Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 33-9443
OUTLET BROADCASTING, INC.
(Exact name of registrant as specified in its charter)
Rhode Island 05-0194550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 Kenney Drive 02920
Cranston, Rhode Island (Zip Code)
(Address of principal executive offices)
(401) 455-9200
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock June 30, 1994
- - --------------------- ---------------
Class A Common Stock, par value $.01 per share 1,000,000 shares
OUTLET BROADCASTING, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets --
June 30, 1994 and December 31, 1993
Condensed Consolidated Statements of Operations --
Three Months and Six Months Ended
June 30, 1994 and June 30, 1993
Condensed Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1994 and
June 30, 1993
Notes to Condensed Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis
Part II. Other Information
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I. FINANCIAL INFORMATION
OUTLET BROADCASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1993 1994
------------ ------------
(Note) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,756,000 $ 2,859,000
Trade accounts receivable, less allowance
for doubtful accounts (December--$300,000;
June--$347,000) 10,840,000 11,964,000
Film contract rights 3,769,000 2,331,000
Other current assets 793,000 842,000
------------ ------------
TOTAL CURRENT ASSETS 17,158,000 17,996,000
OTHER ASSETS
Film contract rights 2,093,000 1,173,000
Deferred financing costs and other 3,385,000 3,295,000
Other investments 315,000
------------ ------------
5,478,000 4,783,000
PROPERTY AND EQUIPMENT 43,797,000 45,138,000
Less accumulated depreciation 25,674,000 27,056,000
------------ ------------
18,123,000 18,082,000
INTANGIBLE ASSETS, less accumulated amortization
(December--$17,544,000; June--$18,754,000) 76,852,000 76,697,000
------------ ------------
$117,611,000 $117,558,000
============ ============
OUTLET BROADCASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS-Continued
December 31, June 30,
1993 1994
------------ ------------
(Note) (Unaudited)
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 153,000 $ 438,000
Accrued expenses 8,894,000 8,839,000
Film contracts payable 4,187,000 3,415,000
Federal and state income taxes 2,200,000 1,976,000
Current portion of long-term debt 3,500,000 4,000,000
------------ ------------
TOTAL CURRENT LIABILITIES 18,934,000 18,668,000
LONG-TERM DEBT
Senior bank loan 19,500,000 17,250,000
10 7/8% Senior Subordinated Notes 60,000,000 60,000,000
------------ ------------
79,500,000 77,250,000
OTHER LIABILITIES
Film contracts payable 2,754,000 916,000
Unfunded pensions 2,652,000 2,717,000
Deferred income taxes 4,554,000 6,383,000
Other 3,432,000 3,432,000
------------ ------------
13,392,000 13,448,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock 10,000 10,000
Contributed capital 32,482,000 32,490,000
Accumulated deficit (26,707,000) (24,308,000)
------------ ------------
5,785,000 8,192,000
------------ ------------
$117,611,000 $117,558,000
============ ============
Note: The balance sheet at December 31, 1993 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See accompanying notes.
<TABLE>
OUTLET BROADCASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1993 1994 1993 1994
<S> <C> <C> <C> <C>
Net revenue $ 12,830,000 $ 14,828,000 $ 22,857,000 $ 26,286,000
Expenses:
Technical, programming and news 4,493,000 4,749,000 8,889,000 9,095,000
Selling, general and administrative 2,331,000 2,784,000 4,563,000 5,059,000
Corporate expenses 541,000 576,000 1,039,000 1,071,000
Depreciation 632,000 694,000 1,264,000 1,382,000
Amortization of intangible assets 590,000 620,000 1,180,000 1,210,000
------------ ------------ ------------ ------------
8,587,000 9,423,000 16,935,000 17,817,000
------------ ------------ ------------ ------------
Operating income 4,243,000 5,405,000 5,922,000 8,469,000
Other income (expense):
Interest expense:
Loan and notes payable (1,384,000) (2,101,000) (2,782,000) (4,199,000)
Note payable to shareholder (1,865,000) (3,723,000)
------------ ------------ ------------ ------------
(3,249,000) (2,101,000) (6,505,000) (4,199,000)
Interest income 70,000 19,000 159,000 29,000
Other income 44,000 62,000 161,000 132,000
Other expense (148,000) (105,000) (254,000) (203,000)
------------ ------------ ------------ ------------
Income (loss) before income taxes and cumulative effect
of change in accounting principle 960,000 3,280,000 (517,000) 4,228,000
Income taxes 88,000 1,438,000 88,000 1,829,000
------------ ------------ ------------ ------------
Income (loss) before cumulative effect of change in
accounting principle 872,000 1,842,000 (605,000) 2,399,000
Cumulative effect of change in method of accounting
for income taxes 4,434,000
------------ ------------ ------------ ------------
Net income $ 872,000 $ 1,842,000 $ 3,829,000 $ 2,399,000
============ ============ ============ ============
Income (loss) per share:
Before cumulative effect of change in
accounting principle $ 0.87 $ 1.84 $ (0.61) $ 2.40
Cumulative effect of change in method of accounting
for income taxes 4.44
------------ ------------ ------------ ------------
Net income per share $ 0.87 $ 1.84 $ 3.83 $ 2.40
============ ============ ============ ============
Weighted average number of
common shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000
============ ============ ============ ============
<FN>
See accompanying notes.
</TABLE>
OUTLET BROADCASTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
---------------------------
June 30, June 30,
1993 1994
------------ ------------
Cash from operations $ 1,717,000 $ 5,559,000
Investing activities:
Capital expenditures-net of disposals (5,407,000) (1,341,000)
Investment in local marketing agreements (1,058,000)
Investment in station acquisition (315,000)
------------ ------------
(5,407,000) (2,714,000)
Financing activities:
Payment of term loan (1,750,000)
Other 8,000
------------ ------------
(1,742,000)
------------ ------------
Net (decrease) increase in cash and
cash equivalents $ (3,690,000) $ 1,103,000
============ ============
See accompanying notes.
OUTLET BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1994
Note 1 - Basis of Presentation
- - -------------------------------
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six month
period ended June 30, 1994 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1994. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1993.
Note 2 - Income (Loss) Per Share
- - ---------------------------------
Income (loss) per share has been computed by dividing net income (loss)
by the weighted average number of shares of common stock outstanding during
the period.
Note 3 - Contingent Liabilities and Commitments
- - ------------------------------------------------
The Company has commitments to acquire approximately $3,261,000 of film
contract rights at June 30, 1994.
At June 30, 1994, the Company remains contingently liable on
approximately $14,288,000 of store leases associated with its retail division
which was sold as of the fiscal year ended January 31, 1983. All of the
leases have been assumed by others and management believes that future
payments, if any, would not be material to the Company's financial statements.
The Company also remains contingently liable on approximately $4,878,000
of building and tower leases related to radio and television stations sold in
March 1990.
The Company may be subject to litigation arising from its normal
business operations. Any liability which may result therefrom, to the extent
not provided by insurance or accruals, would not have a material effect on the
Company's financial position.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OUTLET BROADCASTING, INC. AND SUBSIDIARIES
The Company's owned operations consist of two VHF television stations,
WJAR, which serves the Providence, Rhode Island area and WCMH which serves the
Columbus, Ohio area.
As of the 1994 second quarter, the Company's operations also include an
independent UHF television station, WWHO, Chillicothe, Ohio. Pursuant to a
local marketing agreement entered into with the licensee of WWHO, the Company
serves as a broker for the sale of that station's advertising time and
provides it with certain programming and operating capabilities. In return,
the Company retains a substantial percentage of WWHO's net operating income to
the extent that it exceeds cumulative net operating losses.
Three Months Ended June 30, 1994 and June 30, 1993
The following table sets forth a comparison of total Company operating
results for the second quarters of 1993 and 1994.
Three Months Ended June 30
1993 1994 Increase(Decrease)
Percent Percent 1994 vs. 1993
of Net of Net Percentage
Dollars in thousands Amount Revenue Amount Revenue Amount Change
- - --------------------- ------- ------- ------- -------- ------- ----------
Net revenue $12,830 100.0% $14,828 100.0% $1,998 15.6%
Expenses:
Technical, programming
and news 4,493 35.0 4,749 32.0 256 5.7
Selling, general and
administrative 2,331 18.2 2,784 18.7 453 19.4
Corporate expenses 541 4.2 576 3.9 35 6.5
Depreciation and
amortization 1,222 9.5 1,314 8.9 92 7.5
Operating income $ 4,243 33.1% $ 5,405 36.5% $1,162 27.4%
Net cash provided
by operations (a) $ 3,107 24.2% $ 3,745 25.3% $ 638 20.5%
Operating cash
flow (a) $ 5,465 42.6% $ 6,719 45.3% $1,254 22.9%
(a) "Net cash provided by operations" includes all cash flow (including
working capital changes) other than cash flows associated with investing
or financing activities.
"Operating cash flow" means operating income plus depreciation and
amortization.
Net revenue of $14,828,000 in the second quarter of 1994 increased by
$1,998,000 or 15.6% compared with $12,830,000 in the second quarter of 1993.
The increased revenue was primarily attributable to the combination of
improved economic conditions, a robust television market and strong viewership
of the Company's television stations. As a result, the Company was able to
generate higher advertising rates compared to those of a year ago. The
revenue increase provided by television station WWHO amounted to less than 2%
of the prior year's revenue total.
Revenues were up at both of the Company's owned television stations. In
comparison with the second quarter of 1993, television stations WJAR and WCMH
had revenue gains of 20.4% and 10.3%, respectively. Revenues from local and
national advertising sources, at owned television stations, increased over the
prior year by more than 18% and 10% respectively. However, total network
compensation decreased by 5.3%. The Company's overall revenue improvement
accounted for the second quarter's increase in operating income.
Technical, programming and news expenses in the 1994 second quarter of
$4,749,000 increased by $256,000 or 5.7% from $4,493,000 in the prior year.
The overall increase was caused by the inclusion of operating expenses for
WWHO in the current quarter. Excluding the effect of WWHO, there was a 1%
decrease in technical, programming and news expenses (at the owned stations).
The decrease resulted from a 13.2% reduction in film syndication costs at WCMH
offset, somewhat, by a 8.3% increase in news department expenses at WJAR. The
latter station incurred additional news costs in May during a visit to the
station by President Clinton. At that time, WJAR hosted and telecast a
President Clinton town meeting. As a percent to revenue, technical,
programming and news expenses decreased from 35% in the 1993 second quarter to
32% in the 1994 second quarter.
Selling, general and administrative expenses of $2,784,000 in the second
quarter of 1994 increased by $453,000 or 19.4% versus $2,331,000 in the prior
year period. Of the total increase, WWHO provided $207,000. The balance of
the increase included higher sales commissions payable because of increased
revenue, increased legal fees related to labor negotiations (WJAR) and
litigation (WCMH), increased promotional expenses (WJAR) and added costs for
employee benefits. As a percentage of revenue, selling, general and
administrative expenses increased to 18.7% in the 1994 second quarter from
18.2% a year ago. However, without the effect of WWHO, selling, general and
administrative expenses were at 17.6% of revenue. Corporate expenses
increased in the current quarter due to added costs for payroll and
professional services.
Depreciation expense increased in the current quarter because of an
increased investment in property and equipment attributable to the Company's
April 1993 relocation of WJAR studios and corporate headquarters into a new
facility. Amortization of intangibles increased in 1994 due to the Company's
second quarter investment in television station WWHO.
Total expenses of $9,423,000 in the second quarter of 1994 increased by
$836,000 or 9.7% from $8,587,000 in the prior year period. As a percent to
revenue, total quarterly expenses in 1994 were 63.5%. This was down 3.4% from
the prior year's second quarter, wherein total expenses were at 66.9% of
revenue.
Operating income of $5,405,000 in the 1994 second quarter increased by
$1,162,000 or 27.4% compared to $4,243,000 in the prior year. Operating
income also increased as a percent to revenue, from 33.1% in the second
quarter of 1993 to 36.5% in the second quarter of 1994. The improvement in
operating income was the result of a 15.6% increase in revenue which more than
offset a 9.7% increase in total expenses.
The increased operating income also contributed to the Company's
improvement of $638,000 or 20.5% in net cash provided by operations.
Similarly, operating cash flow of $6,719,000 increased by $1,254,000 or 22.9%
from last year's $5,465,000 and represented 45.3% of revenue compared to 42.6%
of revenue in the prior year.
In the second quarter of 1994, total interest expense of $2,101,000
decreased by $1,148,000 or 35.3% compared to $3,249,000 a year ago. The
decrease resulted from a debt refinancing undertaken in 1993 which served to
reduce the Company's outstanding debt as well as lower the rate of interest on
borrowed funds. As a result of the refinancing, the note payable to
shareholder was repaid in full. Interest income declined because of lower
cash balances maintained during 1994.
In the second quarter of 1994, the ratio of operating cash flow -
$6,719,000, to interest expense - $2,101,000, improved to 3.2 to 1. In the
second quarter of 1993, this ratio was 1.7 to 1.
The Company's 1994 second quarter income before income taxes amounted to
$3,280,000. This was an improvement of $2,320,000 compared to pretax income
in the prior year period of $960,000. After a 1994 second quarter provision
for income taxes of $1,438,000, which increased deferred income taxes payable,
net income was $1,842,000 or $1.84 per share. This was more than double the
prior year's net income of $872,000 or $.87 per share.
Net cash provided by operations in the second quarter of 1994 totalled
$3,745,000. This was an increase of $638,000 compared to net cash provided by
operations of $3,107,000 in the second quarter of 1993. The improvement
primarily represents the beneficial effect of the Company's increased
operating income reduced by $384,000 in cash payments for second quarter
interest installments. There were no cash payments for interest in the prior
year's second quarter. As a result of the 1993 debt refinancing, there was a
reduced liability for accrued interest payable as of June 30, 1994.
The 1994 second quarter saw the Company increase its cash investment in
film contract rights by $1,247,000. This was primarily attributable to the
payment of film contract obligations during the period. After amortization of
film contract rights in the amount of $1,006,000, the increased net investment
during the quarter was $241,000.
Because of the Company's increased volume of business activity,
outstanding trade accounts receivable continued to trend generally higher in
the second quarter of 1994 compared with the same period a year ago.
Six Months Ended June 30, 1994 and June 30, 1993
The following table sets forth a comparison of total Company operating
results for the second quarters of 1993 and 1994.
Six Months Ended June 30
1993 1994 Increase(Decrease)
Percent Percent 1994 vs. 1993
of Net of Net Percentage
Dollars in thousands Amount Revenue Amount Revenue Amount Change
- - -------------------- ------- ------- ------- ------- ------ ----------
Net revenue $22,857 100.0% $26,286 100.0% $3,429 15.0%
Expenses:
Technical, programming
and news 8,889 38.9 9,095 34.6 206 2.3
Selling, general and
administrative 4,563 20.0 5,059 19.2 496 10.9
Corporate expenses 1,039 4.5 1,071 4.1 32 3.1
Depreciation and
amortization 2,444 10.7 2,592 9.9 148 6.1
Operating income $ 5,922 25.9% $ 8,469 32.2% $2,547 43.0
Net cash provided
by operations (a) $ 1,717 7.5% $ 5,559 21.1% $3,842 223.8%
Operating cash
flow (a) $ 8,366 36.6% $11,061 42.1% $2,695 32.2%
(a) "Net cash provided by operations" includes all cash flow (including
working capital changes) other than cash flows associated with investing
or financing activities.
"Operating cash flow" means operating income plus depreciation and
amortization.
For the first half of 1994, net revenue totalled $26,286,000. This was an
increase of $3,429,000 or 15% versus $22,857,000 in the prior year period.
Improved economic conditions and strong viewer ratings continued to contribute
to the increased revenue performance. Both of the Company's television
stations maintained higher unit advertising rates in the first six months of
1994 compared to 1993. The higher rates accounted for most of the increased
revenue.
Television stations WJAR and WCMH had year-to-date revenue gains of 19.2%
and 11.1% respectively. Revenues from local and national advertising sources,
at owned television stations, increased over the prior year by 16.2% and
12.8%, respectively. Network compensation decreased by slightly more than 1%.
The revenue increase provided by television station WWHO amounted to less than
1% of the prior year's revenue total.
Technical, programming and news expenses increased by $206,000 or 2.3% in
the first six months of 1994 compared with the same period a year ago. The
increase resulted from the inclusion of WWHO's expenses in the current year.
Without the effect of WWHO, there was a 1% decrease in technical, programming
and news expenses at the owned stations. The net decrease primarily reflected
a reduction in film syndication costs at WCMH.
In the first six months of 1994, selling, general and administrative
expenses increased by $496,000 or 10.9%. Of the total increase, $207,000
resulted from WWHO. The remainder of the increase primarily reflected higher
sales commissions because of greater revenues, increased legal fees due to
labor negotiations (WJAR) and litigation (WCMH) along with increased
promotional expenses (WJAR).
Depreciation expense increased in the first six months of 1994 because of
increased property additions during 1993 that became subject to a full year of
depreciation in 1994. Amortization expense increased because of a current
year investment in television station WWHO.
Total expenses of $17,817,000 in the first half of 1994 increased by
$882,000 or 5.2% compared to $16,935,000 in the same prior year period.
However, as a percent to revenue, total expenses for the 1994 year-to-date
were reduced to 67.8% from 74.1% in the first half of 1993.
The Company's operating income for the first half of 1994 of $8,469,000
increased by $2,547,000 or 43% when compared with operating income of
$5,922,000 in the first half of 1993. The improvement in operating income
resulted from the combined effect of a 15% increase in revenues reduced by a
5.2% increase in total expenses.
In comparison with the prior year, the current year's interest expense
decreased by $2,306,000 due to the effect of a debt refinancing that occurred
in 1993. Because of reduced cash balances and lower market interest rates,
interest income in 1994 declined from that of the prior year.
In the first half of 1994, the ratio of operating cash flow - $11,061,000,
to interest expense - $4,199,000, was 2.6 to 1. In the first half of 1993,
this ratio was 1.3 to 1.
The Company's 1994 first half income before income taxes amounted to
$4,228,000. This was an improvement of $4,745,000 compared to a loss in the
prior year period of $517,000. After a 1994 first half provision for income
taxes of $1,829,000, which increased deferred income taxes payable, net income
was $2,399,000 or $2.40 per share. This compares with a 1993 loss, before
cumulative effect of change in accounting principle, of $605,000 or $(.61) per
share.
Effective January 1, 1993, the Company adopted Financial Accounting
Standards Board (FASB) Statement No. 109, "Accounting for Income Taxes", which
requires a change to the liability method of accounting for deferred income
taxes. Adoption of Statement 109 resulted in a cumulative effect of change in
accounting principle, in the amount of $4,434,000 or $4.44 per share,
representing the recognition of previously unrecognized tax benefits. After
giving effect to the change in accounting principle, the 1993 first half net
income amounted to $3,829,000 or $3.83 per share.
Net cash provided by operations in the first six months of 1994 totalled
$5,559,000. This was an improvement of $3,842,000 or 223.8% compared to net
cash provided by operations of $1,717,000 in the first six months of 1993.
The improvement primarily represents the beneficial effect of the Company's
increased operating income and decreased interest expense. As a result of the
1993 debt refinancing, cash paid for 1994 first half interest installments was
reduced to $4,041,000 from $6,050,000 in the prior year period.
During the first six months of 1994, the Company increased its cash
investment in film contract rights by $2,688,000, primarily by making payment
of film contract obligations. After giving effect to the period's
amortization of film contract rights in the amount of $2,436,000, the
increased net investment in film contract rights was $252,000. This compares
with a cash investment in film contract rights of $2,654,000 during the first
half of 1993 and a net increased investment in film contract rights of
$115,000 for that period.
The Company's increased volume of business activity resulted in a higher
level of outstanding trade accounts receivable which, in the first half of
1994, increased by $1,124,000. In the first six months of the prior year,
there was an increase in trade accounts receivable of $809,000. The Company
increased its outstanding trade accounts payable by $285,000 in the first six
months of 1994 versus an increase of $133,000 in the first six months of 1993.
Cash required by investing activities totalled $2,714,000 in the first six
months of 1994. This included capital expenditures of $1,341,000 and an
investment of $1,055,000 pursuant to a local marketing agreement entered into
with the licensee of television station WWHO. Under the agreement, television
station WCMH will function as broker of the programming and commercial time
available on WWHO. In return, WCMH is allowed to recover its aggregate
capital expenditure investment in WWHO from operating profits of WWHO and
will share any remaining net operating profits with that station's licensee.
During 1994, the Company expects to incur capital expenditures totalling
approximately $750,000 in connection with WWHO, of which $708,000 has been
spent thru June.
Investing activities also include a deposit payment of $315,000 made in
connection with the Company's agreement to purchase television station WYED,
Goldsboro, North Carolina. WYED is an independent television station serving
the Raleigh-Durham-Goldsboro market area. This acquisition closed in August
1994 at a total purchase cost of $5,372,500. Funds for the purchase were
available to the Company from internal operations. The Company expects to
incur additional capital expenditures during 1994 of approximately $900,000
for this station.
The Company anticipates that it will finance the capital expenditure
requirements for WWHO and WYED from internally generated funds from operations
along with amounts available under its revolving credit facility with a bank.
In this connection, and for added flexibility, the Company may seek to
increase the limit of its revolving credit facility from $5,000,000 to
$10,000,000.
In 1993, cash required by investing activities totalled $5,407,000. This
included $4,668,000 for construction of new corporate headquarters and WJAR
broadcast studios.
Cash used by financing activities in the first half of 1994 amounted to
$1,742,000. This included payment of required quarterly installments
totalling $1,750,000 due on a term loan with the Company's senior bank lender.
In the first six months of 1994, the Company was able to fund cash used by
both investing and financing activities from cash provided by operations.
Because of the significant improvement in cash provided by operations, the
Company was yet further able to increase its cash on hand by $1,103,000.
As a result of the improved operations, the Company reduced its excess of
current liabilities over current assets during the period by $1,104,000. This
occurred notwithstanding that there was an increase of $500,000 in current
portion of long-term debt.
The ratio of current assets to current liabilities improved from .9 to 1
at December 31, 1993 to .96 to 1 at June 30, 1994. The Company is benefitting
from improved operating results and a reduced annual requirement for interest
expense. It is expected that continuation of this favorable trend, combined
with amounts currently available under the revolving credit facility
($5,000,000), will provide adequate liquidity for the Company to meet its
ongoing operating and capital expenditure needs.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- - ---------------------------
There are no pending legal proceedings or actions against the Company or
its subsidiaries which would have a material effect on the business or
financial condition of the Company except for the legal proceedings and
contingent lease and film obligations as described in Note 3 to the
consolidated condensed financial statements on page 7 of this report.
Item 5. Other Information
- - ---------------------------
On August 10, 1994 the Company purchased the assets and broadcast
license of television station WYED from Group H Broadcasting Corp. and George
G. Beasley for an aggregate price of $5,372,500. WYED is an independent UHF
television station licensed to Goldsboro, North Carolina and broadcasts in the
Raleigh-Durham (Fayetteville, Goldsboro and Rocky Mount), North Carolina
market area. Funds for the acquisition were provided by internal operations.
On July 28, 1994 the Company and NBC reached an understanding as to the
amounts to be provided by NBC to the Company for network compensation and
promotion grants, effective September 1, 1994, for a period of six years. The
terms of the understanding are to be embodied in a formalized network
affiliation agreement to become effective as of the September 1, 1994 date.
Item 6. Exhibits and Reports on Form 8-K
- - ------------------------------------------
(a) Exhibits
10. Asset Purchase Agreement between Group H Broadcasting Corp.
and Outlet Broadcasting, Inc. dated May 2, 1994
(b) Reports on Form 8-K -- None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTLET BROADCASTING, INC.
(Registrant)
Date August 12, 1994 /s/ James G. Babb
James G. Babb
Chairman of the Board,
President and
Chief Executive Officer
Date August 12, 1994 /s/ Felix W. Oziemblewski
Felix W. Oziemblewski
Vice President-
Chief Financial Officer
ASSET PURCHASE AGREEMENT
Between
Group H Broadcasting Corp.
and
Outlet Broadcasting, Inc.
Dated May 2, 1994
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into this
2nd day of May, 1994, by and among Group H Broadcasting Corp., a
South Carolina corporation ("Seller"); and Outlet Broadcasting,
Inc., a Rhode Island corporation ("Buyer"); and for purposes of
Sections 6.19 and 22 Beasley Broadcasting Management Corporation,
a North Carolina corporation and an affiliate of Seller ("BBMC").
W I T N E S S E T H :
WHEREAS, Seller is the licensee of television broadcast
station WYED(TV), Goldsboro, North Carolina ("Station");
WHEREAS, Buyer desires to acquire and Seller desires to sell
to Buyer all of the personal property used or intended to be used
in the operation of Station and to secure an assignment of
certain of Station's contracts, leases and agreements as well as
the licenses and other authorizations issued by the Federal
Communications Commission ("FCC" or "Commission") for the
operation of Station ("FCC Licenses");
WHEREAS, the FCC Licenses may not be assigned to Buyer
without the prior written consent of the Commission; and
WHEREAS, Buyer is simultaneously entering into an Agreement
of Purchase and Sale for Real Estate ("Real Estate Agreement")
with the president of Seller, pursuant to which Buyer will
1
acquire certain real property, including studios, used by the
Station (the "Real Property").
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein included, the parties intending to be legally
bound agree as follows:
1. Definitions. Unless otherwise stated in this Agreement,
the following terms shall have the following meanings:
1.1. "Assignment Application" refers to the application
that Seller and Buyer will join in and file with the Commission
requesting its unconditional written consent to the assignment of
the FCC Licenses from Seller to Buyer;
1.2. "Closing Date" means 10:00 a.m. on the tenth
(10th) business day following the date that the Commission's
consent to the grant of the Assignment Application has become a
Final Order, or such other time as the parties mutually may agree
to in writing;
1.3. "Closing Place" means the offices of Horack,
Talley, Pharr, and Lowndes, P.A., in Charlotte, North Carolina,
or such other place as the parties may mutually agree to in
writing;
1.4. "Escrow Agent" means Russell J. Schwartz, Esquire,
of Horack, Talley, Pharr and Lowndes;
1.5. "Escrow Agreement" means an escrow agreement in
the form of Appendix A attached hereto executed by Seller, Buyer
2
and Escrow Agent simultaneously with the execution of this
Agreement;
1.6. "Final Order" means action by the Commission
granting its consent and approval to the Assignment Application,
which action is not reversed, stayed, enjoined or set aside, and
with respect to which no timely requests for stay,
reconsideration, review, rehearing or a notice of appeal is
pending, and as to which the time for filing any such request,
petition or notice of appeal or for review by the FCC on its
motion has expired;
1.7. "Noncompetition Agreement" means a noncompetition
agreement in the form of Appendix B attached hereto executed by
Buyer and George G. Beasley on the Closing Date; and
1.8. "Schedule Volume" refers to the schedules
referenced in Articles 6 and 7 of this Agreement.
2. Assets To Be Conveyed. Subject to the terms and upon
satisfaction of the conditions included in this Agreement, on the
Closing Date at the Closing Place, Seller will sell, assign,
convey, transfer and deliver to Buyer by instruments of
conveyance in form reasonably satisfactory to Buyer, and Buyer
shall purchase and accept the assignment of the following:
2.1. The FCC Licenses as listed in Appendix C attached
hereto, including all of Seller's right, title and interest in
and to the call letters "WYED";
3
2.2. All of the fixed and tangible personal property,
physical assets and equipment, leasehold improvements, music
formats, music libraries, programs and program production
materials and related assets owned by Seller and used or intended
to be used in the operation of Station including, but not limited
to the assets and equipment listed in Schedule 1 of the Schedule
Volume, together with any replacements thereof or additions
thereto made between the date hereof and the Closing Date, less
any retirements made in the ordinary and usual course of business
("Personal Tangible Assets"), free and clear of all mortgages,
liens, charges, claims, pledges, security interests and other
encumbrances whatsoever except for liens for taxes and other
governmental charges not yet due and payable;
2.3. The contracts, leases and agreements of Seller
relating to the Station which are (a) listed and described in
Schedule 2 or Schedule 3 of the Schedule Volume or existing as of
this date and not required to be so listed and which are in
effect on the Closing Date and (b) entered into between the date
hereof and the Closing Date in the usual and ordinary course of
business as permitted by Section 9.4 or Section 9.5 or which have
been consented to by Buyer in writing, and (c) time sales
agreements in effect on the Closing Date which are for cash at
rates consistent with normal and customary practices of Station
in effect for the periods in question;
4
2.4. The copyrights, trademarks, trade names and
service marks owned by Seller and used or intended to be used in
the operation of Station as listed in Schedule 3 of the Schedule
Volume;
2.5. Such files, records and logs pertaining to the
operation of the Station as Buyer shall reasonably require,
including all contracts, leases and agreements assigned hereunder
but exclusive of the corporate records of Seller; and
2.6. All of Seller's right, title and interest in and
to all intangible assets, goodwill, going concern value and like
items of the Station.
3. Excluded Assets. The assets being sold to Buyer
hereunder do not include (i) cash, deposits, notes receivable,
insurance policies, or accounts receivable of Seller; (ii) any
pension, retirement, profit sharing or savings plans and trusts,
or the assets thereof; or (iii) Seller's corporate name and
corporate records.
4. Liabilities and Contracts. As of the Closing, Buyer
will assume the liabilities under the contracts, agreements and
leases referenced in Section 2.3 arising as of and after the
Closing and Buyer will be solely responsible for all other
liabilities arising from operation of Station as of and after the
Closing. Seller shall be solely responsible for, and there shall
be no assumption by Buyer of, any liabilities of Seller or
Station except as explicitly set forth in this Agreement. It is
5
expressly agreed that Buyer shall not assume any liability for
the following:
4.1. Accounts payable of Seller arising from pre-
Closing operations of the Station and liabilities for money
borrowed by Seller;
4.2. All agreements, executed or executory, relating to
the exchange of time on Station for goods, wares, services,
advertising, promotions, merchandising or anything other than
cash, except those listed and described in Schedule 2 or Schedule
3 and those specifically consented to by Buyer in writing or
permitted by Section 9.4 or Section 9.5 ;
4.3. Frequency discounts, rebates or allowances to
advertisers (or their agencies) to the extent that the same are
based on broadcasting prior to 12:01 a.m. on the Closing Date and
do not reflect an equal rate of compensation to Station
throughout the entire term of the advertising schedule, except
those listed in Schedule 2 or Schedule 3 and those prorated
pursuant to Section 20; and
4.4. Contracts, agreements or leases except those
specified in Section 2.3 above. While Buyer intends to offer
employment to a number of Seller's employees, Buyer shall be
under no obligation to hire any employees of Seller or to assume
or have any liability whatsoever for any employment contract
(other than employment contracts assumed pursuant to Section
2.3), collective bargaining agreement, vacation pay, pension
6
plan, profit sharing plan or any other employee benefits,
programs or plans.
5. Purchase Price and Method of Payment.
5.1. Purchase Price. The aggregate purchase price to
be paid to Seller by Buyer hereunder shall be Four Million Nine
Hundred Thousand Dollars ($4,900,000.00) together with an
Agreement that Buyer or its assignee shall pay Seller an
additional two-thousand five hundred dollars per month commencing
on January 1, 1996 for so long as the Station shall use the site
on which Seller has its transmission tower for the transmission
of the Station's signal. On or before the closing Date, Buyer
and Seller shall enter into a purchase price allocation agreement
in accord with 26 U.S.C. SEC. 1060, and Buyer and Seller agree to
follow such allocation in preparing and filing their respective
income tax returns. The parties shall cooperate in seeking
whatever appraisals shall be necessary to effectuate this
Section.
5.2. Method of Payment. The Purchase Price shall be
paid by Buyer to Seller as follows:
5.2.1. Simultaneously with the execution of this
Agreement, Buyer has deposited the sum of Two Hundred Fifty
Thousand Dollars ($250,000.00) with the Escrow Agent, which sum
shall be held and delivered to Seller at Closing in accordance
with the provisions of the Escrow Agreement;
7
5.2.2. On the Closing Date at the Closing Place,
Buyer shall pay to Seller the sum of Four Million Six Hundred
Fifty Thousand Dollars ($4,650,000.00) by wire transfer of
federal funds.
5.2.3. Buyer shall pay to George Beasley the sum
of $100,000 as required by paragraph 1 of the Non-competition
Agreement attached hereto as Exhibit A.
6. Representations and Warranties of Seller. Seller and,
to the extent of Section 6.19 only, BBMC represent and warrant to
Buyer that:
6.1. Organization and Standing. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the state of South Carolina, and is qualified
to do business in the state of North Carolina; Seller has paid
(or shall pay when due) all corporate franchise and similar fees
imposed by the states of South Carolina and North Carolina that
are currently due. Seller has full corporate power and authority
to own, lease and operate the Personal Tangible Assets and to
carry on the business of the Station as now being conducted and
as proposed to be conducted by it between the date hereof and the
Closing Date;
6.2. Authorization. Seller has full corporate power
and authority to enter into and perform this Agreement and the
transactions contemplated hereby. All necessary corporate action
to duly approve the execution, delivery and performance of this
8
Agreement and the consummation of the transactions contemplated
hereby has been taken by Seller. This Agreement has been duly
executed and delivered by Seller and constitutes a valid and
binding obligation of Seller enforceable in accordance with its
terms;
6.3. FCC Licenses. Seller is the holder of the FCC
Licenses listed in Appendix C. The FCC Licenses constitute all
of the licenses and authorizations required for and/or used in
the operation of Station as now operated, and the FCC Licenses
are in full force and effect and unimpaired by any act or
omission of Seller, or its officers, directors, employees or
agents. There is not now pending, or to the knowledge of Seller
threatened, any action by or before the Commission to revoke,
cancel, rescind, modify or refuse to renew in the ordinary course
any of the FCC Licenses, or any investigation, Order to Show
Cause, Notice of Violation, Notice of Apparent Liability or of
Forfeiture or material complaint against Station or Seller. In
the event of any such action, or the filing or issuance of any
such order, notice or complaint, or knowledge of the threat
thereof, Seller shall notify Buyer of same in writing within two
(2) business days after Seller becomes aware thereof, and shall
take all reasonable measures to contest in good faith, or seek
removal or rescission of such action, order, notice or complaint.
All material reports, forms, and statements required to be filed
by Seller with the FCC with respect to the Station have been
9
filed and are complete and accurate in all material respects.
Station is operating in all material respects in accordance with
the FCC Licenses, and in compliance with the Communications Act
of 1934, as amended, and the rules, regulations, and policies of
the Commission. Seller has paid all FCC user fees, if any, that
are currently due.
6.4. Financial Information. The unaudited financial
statements of Seller for the year ended December 31, 1993, and
furnished by Seller to Buyer in Schedule 4 of Schedule Volume
have been prepared in the usual and ordinary course of business
in accordance with generally accepted accounting principles
applied on a consistent basis subject to the absence of footnotes
and without regard to normal year end audit adjustments not
contained or reflected therein, and fairly present the financial
condition and operations of Station for the periods covered
thereby;
6.5. Personal Property. All material items of Personal
Tangible Assets are listed and described in Schedule 1. Seller
now has good, valid and merchantable title to the Personal
Tangible Assets free and clear of all mortgages, liens, charges,
claims, pledges, security interests and encumbrances whatsoever
("Liens"), other than (i) Liens listed on Schedule 1, and which
will be removed at or prior to Closing ("Interim Liens"), and
(ii) Liens for taxes and other governmental charges that are not
yet due and payable (the Liens described in this clause (ii)
10
being referred to as "Permitted Liens"). Between the date hereof
and the Closing Date, Seller will not remove any of the Personal
Tangible Assets whether or not listed on Schedule 1 from
Station's premises;
6.6. Insurance. All the Personal Tangible Assets are
insured by Seller against fire, windstorm and liability and other
casualties pursuant to the insurance policies listed in Schedule
5. Seller will continue the present insurance in force and
effect up through the Closing Date.
6.7. Condition and Adequacy of Assets. Except as set
forth on Schedule 1, the Personal Tangible Assets are now and on
the Closing Date will be in good operating condition and repair,
reasonable wear and tear in ordinary usage excepted; are
adequate, fit and suitable for the particular purposes for which
they are presently used; are performing satisfactorily; and are
available for immediate use in the conduct of the business and
operations of the Station. All such Personal Tangible Assets and
the state of maintenance thereof is in compliance in all material
respects with the rules and regulations of the FCC and with all
other applicable statutes, ordinances, rules and regulations,
federal, state and local. The assets listed in Schedule 1
include all such assets necessary to conduct in all material
respects the business and operations of the Station as now
conducted;
11
6.8. Litigation. No judgment is issued or outstanding
against Station or Seller. Except for matters affecting the
broadcasting industry generally or listed in Schedule 6 hereto,
no litigation, action, suit, judgment, proceeding or
investigation, is now pending or outstanding before any forum,
court, or governmental body, department or agency of any kind, or
to the knowledge of Seller threatened, to which Seller or the
Station is a party, which might reasonably result in a material
adverse change in the business, prospects or condition of Station
or its assets; which has the stated purpose or the probable
effect of enjoining or preventing the consummation of this
Agreement or the transactions contemplated hereby or to recover
damages by reason thereof; which questions the validity of any
action taken or to be taken pursuant to or in connection with
this Agreement; or which would have an adverse effect upon the
Assignment Application. In the event of the commencement of any
such proceeding against Seller or Station, Seller shall use its
reasonable efforts to seek removal or dismissal thereof;
6.9. Contracts. Except for contracts listed and
described in Schedule 3, Schedule 2 is a true and complete list
of all contracts, agreements, leases and understandings of
Station to be assumed by Buyer hereunder except contracts (i) for
the sale of time on Station which are for cash consistent with
Seller's normal and customary practices or (ii) that do not
involve monetary obligations of Station in excess of $1,000 in
12
any one case or $10,000 in the aggregate or (iii) which are
terminable on thirty (30) days notice or less without penalty or
premium. Except as listed on Schedule 2, and Schedule 3, Station
is not in material default under any of the contracts, leases or
agreements to be assigned to Buyer hereunder, and Seller has no
knowledge of the breach of any material provision of any other
contract, agreement or lease, or any plan, license, insurance
policy or other instrument concerning or affecting the Personal
Tangible Assets or to which any of the Personal Tangible Assets
are subject, a breach of which, or default of which, would have a
material adverse effect on the business and financial condition
of the Personal Tangible Assets of Station. Seller has not
granted, and has not been granted, any material waiver or
forbearance with respect to any of the contracts being assigned
hereunder except as set forth in Schedule 2 and Schedule 3. No
event has occurred which but for the passage of time or giving of
notice or both would or might constitute a material default under
the contracts by the Seller, and there is no outstanding notice
of material default or termination under any contract, lease or
agreement. To the best of Seller's knowledge, no other party is
in material default under any of the contracts, leases or
agreements being assigned hereunder, except as set forth in
Schedule 2 and Schedule 3. Except as set forth in Schedule 2 and
Schedule 3, the contracts, leases and agreements may be assigned
to Buyer in accordance with this Agreement without the consent of
13
the other party thereto. The contracts, leases and agreements
listed in Schedule 2 and Schedule 3, together with those not
required to be listed, include all those necessary to conduct in
all material respects the business and operations of the Station
as now conducted;
6.10. Insolvency. No insolvency proceedings of any
character including without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors,
voluntary or involuntary, relating to Seller or any of its assets
or properties is pending or, to the knowledge of Seller,
threatened. In the event of the commencement of any such
proceeding against Seller or Station, Seller shall use its
reasonable efforts to seek removal or dismissal thereof. Seller
has not taken any action in contemplation of, or which would
constitute the basis for, the institution of any such insolvency
proceedings;
6.11. Taxes and Reports. Seller has filed all federal,
state and local tax returns and state franchise returns which are
required to be filed by Seller, and has paid in full all taxes,
interest, penalties, assessments and deficiencies which have been
assessed or levied against the Station or any of its assets or
properties, except for property taxes of $34,647.30 which shall
be paid in full prior to the Closing Date and any such items that
are being contested in good faith in appropriate proceedings and
which will be resolved and paid in full prior to the Closing
14
Date. All other material federal, state, county and local tax
returns, reports and declarations of estimated tax or estimated
tax deposits forms required to be filed by the Seller in
connection with the Station's operations or payroll have been
filed; Seller has paid all taxes which have become due pursuant
to such returns or pursuant to any assessment received by them,
and has paid all installments of estimated taxes due except for
any such items that are being contested in good faith in
appropriate proceedings and which will be resolved and paid in
full prior to the Closing Date; and all taxes, levies and other
assessments which the Seller is required by law to withhold or to
collect have been duly withheld and collected, and have been paid
over to the proper governmental authorities or held by the Seller
for such payment;
6.12. Personnel. Seller has delivered to Buyer in
Schedule 7 of the Schedule Volume a list of personnel showing the
names of all persons currently on the payroll of Station,
together with a statement of (i) the amount paid or payable to
each such person for such services and the basis therefor; (ii)
the bonus arrangements for all employees; and (iii) any other
material compensation or personnel benefits or policies in
effect. Seller is in material compliance with all federal, state
and local laws respecting employment and employment practices,
terms and conditions of employment, and wages and hours. Except
as disclosed in Schedule 7, there are no claims or complaints
15
pending or, to Seller's best knowledge, threatened against Seller
before any court or governmental agency involving allegedly
unlawful employment practices. Except as disclosed in Schedule 7,
Seller is not now a party to any plans, contracts, programs or
arrangements, including, but not limited to, employment and
pension agreements, stock purchase, stock option, severance,
hospitalization and insurance plans, other employee benefit or
vacation plans, programs or arrangements, collective bargaining
or other employee or labor agreements. There is no labor strike,
or other material employee or labor controversies or disputes
pending (including without limitation any organizational drive)
or, to the best knowledge of Seller, threatened, which may
materially and adversely affect the operations of Station, and
Seller has not consented to any decree involving any claim of
unfair labor practice and has not been held in any judicial
proceeding to have committed any unfair labor practice under the
National Labor Relations Act. Except as indicated in Schedule 7,
no application for recognition as a collective bargaining unit
has been filed with the National Labor Relations Board with
respect to the employees of the Station nor has there been any
concerted union effort to organize employees of the Station.
6.13. Absence of Restrictions. Subject to receipt of the
required consent, if any, of each party to any contract or
agreement to be assumed by Buyer pursuant to Section 2.3 hereof
and the approval of the transfer of the FCC licenses by the FCC,
16
the execution, delivery and performance of this agreement and the
transactions contemplated hereby by Seller do not:
6.13.1. Violate any provisions of law applicable
to Seller or conflict with, result in the termination or breach
of any term, condition or provision of, or constitute a default
under, the articles of incorporation or bylaws of Seller, or of
any contract, lease, agreement or other instrument or condition
by which Seller or Station is bound or to which the property or
assets of Station or Seller are subject, or result in the
creation of any lien, charge, claim, pledge, security interest,
or encumbrance whatsoever upon the property or assets of Station;
6.13.2. Cause or result in the advancement or
acceleration of maturity of any liability of Station, or the
alteration or modification to the detriment of Buyer of the
terms, conditions or provisions of any contract, lease, agreement
or other instrument or condition by which Station is bound or to
which any of the property or assets of Station are subject; or
6.13.3. Either alone or with the giving of notice
or the passage of time or both, conflict with, constitute grounds
for termination of, or result in a breach of the terms,
conditions or provisions of, or constitute a default under any
agreement, instrument, license or permit individually or in the
aggregate material to the transactions contemplated hereby and to
which Seller is now subject.
17
6.14. Disclosure. The representations of Seller set
forth in this Article 6 and Article 7 (including the Schedule
Volume) of this Agreement, and in any certificate or agreement
furnished or to be furnished by Seller pursuant hereto or in
connection with the transactions contemplated hereby do not
include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements included
herein and therein not misleading;
6.15. Compliance with Applicable Laws. Operation of
the Station and all of the Personal Tangible Assets is in
compliance in all material respects with all applicable laws,
ordinances, regulations, rules and orders. Seller has all
requisite corporate power and all necessary permits,
certificates, licenses, approvals, consents and other
governmental authorizations required to carry on and conduct its
business and to own, lease, use and operate Station's properties
at the places and in the manner in which Station's business is
conducted;
6.16. Copyrights, Trademarks and Similar Rights.
Schedule 3 is a true and correct list of all copyrights,
trademarks, trade names, service marks, licenses, patents,
permits, jingles, privileges and other similar intangible
property rights and interests applied for, issued to or owned by
Seller or under which Seller is licensed or franchised and used
in the conduct of the business and operations of the Station, all
18
of such rights and interests which are issued to or owned by
Seller are, or if licensed or franchised to Seller, to the best
of Seller's knowledge are, valid and in good standing and
uncontested. Seller has delivered to Buyer copies of all
material documents, if any, establishing such rights, licenses or
other authority. Seller has received no notice and has no
knowledge of any infringements or unlawful use of such property.
To the best of Seller's knowledge, Seller, in the operation of
the Station, is not infringing any copyright, trademark, or other
similar right of any third party.
6.17. Cable Matters. Except as set forth in Schedule
3, Seller has not (i) agreed to provide reimbursement for
incremental copyright charges incurred by cable television
systems for the carriage of the Station's signal, (ii) agreed to
provide engineering equipment or technical assistance to any
cable television systems in order to correct inadequate signal
quality problems asserted by cable systems, (iii) provided its
consent for retransmission of the Station's signal to any party,
and (iv) consented to conduct or pay for significant viewing
studies involving the Station's signal or for any costs, other
than those described in this Section 6.17, related to carriage of
the Station's signal by cable television systems or any other
medium.
19
6.18. Absence of Certain Changes. During the period
from December 31, 1993 to the date of this Agreement, except as
set forth in Schedule 8, there has not been,
6.18.1. any material adverse change in the
business, assets, properties or condition (financial or
otherwise) of the Station;
6.18.2. any physical damage, destruction or loss
in any amount exceeding Five Thousand Dollars ($5,000.00) in the
aggregate affecting the Personal Tangible Assets which is not
covered by insurance (or within the applicable deductible
thereunder) or was not remedied;
6.18.3. any material increase in compensation
payable or to become payable to the employees of the Station, or
any material bonus payment made or promised to the employees of
the Station, or any material change in personnel policies,
insurance benefits or other compensation arrangements affecting
the employees of the Station not reflected in the Financial
Statements;
6.18.4. any transfer of or agreement to transfer
any of the Personal Tangible Assets, except for mechanics' liens
and other similar liens in the ordinary course of business (all
of which have been discharged or will be discharged prior to the
Closing Date);
20
6.18.5. any waiver of any rights by Seller having
a material adverse effect on the Station's business, assets,
properties, prospects or financial condition; or
6.18.6. any contract, lease or agreement entered
into except as set forth in Schedule 2 or Schedule 3 or not
required to be listed therein pursuant to Section 6.9.
6.19. Representations and Warranties of BBMC. BBMC
represents and warrants to Buyer that:
6.19.1 Organization and Standing. BBMC is a
corporation duly organized, validly existing and in good standing
under the laws of the state of North Carolina, and is qualified
to do business in the state of North Carolina. BBMC has full
corporate power and authority to own, lease and operate its
properties and to carry on its businesses now being conducted.
6.19.2 Authorization. BBMC has full corporate power
and authority to enter into and perform this Agreement and the
transactions contemplated hereby. All necessary corporate action
to duly approve the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby has been taken by BBMC. This Agreement has been duly
executed and delivered by BBMC and constitutes a valid and
binding obligation of BBMC enforceable in accordance with its
terms.
6.19.3 Financial Information. The unaudited financial
information of BBMC for the year ended December 31, 1993 and
21
furnished by BBMC to Buyer in Schedule 4 of the Schedule Volume
were prepared in the usual and ordinary course of business in
accordance with generally accepted accounting principles applied
on a consistent basis (subject to the absence of footnotes and
without regard to normal year end audit adjustments not contained
or reflected therein), and fairly present the financial condition
and operations of BBMC for the periods covered thereby.
6.19.4 Since December 31, 1993, to the date of this
Agreement, there has not been:
6.19.4.1 Any material or adverse change in the
business, assets or properties or condition (financial or
otherwise) of BBMC.
6.19.4.2 Any transfer of, or agreement to
transfer, a significant portion of the assets of BBMC or any
other transaction not in the ordinary course of business.
7. Environmental Matters.
7.1. Definitions.
7.1.1. Hazardous Substances means hazardous
wastes, hazardous substances, hazardous constituents, toxic
substances or related materials, whether solids, liquids or
gases, including but not limited to substances defined as
"hazardous wastes," "hazardous substances," "toxic substances,"
"pollutants," "contaminants," "radioactive materials," "petroleum
or any faction thereof," or other similar designations in, or
otherwise subject to regulation under, the Comprehensive
22
Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of
1986 ("CERCLA"), 42 U.S.C. SEC. 9601 et seq.; the Toxic Substance
Control Act ("TSCA"), 15 U.S.C. SEC. 2601 et seq.; the Hazardous
Substances Transportation Act, 49 U.S.C. SEC. 1802; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. SEC. 9601 et seq.;
the Clean Water Act ("CWA"), 42 U.S.C. SEC. 7401 et seq.; or any
similar state or local law; and in the plans, rules, regulations
or ordinances adopted, or other criteria and guidelines
promulgated pursuant to the preceding laws or other similar laws,
regulations, rules or ordinances now or hereafter in effect
(collectively the "Environmental Laws").
7.2. Environmental Representations. Except as
disclosed in Schedule 9, to the knowledge of Seller, no Hazardous
Substance is present, and there has been no release or threatened
release of any Hazardous Substance, at, on or under the Real
Property or any real property leased by Seller (collectively
hereinafter "Station Real Property") in a concentration or manner
to require monitoring or remediation under any Environmental Law.
Except as described in Schedule 6, (i) Seller has not been
notified by any governmental authority or any third party of any
violation of any Environmental Laws, in connection with the
operation of Station or the conduct of any activities on or at
the Station Real Property, and (ii) Seller has no knowledge of
notices of violation of Environmental Laws, notices of
23
noncompliance with Environmental Laws or environmental
enforcement, response, removal or remediation actions issued for
or under taken at the Station Real Property.
7.2.1. Environmental Audit. Within twenty (20)
days of the date of this Agreement, Buyer shall cause an
environmental consulting firm to perform a Phase I environmental
assessment, (the "Phase I Environmental Assessment") of the
Station Real Property and the improvements thereon. The results
of such Phase I Environmental Assessment shall be summarized in a
report, in a format acceptable to Seller, to be delivered to
Seller and Buyer within thirty (30) days of the date of this
Agreement. In the event the Phase I Environmental Assessment
recommends additional investigation, testing or sampling at the
Station Real Property or improvements thereon, then Seller shall
permit Buyer to perform or cause to be performed, at Buyer's sole
cost and expense, environmental tests or audits with respect to
the Station Real Property or improvements thereon recommended in
the Phase I Environmental Assessment (the "Phase II Environmental
Assessment"), provided that such Phase II Environmental
Assessment does not materially interfere with the operation of
Station and that the environmental consultant retained by Buyer
to perform the Phase II Environmental Assessment and the scope of
work to be performed thereby are reasonably acceptable to Seller
and that Buyer shall provide to Seller copies of said Phase II
Environmental Assessment results and report within three (3) days
24
of Buyer's receipt thereof. For purposes of the Agreement, the
Phase I Environmental Assessment and Phase II Environmental
Assessment collectively shall be referred to as the
"Environmental Assessment." The Phase II Environmental
Assessment shall be performed under conditions and at times
reasonably agreed upon between Buyer and Seller, and Buyer shall
indemnify and hold harmless Seller for any and all damages or
reasonable costs to Seller arising out of performance by Buyer or
Buyer's authorized representative of the Phase II Environmental
Assessment.
7.2.2. If the Phase I or Phase II Environmental
Assessment (individually an "Environmental Assessment") shows the
presence of any Hazardous Substance requiring monitoring or
remediation (an "Environmental Deficiency"), Seller shall,
subject to the provisions hereof, promptly take all steps
necessary to cure such Environmental Deficiency, provided that,
Seller shall in no event be required to expend more than Fifty
Thousand Dollars ($50,000) to effect such cure. If such
remediation requires the payment of more than Fifty Thousand
Dollars ($50,000), Buyer may, at its sole discretion, by written
notice to Seller, given within ten (10) business days after Buyer
determines that the costs of such remediation will exceed Fifty
Thousand Dollars ($50,000): (i) instruct Seller to effect such
cure and agree to reimburse Seller for all cost incurred in
excess of Fifty Thousand Dollars ($50,000); (ii) agree to
25
undertake such remediation itself after Closing, subject to a
Fifty Thousand Dollar ($50,000) adjustment in the purchase price
of Station in favor of Buyer at Closing; (iii) waive such
remediation in excess of Fifty Thousand Dollars ($50,000) as a
condition of Closing; or (iv) terminate this Agreement unless
Seller agrees to pay the full cost of such remediation. If Buyer
fails to provide timely written notice to Seller of its election
under the preceding sentence, then clause (ii) of the preceding
sentence shall be deemed to have been selected by Buyer. If
Buyer terminates this Agreement pursuant to this Section 7.2.2,
the Escrow Deposit shall be returned to Buyer and the parties
shall be released and discharged from any further obligation
hereunder.
8. Affirmative Covenants of Seller. Between the date
hereof and the Closing Date, except as contemplated by this
Agreement, Seller shall:
8.1. Continue to operate Station (a) in the usual and
ordinary course of business consistent with past practices; (b)
in conformity in all material respects with the FCC Licenses, the
Communications Act of 1934, as amended, and the rules and
regulations of the Commission; and (c) in conformity in all
material respects with all other applicable laws, ordinances,
regulations, rules and orders;
26
8.2. Use its reasonable efforts to preserve the
operation of Station intact and to preserve the business of
Station's customers, suppliers and others having business
relations with Station, and continue to conduct the financial
operations of Station, including its credit and collection
policies, with the same effort, to the same extent, and in
substantially the same manner as in the prior conduct of the
business of the Station;
8.3. Provide Buyer and representatives of Buyer with
reasonable access during normal business hours to the properties,
titles, contracts, books, files, logs, records and affairs of
Station; deliver to Buyer copies of all of Station's monthly
operating statements as may be prepared in the ordinary course of
business; and furnish such additional information concerning
Station as Buyer may from time to time reasonably request,
provided that Buyer shall not be entitled to take any action that
will interfere with the conduct of business by Seller;
8.4. Use its reasonable efforts to complete all
obligations owing by Station to advertisers for the sale of time
on Station for anything other than cash;
8.5. Use its reasonable efforts to procure the consent
of any third parties necessary for the assignment to Buyer of any
contract, agreement or lease to be assigned hereunder;
8.6. Maintain all of the Personal Tangible Assets in
their present good operating condition, repair and order,
27
reasonable wear and tear in ordinary usage excepted, and maintain
the inventories of spare parts and tubes for the technical
operating equipment of Station at the levels normally maintained
for Station;
8.7. Make or provide all payments, services or other
considerations due under the contracts, agreements and leases to
be assigned to Buyer hereunder, so that all payments required to
be made as of 12:01 a.m. on the Closing Date will have been paid;
8.8. Pay or cause to be paid or provided for all
income, personal property, sales, use, franchise, excise, social
security, withholding, workers' compensation and unemployment
insurance taxes and all other taxes of or relating to Station,
their assets and employees, required to be paid to city, county,
state, federal and other governmental units up to the Closing
Date, including FCC user fees, if any;
8.9. Take all steps reasonably necessary or appropriate
to protect Station's broadcast signal from objectionable
interference from other stations, including, without limitation,
the filing of any and all necessary pleadings with the FCC to
prevent same from occurring; and
8.10. Maintain in full force and effect, or renew when
required, all licenses, permits and authorizations relating to
the Station.
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9. Negative Covenants of Seller. Between the date hereof
and the Closing Date, except as contemplated by this Agreement,
Seller will not, without the prior written consent of Buyer:
9.1. With respect to employees of Station, enter into
any agreements with employees, increase the compensation or
bonuses payable to or to become payable by Seller to any of the
employees or effect any changes in the management, personnel
policies or employee benefits other than changes in the ordinary
course of business consistent with the past practices of the
Seller; provided, that no such agreement shall have a term of
more than one year.
9.2. Create, assume or permit to exist any mortgage or
pledge, or subject to lien or encumbrance any of the Personal
Tangible Assets, whether now owned or hereafter acquired, other
than Permitted Liens, unless discharged at or prior to closing;
9.3. Sell, assign, lease or otherwise transfer or
dispose of any of the Personal Tangible Assets whether now owned
or hereafter acquired, except for retirements in the normal and
usual course of business which do not affect the Station's
ability to operate in the ordinary course consistent with past
practices;
9.4. Enter into any new time sales agreements for
Station except in the usual and ordinary course of business
consistent with past practices or renew, renegotiate, modify,
amend or terminate any existing agreements, or enter into any new
29
contracts, agreements or understandings for Station except in the
ordinary course of its business consistent with past practices.
Without the express written consent of Buyer, which consent shall
not be unreasonably withheld, Seller shall not enter into any new
trade-out agreements for advertising, except as permitted by
Section 9.5 hereof;
9.5. Without the express written consent of Buyer,
which consent shall not be unreasonably withheld, enter into any
film contracts for barter or cash except in the ordinary course
of business consistent with past practice and having a term of
less than one (1) year;
9.6. Change Station's call letters, or materially
modify Station's facilities in a manner that would require FCC
approval;
9.7. Take any action inconsistent with its obligations
under this Agreement which would result in a material breach or
default under this Agreement;
9.8. Change its corporate charter or bylaws in any way
which would adversely affect its corporate power or authority to
enter into and perform this Agreement, or which would otherwise
adversely affect its performance under this Agreement;
9.9. Do, or omit to do, any act which will cause a
material breach of, material default under, or termination of,
any contract, agreement, lease, commitment, or obligation to
30
which Seller is a party or by which Seller is bound and which is
to be assumed by Buyer hereunder; or
9.10. File a voluntary insolvency proceeding of any
character including, without limitation, bankruptcy,
receivership, reorganization, composition or arrangement with
creditors, voluntary or involuntary, affecting Buyer or any of
its assets or properties.
10. Buyer's Representations and Warranties. Buyer
represents and warrants to Seller that:
10.1. Organization and Standing. Buyer is now and on
the Closing Date will be a corporation duly organized, validly
existing and in good standing under the laws of the State of
Rhode Island, and on the Closing Date will be qualified to do
business in the state of North Carolina. Buyer has all necessary
corporate power and authority to carry on its business as now
being conducted and to enter into and perform this Agreement;
10.2. Authorization. Buyer has full corporate power
and authority to enter into and perform this Agreement and the
transactions contemplated hereby. All necessary corporate action
to duly approve the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby has been taken by Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid and
binding obligation of Buyer enforceable in accordance with its
terms;
31
10.3. Qualifications of Buyer. Buyer is legally and
financially qualified to be the assignee of the FCC Licenses
hereunder;
10.4. Litigation. No judgment is issued or outstanding
against Buyer, nor is any litigation, action, suit, judgment,
proceeding or investigation pending or outstanding before any
forum, court or governmental body, department or agency of any
kind, or to the knowledge of Buyer, threatened, to which Buyer is
a party, which has the stated purpose or the probable effect of
enjoining or preventing the consummation of this Agreement or the
transactions contemplated hereby or to recover damages by reason
thereof, which questions the validity of any action taken or to
be taken pursuant to or in connection with this Agreement, or
which would prevent Buyer from being qualified to be the assignee
of Station's FCC Licenses or from consummating the transactions
contemplated hereunder. In the event of the commencement of any
such proceeding against Buyer, Buyer shall use its reasonable
efforts to seek removal or dismissal thereof;
10.5. Insolvency. No insolvency proceedings of any
character including, without limitation, bankruptcy,
receivership, reorganization, composition or arrangement with
creditors, voluntary or involuntary, affecting Buyer or any of
its assets or properties is now or on the Closing Date will be
pending or, to the knowledge of Buyer, threatened. In the event
of the commencement of any such proceeding against Buyer, Buyer
32
shall use its reasonable and best efforts to seek removal or
dismissal thereof within ninety (90) days. Buyer shall not have
taken any action in contemplation of, or which would constitute
the basis for, the institution of any such insolvency
proceedings; and
10.6. Absence of Restrictions. No unwaived contract,
agreement or other instrument or condition exists which
materially restricts, limits, or in any manner materially affects
the transactions contemplated hereby. The execution, delivery
and consummation of this Agreement by Buyer do not conflict with,
or result in a breach of, the terms, conditions or provisions of,
or constitute a default under its articles of incorporation or
bylaws or any contract, lease, agreement, or other instruments on
condition by which Buyer is bound.
10.7. Disclosure. The Representations of Buyer set
forth in this Article 10 and in any certificate or agreement
furnished or to be furnished by Buyer pursuant hereto or in
connection with the transactions contemplated hereby do not
include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements included
herein not misleading.
11. Control of Station. This Agreement shall not be
consummated until after the Commission has given its written
consent and approval to the Assignment Application. Between the
date of this Agreement and the Closing Date, Buyer, its employees
33
or agents, shall not directly or indirectly control, supervise or
direct or attempt to control, supervise or direct the operation
of Station, and such operation shall be the sole responsibility
of and in the complete discretion of Seller.
12. Application for Commission Consent and Approval. Seller
and Buyer shall prepare their respective sections of the
Assignment Application as soon as practicable, and Seller shall
deliver its section of the application to Buyer's counsel no
later than the third (3rd) business day after the day hereof.
Buyer's counsel shall file the Assignment Application with the
Commission as soon as practicable but in no event later than the
fourth (4th) business day after the date hereof. The parties
will take all steps as may be necessary or proper expeditiously
and diligently to prosecute the Assignment Application to a
favorable conclusion. Seller and Buyer shall each bear their own
expenses in connection with the preparation of the applicable
sections of the Assignment Application and in connection with the
prosecution thereof, except that Buyer shall pay the filing fee
required by the FCC to file the Assignment Application.
13. Time for Commission Consent. In the event that the
grant of the Assignment Application by the FCC has not become a
Final Order by March 31, 1995, or the Assignment Application is
designated for hearing by the FCC, either Buyer or Seller may
thereafter terminate this Agreement upon five (5) business days
written notice to the other party; provided, however, that if the
34
party desiring to terminate this Agreement is or has been in
default hereunder or has been in default in any manner which has
delayed FCC action on the Assignment Application or resulted in
the designation for hearing by the FCC, then such defaulting
party may not terminate this Agreement under this Section. In
the event of a termination of this Agreement pursuant to this
Paragraph, each party shall be released from all further
obligations under this Agreement and the funds being held in
escrow shall be disbursed in accordance with the terms of the
Escrow Agreement.
14. Risk of Loss. The risk of loss or damage to any of the
assets of Station from fire or other casualty or cause shall be
upon Seller at all times up to the closing on the Closing Date,
and it shall be the responsibility of Seller to repair or cause
to be repaired and to restore the assets as closely as
practicable to their condition prior to any such loss or damage.
In the event of any such loss or damage, Seller shall promptly
notify Buyer of same in writing, specifying with particularity
the loss or damage incurred, the cause thereof if known or
reasonably ascertainable, and the insurance coverage. The
proceeds of any claim for any loss payable under any insurance
policy with respect thereto shall be used to repair, replace or
restore any such property as closely as practicable to its former
condition subject to the conditions stated below. If the
property is not completely repaired, replaced or restored on or
35
before the Closing or the Closing Date specified in Paragraph
1.2, the Buyer, at its sole option, may (a) postpone the Closing
until such time as the property has been completely repaired,
replaced or restored, and, if necessary, the parties shall join
in an application or applications requesting the Commission to
extend the effective period of its consent to the Assignment
Application; (b) consummate the Closing and accept the property
in its then condition, in which event Seller shall assign to
Buyer all proceeds of insurance covering the property involved;
or (c) rescind this Agreement and declare it of no further force
and effect, if such repairs, replacements or restorations are not
completed within forty-five (45) days after the original Closing
Date specified in Paragraph 1.2 above.
15. Broadcast Transmission of Station Prior to Closing Date.
If, prior to the Closing Date, any event occurs which prevents
the regular broadcast transmission of Station in the normal and
usual manner in which it has heretofore been operating for a
period of twelve (12) continuous hours or more, Seller shall give
prompt written notice thereof to Buyer. Buyer shall be entitled,
by giving written notice to Seller, to terminate this Agreement
forthwith and without any further obligation hereunder, if: (a)
broadcast transmissions are not commenced on a temporary basis
within five (5) calendar days, or (b) such facilities are not
restored so that normal and usual transmissions are resumed by
36
the earlier of (i) ten (10) calendar days after such event or
(ii) the closing on the Closing Date.
16. Conditions Precedent to Buyer's Obligations. The
obligation of the Buyer to consummate the transactions
contemplated hereby is subject to the fulfillment prior to and at
the Closing Date of each of the following conditions, each of
which, with the exception of the need for FCC consent, may be
waived (but only by an express written waiver) at the sole
discretion of Buyer:
16.1. Commission Approval. The Commission shall have
given its written consent to the Assignment Application which
consent shall not include any conditions materially adverse to
Buyer, and such consent shall have become a Final Order;
16.2. Representations and Warranties. The
representations and warranties of the Seller and BBMC included in
this Agreement shall be true and correct in all material respects
at and as of the Closing Date as though such representations and
warranties were made at and as of such time except for any
changes permitted by the terms hereof or consented to in writing
by the Buyer;
16.3. Performance by Seller and BBMC. Seller and BBMC
shall have in all material respects performed and complied with
all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to and at
the Closing Date;
37
16.4. Performance by George Beasley. George Beasley
shall have in all material respects performed and complied with
all covenants, agreements and conditions required by the Real
Estate Agreement to be performed or complied with by it prior to
and at the Closing Date and the transactions contemplated thereby
shall have been consummated;
16.5. FCC Licenses. On the Closing Date, Seller shall
be the holder of the FCC Licenses. No proceedings shall be
pending or threatened which may result in the revocation,
cancellation, suspension or modification of any such FCC
Licenses;
16.6. Consents. All necessary approvals and consents
to the assignment to Buyer hereunder of the contracts, agreements
and leases to be assigned to and assumed by Buyer hereunder
listed on Schedules 2 and 3 and designated as "material
contracts" on such Schedules shall have been obtained and
delivered to Buyer;
16.7. Litigation and Insolvency. Except for matters
affecting the broadcasting industry generally or disclosed to
Buyer hereunder, no litigation, action, suit, judgment,
proceeding or investigation shall be pending or outstanding
before any forum, court, or governmental body, department or
agency of any kind, which would reasonably be expected to result
in any material adverse change in the business, prospects or
condition of Station or its assets, which has the stated purpose
38
or the probable effect of enjoining or preventing the
consummation of this Agreement or the transactions contemplated
hereby or to recover damages by reason thereof, or which
questions the validity of any action taken or to be taken
pursuant to or in connection with this Agreement. No insolvency
proceedings of any character including without limitation,
bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, against
Seller or any of its assets or properties shall be pending, and
Seller shall not have taken any action in contemplation of, or
which would constitute the basis for, the institution of any such
insolvency proceedings; and
16.8. Environmental Report. All Environmental
Assessments required by Section 7.2.1 shall have been completed.
17. Conditions Precedent to Seller's Obligations. The
obligation of the Seller to consummate the transactions
contemplated hereby is subject to the fulfillment prior to and at
the Closing Date of each of the following conditions, each of
which, with the exception of the need for FCC consent, may be
waived (but only by an express written waiver) at the sole
discretion, of Seller:
17.1. Commission Approval. The Commission shall have
given its written consent to the Assignment Application, which
consent shall not include any condition materially adverse to
Seller, and such consent shall have become a Final Order;
39
17.2. Representations and Warranties. The
representations and warranties of Buyer included in this
Agreement shall be true and correct in all material respects at
and as of the Closing Date as though such representations and
warranties were made at and as of such time;
17.3. Performance. Buyer shall have in all material
respects performed and complied with all covenants, agreements
and conditions required by this Agreement and the Real Estate
Agreement to be performed or complied with by it prior to and at
the Closing Date and the transaction contemplated by the Real
Estate Agreement shall have been consummated; and
17.4. Litigation and Insolvency. Except for matters
affecting the broadcasting industry generally, no litigation,
action, suit, judgment, proceeding or investigation shall be
pending or outstanding before any forum, court or governmental
body, department or agency of any kind which has the stated
purpose or the probable effect of enjoining or preventing the
consummation of this Agreement or the transactions contemplated
hereby or to recover damages by reason thereof, which questions
the validity of any action taken or to be taken pursuant to or in
connection with this Agreement, or which would prevent Buyer from
consummating the transactions contemplated hereunder. No
insolvency proceedings of any character including, without
limitation, bankruptcy, receivership, reorganization, composition
or arrangement with creditors, voluntary or involuntary,
40
affecting Buyer or any of its assets or properties shall be
pending, and Buyer shall not have taken any action in
contemplation of, or which would constitute the basis for, the
institution of any such insolvency proceedings.
18. Seller's Performance at Closing. On the Closing Date at
the Closing Place, Seller shall execute and deliver or cause to
be delivered to Buyer:
18.1. One or more bills of sale conveying to Buyer all
of the Personal Tangible Assets to be acquired by Buyer
hereunder;
18.2. An assignment assigning to Buyer the FCC
Licenses;
18.3. An assignment assigning to Buyer the contracts,
leases and agreements to be assigned to Buyer hereunder together
with necessary consents thereto and the original copies of said
contracts and agreements;
18.4. An assignment of accounts receivable for
collection pursuant to Paragraph 21 hereof;
18.5. The files, records and logs referred to in
Paragraph 2.5 hereof;
18.6. An opinion of Seller's counsel dated as of the
Closing Date, in form and substance satisfactory to Buyer's
counsel, that:
18.6.1. Each of Seller and BBMC is a corporation
duly incorporated, validly existing and in good standing under
41
the laws of the state of South Carolina and North Carolina,
respectively, and is qualified to do business in the state of
North Carolina;
18.6.2. All necessary corporate action to duly
approve the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby has
been taken by Seller and BBMC, and this Agreement constitutes a
valid and binding agreement of Seller and BBMC enforceable in
accordance with its terms; and
18.6.3. The bulk sales laws of the North Carolina
Uniform Commercial Code have been complied with or are not
applicable to the transactions contemplated in this Agreement.
Such opinion shall contain appropriate limitations and
qualifications and be limited to the laws of the States of South
Carolina and North Carolina and the United States of America;
18.7. An opinion of Seller's communications counsel
dated as of the Closing Date in the form attached as Appendix D;
18.8. A copy of a resolution of Seller's and BBMC's
board of directors and stockholders, certified by Seller's and
BBMC's secretary, authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby;
18.9. The Noncompetition Agreement;
42
18.10. A certificate of an officer of Seller, dated the
Closing Date, certifying to the fulfillment of the conditions set
forth in Sections 16.2 and 16.3;
18.11. A certificate of an officer of BBMC, dated the
Closing Date, certifying to the fulfillment of the conditions set
forth in Sections 16.2 and 16.3.
18.12. Such other assignments, bills of sale or
instruments of conveyance, and certificates of officers as
reasonably may be requested by Buyer to consummate this Agreement
and the transactions contemplated hereby.
19. Buyer's Performance at Closing. On the Closing Date at
the Closing Place, Buyer shall:
19.1. Have delivered to Seller the Two Hundred Fifty
Thousand Dollars ($250,000.00) held pursuant to the Escrow
Agreement;
19.2. Pay to Seller and George Beasley, respectively,
by wire transfer of federal funds or by bank cashier's or
certified check the monies payable as set forth in Sections 5.2.2
and 5.2.3 hereof;
19.3. Deliver to Seller a copy of a resolution of
Buyer's board of directors, certified by Buyer's secretary,
authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated hereby;
19.4. Execute and deliver to Seller such assumption
agreements and other instruments and documents as are required to
43
make, confirm, and evidence Buyer's assumption of any obligation
to pay, perform, and discharge: (i) Seller's obligations under
the contracts, agreements and leases referenced in Section 2.3
hereof, and (ii) all other liabilities arising from operation of
Station from and after the Closing;
19.5. Deliver to Seller an opinion of Buyer's counsel,
dated as of the Closing Date, in form and substance satisfactory
to Seller's counsel, that:
19.5.1 Buyer is duly organized and in good
standing under the laws of the state of Rhode Island and is
qualified to do business in the state of North Carolina; and
19.5.2. All necessary corporate action to duly
approve the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby has
been taken by Buyer, and this Agreement constitutes a valid and
binding agreement of Buyer enforceable in accordance with its
terms.
Such opinion shall contain appropriate limitations and
qualifications and be limited to the laws of the States of Rhode
Island, North Carolina and the United States of America.
19.6. Execute and deliver to Seller the Noncompetition
Agreement;
19.7. An opinion of Buyer's communications counsel
dated as of the Closing Date in the form attached as Appendix E;
and
44
19.8. Execute and deliver to Seller an agreement by
which Buyer or its assignee shall pay to Seller the sum of Two
Thousand Five Hundred Dollars ($2500) per month (pro rated for
any portion of any month) for each month or portion thereof on
and after January 1, 1996 and before January 21, 2028 that the
Station uses the existing transmission site now leased by Seller
for the transmission of the Station's signal.
19.9. Execute and deliver to Seller such other
instruments, documents and certificates of officers as reasonably
may be requested by Seller to consummate this Agreement and the
transactions contemplated hereby.
20. Prorations. Operation of the Station and the income,
expenses and liabilities attributable thereto through 12:01 a.m.
on the Closing Date shall be for the account of Seller and
thereafter for the account of Buyer. Expenses including, but not
limited to, such items as power and utilities charges, ad valorem
personal property taxes upon the basis of the most recent
assessment available, FCC user fees (if any), frequency
discounts, prepaid time sales agreements, payroll taxes, and
other fringe benefits of employees of Seller who enter the
employment of Buyer and which benefits Buyer agrees to assume,
rents and similar prepaid and deferred items shall be prorated
between Seller and Buyer as of 12:01 a.m of the Closing Date, the
proration to be made and paid, insofar as feasible, on the
45
Closing Date, with a final settlement sixty (60) days after the
Closing Date.
21. Collection of Accounts Receivable. No later than five
(5) calendar days following the Closing Date, Seller shall
deliver to Buyer a complete and detailed list of all the accounts
receivable of Seller ("Accounts Receivable"). During the period
one hundred and twenty (120) calendar days following the Closing
Date, Buyer shall use reasonable efforts, as Seller's agent, to
collect the Accounts Receivable in the usual and ordinary course
of business. Buyer shall not be required to institute any legal
proceedings to enforce the collection of any Accounts Receivable
or to refer any of the Accounts Receivable to a collection
agency. Buyer shall not adjust any Accounts Receivable or grant
credit without Seller's written consent, and any amounts
collected pursuant to this Section 21 shall be paid to Seller
without claim of set-off, counterclaim or deduction of any nature
or for any cause whatsoever. Buyer further agrees not to use
such amounts for its own account nor to pledge, secure or
otherwise encumber such Accounts Receivable or the proceeds
therefrom. On or before the fifteenth (15th) calendar day
following the end of each calendar month during such one hundred
and twenty (120) day period, Buyer shall furnish to Seller a list
of, and pay over to Seller, all amounts collected during the
preceding month with respect to Accounts Receivable. At the end
of the one hundred and twenty (120) day period, Buyer shall turn
46
back the uncollected Accounts Receivable and Buyer's
responsibility and liability for the collection of Accounts
Receivable shall cease, and Seller shall solely be responsible
for the collection of the balance of the Accounts Receivable.
During the one hundred and twenty (120) day period in which Buyer
shall act as Seller's agent for the collection of Accounts
Receivable hereunder, payments received from customers shall be
applied first to obligations such customers incurred prior to
12:01 a.m. on the Closing Date and shall not be applied to any
obligations incurred by such customer after 12:01 a.m. on the
Closing Date until the amount of such Accounts Receivable has
been paid in full, unless Accounts Receivable are disputed by the
account debtor, in which event such disputed Accounts Receivable,
to the extent disputed, shall be turned back to Seller for
resolution.
22. Indemnification.
22.1. Indemnity by Seller and BBMC. From and after the
Closing, Seller and BBMC, subject to the limitations contained
herein, jointly and severally agree to indemnify, defend and hold
harmless the Buyer, its successors and assigns, from and against:
(a) Any and all claims, demands, liabilities,
obligations, actions, suits, proceedings, losses, damages, costs,
expenses, assessments, judgments, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, of
every kind and description, contingent or otherwise, (the
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foregoing hereinafter collectively referred to as "Damages")
occasioned by, arising out of or resulting from the operation of
the Station prior to closing on the Closing Date, including, but
not limited to, any and all claims, liabilities and obligations
arising or required to be performed prior to 12:01 a.m. on the
Closing Date under any contract, agreement or lease assumed by
Buyer hereunder;
(b) Any and all Damages occasioned by, arising out
of or resulting from any misrepresentation, breach of warranty or
covenant, or default or nonfulfillment of any agreement on the
part of Seller or BBMC under this Agreement.
Nothing in the foregoing paragraphs (a) and (b)
shall obligate either Seller or BBMC to perform or undertake any
actions or make any payments with respect to Environmental
Deficiencies except as set forth in Section 7.2.2 hereof.
22.2. Indemnity by Buyer. From and after the Closing,
Buyer agrees to indemnify, defend and hold harmless the Seller,
its successors and assigns, from and against:
(a) Any and all Damages occasioned by, arising out
of or resulting from the operation of the Station subsequent to
closing on the Closing Date, including, but not limited to, any
and all claims, liabilities and obligations arising or required
to be performed subsequent to 12:01 a.m. on the Closing Date
under any contract, agreement or lease assumed by Buyer
hereunder; and
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(b) Any and all Damages occasioned by, arising out
of or resulting from any misrepresentation, breach of warranty or
covenant, or default or nonfulfillment of any agreement on the
part of Buyer under this Agreement.
22.3. Indemnification Procedures. In the event of a
claim for indemnification hereunder, the party entitled to
indemnification ("Indemnified Party") shall notify the other
party ("Indemnifying Party") in writing as soon as practicable
but in no event later than fifteen (15) calendar days after
receipt of such claims. The Indemnified Party's failure to do so
shall not preclude it from seeking indemnification hereunder
unless such failure has materially prejudiced the Indemnifying
Party's ability to defend such claim. The Indemnifying Party
shall promptly defend such claim by counsel of its own choosing
and the Indemnified Party shall cooperate with the Indemnifying
Party in the defense of such claim including the settlement of
the matter on the basis stipulated by the Indemnifying Party
(with the Indemnifying Party being responsible for all costs and
expenses of such settlement). If the Indemnifying Party within a
reasonable time after notice of a claim fails to defend the
Indemnified Party, the Indemnified Party shall be entitled to
undertake the defense, compromise or settlement of such claim at
the expense of and for the account and risk of the Indemnifying
Party. Upon the assumption of the defense of such claim, the
Indemnifying Party may settle, compromise or defend as it sees
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fit; provided, however, that anything in this Section to the
contrary notwithstanding:
(i) if there is a reasonable probability that a
claim may materially and adversely affect the Indemnified Party,
the Indemnified Party shall have the right, at its cost and
expense, to defend, compromise or settle such claim against it;
(ii) if the facts giving rise to indemnification
hereunder shall involve a possible claim by the Indemnified
Party against a third party, the Indemnified Party shall have the
right, at its own cost and expense, to undertake the prosecution,
compromise and settlement of such claim; and
(iii) the Indemnifying Party will not, without the
Indemnified Party's written consent, settle or compromise any
claim or consent to any entry of judgment which does not include
as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party of a release from all
liability in respect to such claim.
22.4 Limitations on Indemnity.
22.4.1 No party entitled to indemnification
pursuant to the terms of this Agreement shall be entitled to
reimbursement for any claim incurred by such party, for which
such party is otherwise entitled to indemnification until the
aggregate amount of all such claims for which such party is
entitled to indemnification exceeds Fifty Thousand Dollars
($50,000) (at which time such party shall be entitled to
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indemnification for such claims in excess of Fifty Thousand
Dollars ($50,000). Notwithstanding the foregoing, the maximum
amount that any party may under any circumstances be liable for
under this Section 22 shall be an amount equal to Five Hundred
Thousand Dollars ($500,000). For purposes of the foregoing
provisions, BBMC and Seller shall be considered collectively to
constitute one party.
22.4.2 Notwithstanding the foregoing provisions of
this Section, an Indemnifying Party shall have no responsibility
or obligation with respect to claims for indemnification asserted
pursuant to this Section 22 unless such claims are asserted in
writing by the Indemnified Party to the Indemnifying Party within
eighteen (18) months following the Closing Date. No such claim
may be brought under this Agreement or any other certificate,
document or instrument delivered pursuant to 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
such eighteen (18) month period. In the event such a notice is
given, the right to indemnification with respect thereto shall
survive until such claim is finally resolved and any obligations
with respect thereto are fully satisfied.
22.4.3 No party hereto shall have any liability
for any matters set forth in Section 22.1 or 22.2 except to the
extent provided in this Section 22.4.
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23. Confidentiality. At all times before, on, and after the
Closing Date, the Seller agrees that it shall not and that it
shall cause its officers, directors, shareholders, employees, and
agents not to disclose to third parties or use any confidential
information concerning the business, operations, or assets of the
Station other than as required in connection with Seller's
discharge or satisfaction of any liabilities retained by it;
Buyer's financing of the purchase of the Station; or any
financial or other information regarding Buyer received from
Buyer or its agents in the course of investigating, negotiating,
or performing the transaction contemplated by this Agreement,
provided that the foregoing shall not apply to information that
is or becomes publicly known or available other than through
disclosure by Seller, or to the disclosure of information which
is in the opinion of counsel, required to comply with applicable
laws, rules, regulations or legal process.
24. Buyer's Right of Specific Performance. The property and
assets to be transferred pursuant to the terms of this Agreement
are unique and not readily available on the open market. For
that reason and others, the Buyer will be damaged seriously
should this purchase not be consummated through no fault of its
own, but for reasons attributable to Seller. Accordingly, the
Buyer, in addition to all other legal remedies, shall have the
right to enforce the terms of this Agreement by a decree of
specific performance.
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25. Expenses. Except for the FCC filing fee which pursuant
to Section 12 is the responsibility of Buyer, all expenses
incurred in connection with this transaction shall be borne by
the party incurring same.
26. Survival of Covenants, Representations and Warranties.
All representations, warranties, covenants and agreements
included in this Agreement shall survive the Closing Date for a
period of eighteen (18) months notwithstanding any investigations
made by or on behalf of the parties hereto.
27. Finders, Consultants and Brokers. The parties hereto
hereby represent and warrant to one another that there has been
no finder, broker or consultant involved in the negotiations
leading up to the execution of this Agreement, and no finder's,
broker's or consultant's fees or commissions are payable in
connection with the transactions contemplated hereby.
28. Notices. All notices, demands and requests required or
permitted to be given under the provisions of this Agreement
shall be deemed to be duly given when delivered personally (which
shall include delivery by Federal Express or other nationally
recognized, reputable overnight courier service that issues a
receipt or other confirmation of delivery) to the party for whom
such communication is intended, or three (3) business days after
the date mailed by certified or registered U.S. mail, return
receipt requested, postage prepaid, addressed as follows:
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(a) If to Seller: Mr. George G. Beasley
Group H Broadcasting Corp.
c/o Beasley Broadcasting Corp.
3033 Riviera Drive, Suite 200
Naples, Florida 33940
cc: Bruce E. Rosenblum, Esquire
Latham and Watkins
1001 Pennsylvania Ave., N.W.
Washington, D.C. 20004
(b) If to Buyer: Mr. James G. Babb
Outlet Broadcasting, Inc.
23 Kenney Drive
Cranston, Rhode Island 02920
cc: Stephen J. Carlotti, Esquire
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
or any such other addresses as the parties may from time to time
designate in writing.
29. Benefit and Assignment. This Agreement shall be binding
upon, and inure to the benefit of the parties hereto, and their
respective successors and permitted assigns. This Agreement
shall not be assigned without the prior written consent of the
other party hereto; provided, however, Buyer may assign its
rights and obligations hereunder to another wholly owned
subsidiary of Buyer if such assignment will not result in a major
amendment of the Assignment Application under the FCC's rules.
30. Other Documents. The parties shall execute such other
documents as may be necessary and desirable to the implementation
and consummation of this Agreement.
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31. Construction. This Agreement shall be governed,
construed and enforced in accordance with the laws of the state
of North Carolina.
32. Counterparts. This Agreement may be signed in any
number of counterparts with the same effect as if the signature
on each such counterpart were upon the same instrument.
33. Headings. The headings of the sections of this
Agreement are inserted as a matter of convenience and for
reference purposes only and in no respect define, limit or
describe the scope of this Agreement or the intent of any section
hereof.
34. Entire Agreement. All appendices and schedules attached
to this Agreement shall be deemed part of this Agreement and
incorporated herein, where applicable, as if fully set forth
therein. This Agreement, all appendices, schedules and exhibits
hereto and all agreements to be delivered by the parties pursuant
hereto, represent the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof,
supersede all prior negotiations between such parties, and can be
amended, supplemented or changed only by an agreement in writing
which makes specific reference to this Agreement and which is
signed by the party against whom enforcement of any such
amendment, supplement or modification is sought.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers on the
day and year first above written.
GROUP H BROADCASTING CORP.
By:____________________________
George G. Beasley, President
OUTLET BROADCASTING, INC.
By:___________________________
James G. Babb, Chairman
Beasley Broadcasting Management
Corporation
By:____________________________
George G. Beasley, President
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APPENDICES
APPENDIX A - ESCROW AGREEMENT
APPENDIX B - NONCOMPETITION AGREEMENT
APPENDIX C - FCC LICENSES
APPENDIX D - SELLER'S COMMUNICATIONS COUNSEL OPINION
APPENDIX E - BUYER'S COMMUNICATIONS COUNSEL OPINION
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