Initial Remaining Holdback Amount made in accordance with Section 12.04(b) from and after the Initial Indemnification Holdback Date and (z) the maximum amount payable under any unresolved claims made by any Buyer Indemnified Party pursuant to this Article XII (the amount of the Initial Indemnity Holdback Amount remaining after such distribution, the “Second Remaining Holdback Amount”).  Except for claims relating to fraud, the Second Remaining Holdback Amount shall, from and after the Second Indemnification Holdback Payment Date, be the sole and exclusive source for effecting the payment and discharge of

 

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any and all amounts to which any Buyer Indemnified Party shall be entitled to indemnification pursuant to this Article XII.

 

(iii)                               On the date which is the sixth anniversary of the Closing Date (the “Final Indemnification Holdback Payment Date”), FPMG LLC shall be entitled to distribute to its members an amount equal to the excess, if any, of the Second Remaining Holdback Amount over the sum of (x) the aggregate amount of any reductions of the Second Remaining Holdback Amount made in accordance with Section 12.04(b) from and after the Second Indemnification Holdback Date and (y) the maximum amount payable under any unresolved claims made by any Buyer Indemnified Party pursuant to this Article XII (the amount of the Second Remaining Holdback Amount after such distribution, the “Final Remaining Holdback Amount”).  Except for claims relating to fraud, the Final Remaining Holdback Amount shall, from and after the Final Indemnification Holdback Payment Date, be the sole and exclusive source for effecting the payment and discharge of any and all amounts to which any Buyer Indemnified Party shall be entitled to indemnification pursuant to this Article XII.

 

(b)                                 To the extent that any Buyer Indemnified Party is entitled to any indemnification pursuant to Article XII, the Indemnification Holdback Amount, the Initial Remaining Holdback Amount, Second Remaining Holdback Amount or the Final Remaining Holdback Amount, as applicable, shall be reduced dollar-for-dollar by the amount of such indemnification made to such Buyer Indemnified Party, but only to the extent such indemnification is (x) consented to in writing by the Seller, to the extent required by Section 12.05, or (y) in such Buyer Indemnified Party’s favor and is finally determined pursuant to a final, non-appealable judgment of a court of competent jurisdiction or is no longer subject to challenge under applicable Law (a “Final Determination”).

 

(c)                                  To the extent any claims for indemnification pursuant to Article XII by any Buyer Indemnified Party remain pending and unresolved (and such claims have been timely made in accordance with Article XII) after the Final Indemnification Holdback Date, Seller shall not distribute the portion of the Final Remaining Holdback Amount relating to any such pending and unresolved indemnification claim until (x) the resolution of such indemnification claim is consented to in writing by the Seller, to the extent required by Section 12.05, or (y) such indemnification claim is determined in favor of such Buyer Indemnified Party, by a Final Determination, in which case the amount to which Buyer is entitled to by such Final Determination shall be distributed in accordance with Section 12.04(c).  To the extent that any such indemnification claims are resolved in Seller’s favor by a Final Determination, FPMG LLC shall distribute the portion of the Final Remaining Holdback Amount relating to such claims to its members.

 

(d)                                 Any payment required to be made by FPMG LLC pursuant to this Section 12.04 shall be made by wire transfer or other delivery of immediately available funds within five Business Days following the date on which such payment is required to be made.

 

(e)                                  FPMG LLC is entitled to retain interest on the account where the Indemnification Holdback Amount, Initial Remaining Holdback Amount and the Final

 

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Remaining Holdback Amount, as applicable, are held and distribute any such interest earned to its members.

 

(f)                                    Except for claims relating to fraud, each Buyer Indemnified Party’s sole and exclusive remedy to receive payments of any amounts to which any Buyer Indemnified Parties shall be entitled to indemnification pursuant to this Article XII hereof shall in no event exceed the amount of, and shall be recoverable solely from, the Indemnification Holdback Amount.  In the event that the Indemnification Holdback Amount, the Initial Remaining Holdback Amount, the Second Remaining Holdback Amount or the Final Remaining Holdback Amount, as the case may be, is insufficient to pay any Buyer Indemnified Party any amounts owed to such Buyer Indemnified Party to this Article XII, except for claims relating to fraud, the Buyer Indemnified Parties shall not be entitled to collect any remaining amounts not satisfied from the Indemnification Holdback Amount and none of Seller or its Affiliates, nor any other Person shall have any liability for any such deficiency.

 

Section 12.05                          Notification of Claims.

 

(a)                                  A party entitled to be indemnified pursuant to Section 12.02 or Section 12.03 (the “Indemnified Party”) shall promptly notify the party liable for such indemnification (the “Indemnifying Party”) in writing of any claim or demand that the Indemnified Party has determined has given or could give rise to a right of indemnification under this Agreement; provided, however, that a failure to give prompt notice or to include any specified information in any notice will not affect the rights or obligations of any party hereunder except and only to the extent that, as a result of such failure, any party that was entitled to receive such notice was damaged as a result of such failure.  Subject to the Indemnifying Party’s right to defend in good faith third party claims as hereinafter provided, the Indemnifying Party shall satisfy its obligations under this Article XII within 30 days after the receipt of written notice thereof from the Indemnified Party.

 

(b)                                 If the Indemnified Party shall notify the Indemnifying Party of any claim or demand pursuant to Section 12.05(a), and if such claim or demand relates to a claim or demand asserted by a third party against the Indemnified Party that the Indemnifying Party acknowledges is a claim or demand for which it must indemnify or hold harmless the Indemnified Party under Section 12.02 or Section 12.03, the Indemnifying Party shall have the right to employ counsel reasonably acceptable to the Indemnified Party to defend any such claim or demand asserted against the Indemnified Party for so long as the Indemnifying Party shall continue in good faith to diligently defend against such action or claim.  The Indemnified Party shall have the right to participate in the defense of any such claim or demand at its own expense.  The Indemnifying Party shall notify the Indemnified Party in writing, as promptly as possible (but in any case five Business Days before the due date for the answer or response to a claim) after the date of the notice of claim given by the Indemnified Party to the Indemnifying Party under Section 12.05(a) of its election to defend in good faith any such third party claim or demand.  So long as the Indemnifying Party is defending in good faith any such claim or demand asserted by a third party against the Indemnified Party, the Indemnified Party shall not settle or compromise such claim or demand without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld, and the Indemnified Party shall make available to the Indemnifying Party or its agents all records and other material in the Indemnified Party’s

 

53

 

possession reasonably required by it for its use in contesting any third party claim or demand.  Whether or not the Indemnifying Party elects to defend any such claim or demand, the Indemnified Party shall have no obligations to do so.  In the event: (i) the Indemnifying Party elects not to defend such claim or action; or (ii) the Indemnifying Party elects to defend such claim or action but fails to diligently defend such claim or action in good faith, the Indemnified Party shall have the right to conduct the defense thereof and to settle or compromise such claim or action without the consent of the Indemnifying Party, except that with respect to the settlement or compromise of such a claim, demand or action, the Indemnified Party shall not settle or compromise any such claim or demand or action without the consent of the Indemnifying Party (such consent not to be unreasonably withheld), unless the Indemnifying Party is given a full and completed release of any and all liability by all relevant parties relating thereto and has no obligation to pay any damages.

 

Section 12.06                          Net Losses; Subrogation; Mitigation.

 

(a)                                  Notwithstanding anything contained herein to the contrary, the amount of any Losses incurred or suffered by an Indemnified Party shall be calculated after giving effect to (i) any insurance proceeds received by the Indemnified Person (or any of its Affiliates) with respect to such Losses and (ii) any recoveries obtained by the Indemnified Party (or any of its Affiliates) from any other third party.  Each Indemnified Party shall exercise reasonable best efforts to obtain such proceeds, benefits and recoveries.  If any such proceeds, benefits or recoveries are received by an Indemnified Party (or any of its Affiliates) with respect to any Losses after an Indemnifying Party has made a payment to the Indemnified Party with respect thereto, the Indemnified Party (or such Affiliate) shall pay to the Indemnifying Party the amount of such proceeds, benefits or recoveries (up to the amount of the Indemnifying Party’s payment).  With respect to any Losses incurred or suffered by an Indemnified Party, no liability shall attach to the Indemnifying Party in respect of any Losses to the extent that the same Losses have been recovered by the Indemnified Person from the Indemnifying Party, accordingly, the Indemnified Person may only recover once in respect of the same Loss.

 

(b)                                 Upon making any payment to an Indemnified Party in respect of any Losses, the Indemnifying Party shall, to the extent of such payment, be subrogated to all rights of the Indemnified Party (and its Affiliates) against any third party in respect of the Losses to which such payment relates.  Such Indemnified Party (and its Affiliates) and Indemnifying Party shall execute upon request all instruments reasonably necessary to evidence or further perfect such subrogation rights.

 

(c)                                  Buyer and Seller shall use reasonable best efforts to mitigate any Losses, whether by asserting claims against a third party or by otherwise qualifying for a benefit that would reduce or eliminate an indemnified matter; provided, that no party shall be required to use such efforts if they would be demonstrably detrimental in any material respect to such party.

 

Section 12.07                          Computation of Indemnifiable Losses.  Any calculation of Losses for purposes of this Article XII shall be (a) reduced to take account of any net Tax benefit actually realized by the Indemnified Party arising from the deductibility of any such Loss in the year such Loss is incurred; and (b) increased to take account of any net Tax liability actually realized by the Indemnified Party arising from the receipt or accrual of any indemnity obligation

 

54

 

hereunder.  To the extent permitted by law, all indemnity payments made pursuant to this Agreement shall be treated by the parties hereto as an adjustment to the Purchase Price.

 

Section 12.08                          Exclusive Remedies.  Buyer and Seller acknowledge and agree that, if the Closing occurs, the indemnification provisions of this Article XII shall be the sole and exclusive remedies of Buyer and Seller for any breach of the representations or warranties or nonperformance of any covenants and agreements of Buyer or Seller contained in this Agreement or any Ancillary Agreement, and neither party shall have any liability to the other party under any circumstances for special, indirect, consequential, punitive or exemplary damages, or lost profits, diminution in value or any damages based on any type of multiple of earnings of any Indemnified Party provided, however, that nothing contained in this Agreement shall relieve or limit the liability of either party from any liability or Losses arising out of or resulting from fraud in connection with the transactions contemplated in this Agreement or the Ancillary Agreements.

 

Section 12.09                          Specific Performance.  Each of Seller and Buyer agree that irreparable harm may occur for which money damages would not be an adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached such that the Closing did not occur.  It is accordingly agreed that each of Seller and Buyer may be entitled to an injunction or injunctions and other equitable relief to prevent breaches of this Agreement, any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief hereby being waived.

 

ARTICLE XIII
 GENERAL PROVISIONS

 

Section 13.01                          Expenses.  Except as may be otherwise specified herein or in the LMA, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.

 

Section 13.02                          Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly delivered and received (a) on the date of personal delivery, (b) on the date of transmission, if sent by facsimile, or (c) one Business Day after having been dispatched via a nationally recognized overnight courier service, to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13.02):

 

If to Buyer:

 

Sinclair Television Group, Inc.

10706 Beaver Dam Road

Cockeysville, MD 21030

Attention:  President

Facsimile:  (410) 568-1533

 

55

 

With a copy, which shall not constitute notice, to:

 

Sinclair Broadcast Group, Inc

10706 Beaver Dam Road

Cockeysville, MD 21030

Attention:  General Counsel

Facsimile:  (410) 568-1537

 

If to Seller:

 

Four Points Media Group Holding LLC

 

c/o Cerberus Capital Management, L.P. 
 299 Park Avenue 
 New York, New York 10171 
 Attention: Robert G. Warden
 Facsimile: (212) 891-1540

 

With a copy, which shall not constitute notice, to:

 

Schulte Roth & Zabel LLP 
 919 Third Avenue 
 New York, New York 10022
 Attention: Stuart D. Freedman
 Facsimile: (212) 593-5955

 

Section 13.03                          Headings.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

Section 13.04                          Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced because of any Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to either party hereto.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

Section 13.05                          Entire Agreement.  This Agreement, the Confidentiality Agreement and the Ancillary Agreements constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between Seller and Buyer with respect to the subject matter hereof and thereof, except as otherwise expressly provided herein.

 

Section 13.06                          Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

 

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Neither party may assign its rights under this Agreement without the other party’s prior written consent; provided, however, that Buyer may assign its rights hereunder to an affiliate of Buyer upon written notice to, but without consent of, Seller, provided that (i) any such assignment does not delay or impede processing of the FCC Applications, grant of the FCC Consent or Closing, (ii) any such assignee delivers to Seller a written assumption of this Agreement, (iii) Buyer shall remain liable for all of its obligations hereunder, and (iv) Buyer shall be solely responsible for any third party consents necessary in connection therewith (none of which are a condition to Closing); provided further, however, that anything in this Agreement to the contrary notwithstanding, Seller shall have the right (without the prior written consent of Buyer), at any time, and in its sole discretion, to assign for security interest purposes any or all of its rights under this Agreement to any lender providing financing to Seller, or any of Seller’s permitted assigns, or any Affiliates of Seller or Seller’s permitted assigns (Seller, such assigns, and such Affiliates, collectively, the (“Seller Parties”)) and, upon the occurrence and during the continuance of any event of default under the financing agreements between any such lender and a Seller Party, and only in such circumstances, such lender may exercise any or all of the rights, interests, and remedies of any of the Seller Parties under this Agreement.  No assignment shall relieve a party of any obligation or liability under this Agreement.

 

Section 13.07                          No Recourse.  Notwithstanding any of the terms or provisions of this Agreement, Seller, on the one hand, and Buyer, on the other hand, agree that neither it nor any Person acting on its behalf may assert any claims or cause of action against any employee, officer or director of the other party or stockholder of such other party in connection with or arising out of this Agreement or the transactions contemplated hereby.

 

Section 13.08                          No Third-Party Beneficiaries.  Except as expressly provided in Article IX, Article XII and Section 13.06, this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 13.09                          Amendments and Waivers.

 

(a)                                  This Agreement may not be amended or modified except by an instrument in writing signed by Seller, Buyer and FPMG LLC.

 

(b)                                 At any time prior to the Closing, either party may (i) extend the time for the performance of any of the obligations or other acts of the other party hereto, (ii) waive any inaccuracies in the representations and warranties of the other party hereto contained herein or in any document delivered pursuant hereto or (iii) waive compliance by the other party hereto with any of the agreements or conditions contained herein.  Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby.

 

(c)                                  No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or

 

57

 

privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 13.10                          Governing Law; Jurisdiction.  The construction and performance of this Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware without regard to its principles of conflict of law.  The exclusive forum for the resolution of any disputes arising hereunder shall be the Delaware Chancery Court, and each party hereto irrevocably submits to the exclusive jurisdiction of such courts in any such action or proceeding and irrevocably waives the reference of an inconvenient forum to the maintenance of any such action or proceeding.  Each party agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court.

 

Section 13.11                          WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 13.12                          Counterparts.  This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Agreement by facsimile or e-mail shall be effective as delivery of a manually executed counterpart of this Agreement.

 

Section 13.13                          No Presumption.  This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

 

Section 13.14                          Disclosure Schedules.

 

(a)                                  The parties acknowledge and agree that (i) matters reflected in the Disclosure Schedules are not necessarily limited to the matters required by the Agreement to be disclosed in the Disclosure Schedules, (ii) the Disclosure Schedules may include certain items and information solely for informational purposes for the convenience of the parties and (iii) the disclosure by Seller of any matter in the Disclosure Schedules shall not be deemed to constitute an acknowledgment by Seller that the matter is required to be disclosed by the terms of this Agreement or that the matter is material.  The specification of any dollar amount in the representations and warranties contained in the Agreement or the inclusion of any specific item in the Disclosure Schedules are not intended to imply that such amounts are within or outside the ordinary course of business for purposes of the Agreement.

 

(b)                                 If and to the extent any information required to be furnished in any section of the Disclosure Schedules is contained in the Agreement or in any section of the Disclosure Schedules, such information shall be deemed to be included in all sections of the Disclosure Schedules to the extent that the relevance of any such information to any other section of the Disclosure Schedules is readily apparent from the text of such disclosure.

 

(c)                                  Seller has disclosed the information contained in the Disclosure Schedules solely for purposes of the Agreement, and no information contained therein shall be

 

58

 

deemed to be an admission by any party thereto to any third party of any matter whatsoever, including of any violation of Law or breach of any agreement.

 

[SIGNATURE PAGES FOLLOW]

 

59

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

	
 
    	
BUYER
    
	
 
    	
 
    
	
 
    	
 
    	
SINCLAIR TELEVISION GROUP, INC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name: David Amy
    
	
 
    	
 
    	
 
    	
Title: Executive Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
SELLER
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
FOUR POINTS MEDIA GROUP OF WEST PALM BEACH, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
FOUR POINTS MEDIA GROUP OF SALT LAKE CITY, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
FOUR POINTS MEDIA GROUP OF PROVIDENCE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    

 

63

 

	
 
    	
FOUR POINTS MEDIA GROUP OF AUSTIN, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
FOUR POINTS MEDIA GROUP SERVICES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
WPB TV LICENSEE CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SLC TV LICENSEE CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PROVIDENCE TV LICENSEE CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
AUSTIN TV LICENSEE CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

64

 

	
 
    	
FOUR POINTS MEDIA GROUP LLC (solely with respect   to Article XII):
    
	
 
    	
 
    
	
 
    	
FOUR POINTS MEDIA GROUP LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

65Exhibit 10.1

 

Stock Option Agreement

Under

The Estée Lauder Companies Inc.

Amended and Restated Fiscal 2002 Share Incentive Plan (the “Plan”)

 

This STOCK OPTION AGREEMENT (the “Agreement”) provides for the granting of options by The Estée Lauder Companies Inc., a Delaware corporation (the “Company”), to the participant, an employee of the Company or one of its subsidiaries (the “Employee” or the “Participant”), to purchase shares of the Company’s Class A Common Stock, par value $0.01 (the “Shares”), subject to the terms below (the “Stock Options” or “Options”).  The name of the “Participant,” the “Award Date,” the aggregate number of Shares that may be purchased pursuant to this Agreement, and the “Award Price” (which is the “Exercise Price”) per Share are stated in the “Notice of Grant” attached or posted electronically together with this Agreement and are incorporated by reference.  The other terms of the Options are stated in this Agreement and in the Plan.  Terms not defined in this Agreement are defined in the Plan, as amended.  The Plan is referred to as the “Grant Plan” in the electronic Notice of Grant.

 

The Stock Options described in this Agreement are granted pursuant to the Company’s Amended and Restated Fiscal 2002 Share Incentive Plan, as may be amended from time to time (the “Plan”), and are subject in all respects to the provisions of the Plan.  The Stock Options granted under this Agreement are not Incentive Stock Options (as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended (the “Code”)).

 

1.  Payment of Exercise Price.  The Company will provide and communicate to the Employee various methods of exercise.  In all cases, upon exercise, the Employee must deliver or cause to be delivered to the Company (or its agent designated for the purpose) upon settlement of the exercise sufficient cash or sufficient number of Shares with value equal to or exceeding the Exercise Price per Share.  The Employee also is required to deliver or cause to be delivered sufficient cash to cover the applicable tax withholding in accordance with Section 5 of this Agreement and fees in connection with the exercise.  To facilitate exercise, the Company may enter into agreements for coordinated procedures with one or more brokerage firms or financial institutions.

 

2.   Exercise Period.

 

a.  General.  Subject to other provisions contained in this Agreement and in the Plan, Stock Options granted under this Agreement will be exercisable in installments as specified under “Exercise Period” in the “Notice of Grant”.

 

Stock Options awarded under this Agreement are exercisable until the close of business on the tenth anniversary of the Award Date; after this date, the Stock Options expire.

 

b.  Death or Disability.  If the Employee dies or becomes totally and permanently disabled (as determined under the Company’s long term disability program), each Stock Option awarded but not yet exercisable as of the Employee’s date of death or disability determination will become immediately exercisable.  The period during which the Stock Option may be exercised will commence on the day after the Employee’s date of death or disability determination and end on the earlier of the close of business on the date of (i) the first anniversary of the Employee’s death or disability determination or (ii) the tenth anniversary of the Award Date.

 

c.  Retirement.  Subject to Section 3, if the Employee formally retires under the terms of the Estée Lauder Inc. Retirement Growth Account Plan (or an affiliate or a successor plan or program of similar purpose), each Stock Option awarded but not yet exercisable as of the date of retirement will become immediately exercisable. Each Stock Option awarded may thereafter be exercised until the close of business on the date of the tenth anniversary of the Award Date.  If the Employee dies during active employment after the attainment of age 55 and the completion of 10 or more years of service, or after the attainment of age 65 and the completion of 5 or more years of service, without formally retiring under the terms of the Estée Lauder Inc. Retirement Growth Account Plan (or an affiliate or a successor plan or

 

 

program of similar purpose), the Employee will have deemed to be retired as of the date of death and this Section 2(c) will apply rather than Section 2(b).  If the Employee dies or becomes disabled after retirement as contemplated by this Section 2(c), the provisions of this section shall apply.

 

d.  Other Termination of Employment.

 

(1) Subject to Section 3, if the Employee terminates voluntarily, each Stock Option exercisable but unexercised as of the effective date of such termination may be exercised until the close of business on the date first to occur of (i) ninety (90) days after the effective date of such termination and (ii) the tenth anniversary of the Award Date.  Each Stock Option awarded but unexercisable as of the date of such termination will be forfeited.

 

(2) Subject to Section 3, if the Employee is terminated at the instance of the Company or relevant subsidiary without Cause (as defined below) or by the Employee for Good Reason (as defined below) after a Change in Control, each Stock Option awarded but unexercisable as of the date of termination will become immediately exercisable.  Each Stock Option awarded may be exercised until the close of business on the date first to occur of (i) ninety (90) days after the effective date of such termination and (ii) the tenth anniversary of the Award Date.  For this purpose, “Cause” is defined in the employment agreement in effect between the Employee and the Company or any subsidiary, including an employment agreement entered into after the Award Date.  In the absence of an employment agreement, “Cause” means any breach by the Employee of any of his or her material obligations under any Company policy or procedure, including, without limitation, the Code of Corporate Conduct and the Policy on Avoidance of Insider Trading.

 

(3) Subject to Section 3, if the Employee terminates for Good Reason (as defined below) on or following a Change in Control, each Stock Option awarded but unexercisable as of the date of termination will become immediately exercisable.  Each Stock Option awarded may be exercised until the close of business on the date first to occur of (i) ninety (90) days after the effective date of such termination and (ii) the tenth anniversary of the Award Date.  “Good Reason” means the occurrence of any of the following, without the express written consent of the Participant, within three (3) years after the occurrence of a Change in Control:

 

(a)           (i) the assignment to the Participant of any duties inconsistent in any material adverse respect with the Participant’s position, authority or responsibilities immediately prior to the Change in Control, or (ii) any other material adverse change in such position, including title, authority or responsibilities;

 

(b)           any failure by the Company to pay any amounts for compensation or benefits owed to the Participant or a material reduction of the overall amounts of compensation and benefits in effect prior to the Change in Control, other than an insubstantial or inadvertent failure remedied by the Company promptly after receipt of notice thereof given by the Participant;

 

(c)           the Company’s requiring the Participant to be based at any office or location more than fifty (50) miles from that location at which he performed his or her services for the Company immediately prior to the Change in Control, except for travel reasonably required in the performance of the Participant’s responsibilities; or

 

(d)           any failure by the Company to obtain the assumption and agreement to perform this Agreement by a successor, unless such assumption occurs by operation of law.

 

(4) In the event of termination for Cause, all outstanding Stock Options held by the Employee are forfeited.

 

3.  Post-Employment Exercises.  No Stock Option represented by this Agreement may be exercised after termination of the Employee’s employment with the Company (or any of its subsidiaries) unless as provided for in Section 2b, 2c or 2d hereof.  The exercise of any Stock Option after termination of

 

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the Employee’s employment by reason of retirement in accordance with Section 2c, or due to termination by the Employee or termination by the Company or relevant subsidiary without Cause in accordance with Section 2d, is subject to satisfaction of the conditions precedent that the Employee neither (i) competes with, takes other employment with, or renders services to a competitor of the Company, its subsidiaries, or affiliates without the Company’s written consent, nor (ii) conducts herself or himself in a manner adversely affecting the Company.  All Stock Options that cannot be exercised after termination of the Employee’s employment will be forfeited.

 

4.  Change in Control.  Upon a Change in Control during the Exercise Period, each unexercisable Stock Option will vest and become exercisable by the Participant in accordance with the Plan and this Agreement, unless the unexercisable Stock Option is assumed by an acquirer in which case the provisions of Section 2 shall continue to apply.  If an unexercisable Stock Option is not assumed by the acquirer and the Shares cease to be outstanding immediately after the Change in Control (e.g., due to a merger with and into another entity), then the consideration to be received per Share upon exercise of the Stock Option will equal the consideration paid to each stockholder per Share generally upon the Change in Control.  If the exercise price of the Stock Option is equal to or greater than the consideration paid to each stockholder per Share generally upon the Change in Control and the Stock Option is not assumed, then the Stock Options shall expire upon the Change in Control.

 

5.  Withholding.  Regardless of any action the Company or the Participant’s employer (the “Employer”) takes with respect to any or all income tax, social security, payroll tax, or other tax-related withholding (“Tax-Related Items”), Participant acknowledges that the ultimate liability for all Tax-Related Items legally due by Participant is and remains his or her responsibility.  Furthermore, Participant acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Stock Options, including the grant of the Stock Options, the exercise of the Stock Options, the subsequent sale of Shares acquired under the Plan and the receipt of any dividends; and (ii) do not commit to structure the terms of the grant of the Stock Options or any aspect of Participant’s participation in the Plan to reduce or eliminate his or her liability for Tax-Related Items.

 

Prior to the relevant taxable event, Participant shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all withholding obligations of the Company and/or the Employer.  In this regard, Participant authorizes the Company and/or the Employer to withhold all applicable Tax-Related Items legally payable by Participant from his or her wages or other cash compensation paid by the Company and/or the Employer or from proceeds of the sale of the Shares acquired under the Plan.  Alternatively, or in addition, the Company may (i) sell or arrange for the sale of Shares that Participant acquires under the Plan to meet the withholding obligation for the Tax-Related Items, and/or (ii) withhold in Shares, provided that the Company only withholds the amount of Shares necessary to satisfy the minimum withholding amount.  If the Company satisfies the Tax-Related Item withholding obligation by withholding a number of Shares as described herein, Participant will be deemed to have been issued the full number of Shares due to Participant at exercise, notwithstanding that a number of the Shares is held back solely for purposes of such Tax-Related Items.

 

Finally, Participant shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of his or her participation in the Plan that cannot be satisfied by the means previously described.  The Company may refuse to issue Shares under the Plan and refuse to deliver the Shares if Participant fails to comply with his or her obligations in connection with the Tax-Related Items as described in this Section.

 

6.   Transferability. Stock Options granted under this Agreement may be transferred under laws of descent and distribution or, during Employee’s lifetime, solely to the Employee’s spouse, siblings, parents, children and grandchildren or trusts for the benefits of such persons, or partnerships, corporations, limited liability companies, or other entities owned solely by such persons, including trusts for such persons.  Any transfer of Stock Options will have no effect until written notice (providing sufficient details relating to the proposed transfer, as required by the Company at that time) is received and confirmed by the Company.  The Employee will remain liable for all obligations of Employee and his or her transferee or

 

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transferees.  Each transferee will also be subject to the Employee’s obligations under this Agreement relating to the Stock Options transferred to him or her.

 

7.  Limitations.  The Employee’s right to continue to serve the Company or any of its subsidiaries as an officer, employee, or otherwise, is not enlarged or otherwise affected by an award under this Agreement.  Nothing in this Agreement or the Plan gives the Employee any right to continue in the employ of the Company or any of its subsidiaries or to interfere in any way with the right of the Company or any subsidiary to terminate his or her employment at any time.  Stock Options are not secured by a trust, insurance contract or other funding medium, and the Employee does not have any interest in any fund or specific asset of the Company by reason of this award or the account established on his or her behalf.  A Stock Option award confers no rights as a shareholder of the Company until Shares are actually delivered to the Employee.

 

8.  Specific Restrictions Upon Option Shares.  The Employee and the Company agree to each of the following:

 

a.  The Employee will acquire Shares hereunder for investment purposes only and not with a view to reselling or otherwise distributing  the Shares to the public in violation of the United States Securities Act of 1933, as amended (the “1933 Act”), and will not dispose of any such Shares in transactions which, in the opinion of counsel to the Company, violate the 1933 Act or the rules and regulations thereunder, or any applicable state or national securities or “blue sky” laws.

 

b.  If any Shares are registered under the 1933 Act, no public offering (other than on a national securities exchange, as defined in the United States Securities Exchange Act of 1934, as amended) of any Shares acquired under this Agreement will be made by the Employee (or any other person) under circumstances where he or she (or such person) may be deemed an underwriter, as defined in the 1933 Act.

 

c.  The Employee agrees that the Company has the authority to endorse upon the certificate or certificates representing the Shares acquired under this Agreement any legends referring to the restrictions described under this Section 8 and any other application restrictions, as the Company may deem appropriate.

 

9.  Notices.  Any notice required or permitted under this Agreement is deemed to have been duly given if delivered, telecopied, mailed (certified or registered mail, return receipt requested) or sent by internationally-recognized courier guaranteeing next day delivery (a) to the Employee at the address on file in the Company’s (or relevant subsidiary’s) personnel records, or (b) to the Company, attention Stock Plan Administration at its principal executive offices, which are currently located at 767 Fifth Avenue, New York, NY 10153.

 

10.  Disclosure and Use of Information.

 

a.   By acknowledging and agreeing to or signing and returning the attached Notice of Grant, and as a condition of the grant of the Stock Options, the Employee hereby expressly and unambiguously consents to the collection, use, and transfer of personal data, including sensitive data, as described in this Section by and among, as necessary and applicable, the Employer, the Company and its subsidiaries and by any agent of the Company or its subsidiaries for the exclusive purpose of implementing, administering and managing Employee’s participation in the Plan.

 

b.   The Employee understands that the Employer, the Company and/or its other  subsidiaries holds, by means of an automated data file or otherwise, certain personal information about the Employee, including, but not limited to, name, home address and telephone number, date of birth, social insurance number, salary, nationality, job title, any shares or directorships held in the Company, details of all Stock Options or other entitlement to shares awarded, canceled, exercised, vested, unvested, or outstanding in the Employee’s favor, for purposes of managing and administering the Plan (“Data”).

 

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c.   The Employee also understands that part or all of his or her Data may be held by the Company or its subsidiaries in connection with managing and administering previous award or incentive plans, pursuant to a prior transfer made with the Employee’s consent in respect of any previous grant of stock options or other awards.

 

d.   The Employee further understands that the Employer may transfer Data to the Company or its subsidiaries as necessary to implement, administer, and manage his or her participation in the Plan.  The Company and its subsidiaries may transfer data among themselves, and each, in turn, may further transfer Data to any third parties assisting the Company in the implementation, administration, and management of the Plan (“Data Recipients”).

 

e.   The Employee understands that the Company, its subsidiaries, and the Data Recipients are or may be located in his or her country of residence, the United States or elsewhere. The Employee authorizes the Employer, the Company, its subsidiaries, and such Data Recipients to receive, possess, use, retain, and transfer Data in electronic or other form, to implement, administer, and manage his or her participation in the Plan, including any transfer of Data that the Administrator deems appropriate for the administration of the Plan and any transfer of Shares on his or her behalf to a broker or third party with whom the Shares may be deposited.

 

f.    The Employee understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative.

 

g.   The Employee understands that Data will be held as long as is reasonably necessary to implement, administer and manage his or her participation in the Plan and he or she may oppose the processing and transfer of his or her Data and may, at any time, review the Data, request that any necessary amendments be made to it, or withdraw his or her consent by notifying the Company in writing. The Employee further understands that withdrawing consent may affect his or her ability to participate in the Plan.

 

11.  Discretionary Nature and Acceptance of Award.  By accepting this Award, the Employee agrees to be bound by the terms of this Agreement and acknowledges that:

 

a.     The Plan is established voluntarily by the Company, it is discretionary in nature, and it may be modified, amended, suspended, or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement.

 

b.     The award of the Stock Options is voluntary and occasional, and does not create any contractual or other right to receive future grants of Stock Options, or benefits in lieu of Stock Options, even if Stock Options have been granted repeatedly in the past;

 

c.     All decisions with respect to future Stock Option grants, if any, will be at the sole discretion of the Company;

 

d.     Employee’s participation in the Plan is voluntary;

 

e.     Employee’s participation in the Plan shall not create a right to further employment with the Employer and shall not interfere with the ability of the Company or the Employer to terminate Employee’s employment at any time;

 

f.    The Stock Option is an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or any subsidiary, and which is outside the scope of Participant’s employment or service contract, if any;

 

g.   The Stock Option is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end

 

5

 

of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or any subsidiary;

 

h.   In the event the Participant is not an Employee of the Company, the Stock Option and Participant’s participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Company; and furthermore, the Stock Option and Participant’s participation in the Plan will not be interpreted to form an employment or service contract with any subsidiary of the Company;

 

i.    The future value of the Shares is unknown and cannot be predicted with certainty;

 

j.    If the Shares decrease in value, the Stock Option will have no value;

 

k.   If Participant exercises the Stock Option and obtains Shares, the value of the Shares obtained upon exercise may increase or decrease in value, even below the Exercise Price;

 

l.    In consideration of the award of the Stock Option, no claim or entitlement to compensation or damages shall arise from termination of the Stock Option or diminution in value of the Stock Option, or Shares purchased through exercise of the Stock Option, resulting from termination of Participant’s employment by the Company or any subsidiary (for any reason whatsoever and whether or not in breach of local labor laws) and in consideration of the grant of the Stock Option, Participant irrevocably releases the Company and any subsidiary from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by acknowledging and agreeing to or signing the Notice of Grant, Participant shall be deemed irrevocably to have waived his or her right to pursue or seek remedy for any such claim or entitlement;

 

m.  In the event of termination of Participant’s employment (whether or not in breach of local labor laws), Participant’s right to receive Stock Options under the Plan and to vest in such Stock Options, if any, will terminate effective as of the date that Participant is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of termination of  Participant’s employment (whether or not in breach of local labor laws), Participant’s right to exercise the Stock Options after termination of employment, if any, will be measured by the date of termination of active employment and will not be extended by any notice period mandated under local law; the Administrator shall have the exclusive discretion to determine when Participant is no longer actively employed for purposes of this Agreement;

 

n.   The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan or Participant’s acquisition or sale of the underlying Shares; and

 

o.   Participant is hereby advised to consult with Participant’s own personal tax, legal and financial advisors regarding Participant’s participation in the Plan before taking any action related to the Plan.

 

12.  Failure to Enforce Not a Waiver.  The Company’s failure to enforce at any time any provision of this Agreement does not constitute a waiver of that provision or of any other provision of this Agreement.

 

13.  Governing Law.  This Agreement is governed by and is to be construed according to the laws of the State of New York that apply to agreements made and performed in that state, without regard to its choice of law provisions.  For purposes of litigating any dispute that arises under this Stock Option or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of New York, and agree that such litigation will be conducted in the courts of New York County, New York, or the federal courts

 

6

 

for the United States for the Southern District of New York, and no other courts, where this Stock Option is made and/or to be performed.

 

14.  Partial Invalidity.  The invalidity or illegality of any provision of this Agreement will be deemed not to affect the validity of any other provision.

 

15.  Section 409A.  The Stock Options are intended to be exempt from Code Section 409A.  The Company reserves the unilateral right to amend this Agreement upon written notice to the Participant to prevent taxation under Code Section 409A.

 

16.  Electronic Delivery.  The Company may, in its sole discretion, decide to deliver any documents related to Stock Options awarded under the Plan or future Stock Options that may be awarded under the Plan by electronic means or request Employee’s consent to participate in the Plan by electronic means.  Employee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.

 

	
 
    	
The   Estée Lauder Companies Inc.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Amy   DiGeso
    
	
 
    	
 
    	
Executive   Vice President,
    
	
 
    	
 
    	
Global   Human Resources
    

 

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This is to confirm that, upon the recommendation of your management, you were awarded options to purchase shares of Class A Common Stock of The Estée Lauder Companies Inc. (the “Shares”) at the most recent meeting of the Stock Plan Subcommittee of the Compensation Committee of the Board of Directors.  This award was made in recognition of the significant contributions you have made as a key employee of the Company, and to motivate you to achieve future successes by aligning your interests more closely with those of our stockholders.  These options are granted under and governed by the terms and conditions of the Plan and the Stock Option Agreement (the “Agreement”) made part hereof.  The Agreement and Summary Plan Description are being sent to you in a separate email.  Please read these documents and keep them for future reference.  The specific terms of your award are as follows:

 

Participant:

 

Employee Number:

 

	
Grant Date:
    	
September 1, 2011
    
	
 
    	
 
    
	
Type of Award:
    	
Non-Qualified Stock Options
    
	
 
    	
 
    
	
Exercise   Price per Share:
    	
$98.17 (Closing trading price on NYSE of the Class A Common Stock on the   date of grant)
    

 

Aggregate number of Shares subject to your options:

 

	
Exercise   Period:
    	
Your options shall become exercisable on the following   dates (or upon death, disability, retirement, or involuntary termination of   employment if these occurrences are earlier), but are subject to termination   or forfeiture as per Paragraphs 2 and 3 of the Agreement:
    

 

	
Number of Shares
    	
 
    	
Date Exercisable
    	
 
    	
Expiration Date
    
	
 
    	
 
    	
January 1, 2013
    	
 
    	
September 1, 2021
    
	
 
    	
 
    	
January 1, 2014
    	
 
    	
September 1, 2021
    
	
 
    	
 
    	
January 1, 2015
    	
 
    	
September 1, 2021
    

 

Questions regarding the stock option program can be directed to Thomas Fellenbaum at (212) 572-3705 or Patricia Zakrzewski at (973) 492-3609.

 

If you wish to accept this grant, please sign this Notice of Grant and return immediately to:

 

Compensation Department

767 Fifth Avenue, 43rd Floor

New York, New York 10153

Attention: Thomas Fellenbaum

 

The undersigned hereby accepts, and agrees to, all terms and provisions of the Agreement, including those contained in this Notice of Grant.

 

 

	
By
    	
 
    	
 
    	
Date
    	
 
    

 

Enclosure:  Share Incentive Plan Overview

 

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