-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WDxkrHxE5Y45OLego4wRf/yF80XBLWUSbgfE+47kykK9G1p6mpr9HhtYs45vkB6r DET2Uwn0LV3QGouIyLYFZA== 0001005150-98-000185.txt : 19980319 0001005150-98-000185.hdr.sgml : 19980319 ACCESSION NUMBER: 0001005150-98-000185 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980317 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SINCLAIR BROADCAST GROUP INC CENTRAL INDEX KEY: 0000912752 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 521494660 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-26076 FILM NUMBER: 98567776 BUSINESS ADDRESS: STREET 1: 2000 WEST 41ST ST CITY: BALTIMORE STATE: MD ZIP: 21211 BUSINESS PHONE: 4104675005 MAIL ADDRESS: STREET 1: 2000 W 41ST ST CITY: BALTIMORE STATE: MD ZIP: 21211 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER : 0-26076 SINCLAIR BROADCAST GROUP, INC. (Exact name of Registrant as specified in its charter) ---------------- Maryland 52-1494660 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2000 WEST 41ST STREET BALTIMORE, MARYLAND 21211 (Address of principal executive offices) (410) 467-5005 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: NONE Securities registered pursuant to Section 12 (g) of the Act: Class A Common Stock, par value $.01 per share Series D Preferred Stock, par value $.01 per share Indicate by check mark whether the registrant (1) has filed all reports required to be files 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 by check mark if disclosure of delinquent filings pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Based on the closing sale price of $56 15/16 per share as of March 16, 1998, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $803.4 million. As of March 13, 1998, there are 14,380,770 shares of Class A Common stock, $.01 par value; 25,166,432 shares of Class B Common Stock, $.01 par value; 976,380 shares of Series B Preferred Stock, $.01 par value, convertible into 3,550,484 shares of Class A Common Stock; and 3,450,000 shares of Series D Preferred Stock, $.01 par value, convertible into 3,780,822 shares of Class A Common Stock of the Registrant issued and outstanding. In addition, 2,000,000 shares of $200 million aggregate liquidation value of 11 5/8% High Yield Trust Offered Preferred Securities of Sinclair Capital, a subsidiary trust of Sinclair Broadcast Group, Inc., are issued and outstanding. PART I FORWARD-LOOKING STATEMENTS The matters discussed in this Form 10-K include forward-looking statements. In addition, when used in this Form 10-K, the words "intends to," "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including the impact of changes in national and regional economies, successful integration of acquired television and radio stations (including achievement of synergies and cost reductions), pricing fluctuations in local and national advertising, volatility in programming costs, the availability of suitable acquisitions on acceptable terms and the other risk factors set forth in the Company's prospectus filed with the Securities and Exchange Commission on December 12, 1997, pursuant to rule 424(b)(5). The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. ITEM 1. BUSINESS BUSINESS OF SINCLAIR The Company is a diversified broadcasting company that currently owns or programs pursuant to LMAs 35 television stations, and upon consummation of all pending acquisitions and dispositions, the Company will own or program pursuant to LMAs 56 television stations. The Company owns or programs pursuant to LMAs 52 radio stations and upon consummation of all pending acquisitions and dispositions, the Company will own or program pursuant to LMAs 51 radio stations. The Company also has options to acquire two additional radio stations. The Company believes that upon completion of all pending acquisitions and dispositions it will be one of the top 10 radio groups in the United States, when measured by the total number of radio stations owned or programmed pursuant to LMAs. The 35 television stations the Company owns or programs pursuant to LMAs are located in 24 geographically diverse markets, with 23 of the stations in the top 51 television DMAs in the United States. Upon consummation of all pending acquisitions and dispositions, the Company will own or program television stations in 37 geographically diverse markets (with 30 of such stations in the top 51 DMAs) and will reach approximately 22.5% of the television households in the United States. The Company currently owns or programs 11 stations affiliated with Fox, 10 with WB, four with ABC, two with NBC, two with UPN, and one with CBS. Five stations operate as independents. Upon consummation of all pending acquisitions and dispositions and the transfer of affiliations pursuant to existing agreements, 23 of the Company's owned or programmed television stations will be Fox affiliates, 11 will be WB affiliates, seven will be UPN affiliates, five will be ABC affiliates, three will be NBC affiliates, one will be a CBS affiliate and six will be operated as independents. Upon consummation of all pending acquisitions and dispositions and transfers of affiliations pursuant to existing agreements, the Company will own or program more stations affiliated with Fox than any other broadcaster. The Company's radio station group is geographically diverse with a variety of programming formats including country, urban, news/talk/sports, rock and adult contemporary. Of the 52 stations owned or provided programming services by the Company, 19 broadcast on the AM band and 33 on the FM band. The Company owns between three and eight stations in all but one of the 12 radio markets it serves. The Company has undergone rapid and significant growth over the course of the last seven years. Since 1991, the Company has increased the number of stations it owns or provides programming services to from three television stations to 35 television stations and 52 radio stations. From 1991 to 1997, net broadcast revenues and Adjusted EBITDA (as defined herein) increased from $39.7 million to $471.2 million, and from $15.5 million to $229.0 million, respectively. Pro forma for pending acquisitions and dispositions described below (except the Montecito Acquisition, the Lakeland Acquisition, and the execution of an LMA with respect to WSYX-TV), net broadcast revenue and Adjusted EBITDA would have been $715.1 million and $345.7 million, respectively. 1 The Company is a Maryland corporation formed in 1986. The Company's principal offices are located at 2000 West 41st Street, Baltimore, Maryland 21211, and its telephone number is (410) 467-5005. TELEVISION BROADCASTING The Company owns and operates, provides programming services to, or has agreed to acquire the following television stations:
NUMBER OF COMMERCIAL EXPIRATION MARKET STATIONS IN STATION DATE OF MARKET RANK(A) STATIONS STATUS(B) CHANNEL AFFILIATION THE MARKET (C) RANK(D) FCC LICENSE - ------------------------------ --------- ---------- ------------- --------- ------------- ---------------- --------- ------------- Minneapolis/St. Paul, Minnesota ................... 14 KLGT Pending 23 WB 6 6 4/1/98 (f) Pittsburgh, Pennsylvania ..... 19 WPGH O&O 53 FOX 6 4 8/1/99 WCWB LMA 22 WB 5 8/1/99 Sacramento, California ....... 20 KOVR O&O 13 CBS 7 3 12/1/98 St. Louis, Missouri .......... 21 KDNL O&O 30 ABC 6 5 2/1/06 Baltimore, Maryland .......... 23 WBFF O&O 45 FOX 5 4 10/1/04 WNUV LMA 54 WB 5 10/1/04 Indianapolis, Indiana ........ 25 WTTV LMA (e) 4 IND (h)(u) 8 5 8/1/05 WTTK LMA (e)(g) 29 IND (h) 5 8/1/05 Raleigh/Durham, North Carolina .............. 29 WLFL O&O 22 FOX 7 4 12/1/04 WRDC LMA 28 UPN 5 12/1/04 Cincinnati, Ohio ............. 30 WSTR O&O 64 WB 5 5 10/1/05 Milwaukee, Wisconsin ......... 31 WCGV O&O 24 IND 6 5 12/1/97 (f) WVTV LMA 18 WB 6 12/1/05 Kansas City, Missouri ........ 32 KSMO O&O 62 IND (h)(v) 8 5 2/1/06 Nashville, Tennessee ......... 33 WZTV Pending (q) 17 FOX 6 4 8/1/05 WUXP Pending (r) 30 UPN 5 8/1/05 Columbus, Ohio ............... 34 WTTE O&O 28 FOX 5 4 10/1/05 Asheville, North Carolina and Greenville/ Spartanburg/ Anderson, South Carolina .............. 35 WFBC LMA 40 IND (h) 6 5 12/1/04 WLOS O&O 13 ABC 6 3 12/1/04 San Antonio, Texas ........... 38 KABB O&O 29 FOX 7 4 8/1/98 KRRT LMA 35 WB 6 8/1/98 Norfolk, Virginia ............ 39 WTVZ O&O 33 FOX 6 4 10/1/04 Buffalo, New York ............ 40 WUTV Pending (q) 29 FOX 5 4 6/1/99 Oklahoma City, Oklahoma 44 KOCB O&O 34 WB 5 5 6/1/98 (f) KOKH Pending (r) 25 FOX 4 6/1/98 (f) Greensboro/Winston- Salem/High Point, North Carolina .............. 46 WXLV Pending (q) 45 ABC 7 4 12/1/04 WUPN Pending (r) 48 UPN 5 12/1/04 Birmingham, Alabama .......... 51 WTTO O&O (m) 21 WB 6 5 4/1/05 WABM LMA 68 IND (h) 6 4/1/05 Dayton, Ohio ................. 53 WKEF Pending (n) 22 NBC 4 3 10/1/05 WRGT Pending (r) 45 FOX 4 10/1/05 Charleston/Huntington, West Virginia ............... 57 WCHS O&O 8 ABC 4 3 10/1/04 WVAH Pending (r) 11 FOX 4 10/1/04 Richmond, Virginia ........... 59 WRLH Pending (q) 35 FOX 5 4 10/1/04 Las Vegas, Nevada ............ 61 KUPN O&O 21 WB 8 5 10/1/98 KFBT Pending (s) 8 10/1/98
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NUMBER OF COMMERCIAL EXPIRATION MARKET STATIONS IN STATION DATE OF MARKET RANK(A) STATIONS STATUS(B) CHANNEL AFFILIATION THE MARKET (C) RANK(D) FCC LICENSE - ------------------------------- --------- ---------- -------------- --------- ------------- ---------------- --------- ------------- Mobile, Alabama and Pensacola, Florida ........... 62 WEAR O&O 3 ABC 6 2 2/01/05 WFGX LMA 35 WB 6 2/01/05 Flint/Saginaw/Bay City, Michigan ..................... 63 WSMH O&O 66 FOX 4 4 10/1/05 Lexington, Kentucky ........... 67 WDKY O&O 56 FOX 5 4 8/1/05 Des Moines, Iowa .............. 69 KDSM O&O 17 FOX 4 4 2/1/06 Syracuse, New York ............ 72 WSYT Pending (n) 68 FOX 5 4 6/1/99 WNYS Pending (o) 43 UPN 5 6/1/99 Rochester, New York ........... 75 WUHF Pending (q) 31 FOX 4 4 6/1/99 Paducah, Kentucky and Cape Girardeau, Missouri .......... 79 KBSI Pending (n) 23 FOX 5 4 2/1/06 WDKA Pending (o) 49 UPN 5 (t) Madison, Wisconsin ............ 84 WMSN Pending (q) 47 FOX 4 4 12/1/05 Burlington, Vermont and Plattsburgh, New York ........ 91 WPTZ O&O (i) 5 NBC 5 2 6/1/99 WNNE O&O (i)(k) 31 NBC 4 4/1/99 WFFF LMA (j) 44 FOX (l) (l) Tri-Cities, Tennessee/ Virginia ..................... 93 WEMT Pending (n) 39 FOX 5 4 8/1/05 Tyler/Longview, Texas ......... 107 KETK Pending (n) 56 NBC 3 2 8/1/98 KLSB Pending (o) 19 NBC (p) 8/1/98 Peoria/Bloomington, Illinois ..................... 110 WYZZ O&O 43 FOX 4 4 12/1/05 Charleston, South Carolina..... 117 WMMP Pending (n) 36 UPN 5 5 12/1/04 WTAT Pending (r) 24 FOX 4 12/1/04 Utica, New York ............... 169 WFXV Pending (q) 33 FOX 4 3 6/1/99 WPNY Pending (q) 11 UPN 4 6/1/98 (f) Tuscaloosa, Alabama ........... 187 WDBB LMA (m) 17 WB 2 2 4/1/05
- ---------- (a) Rankings are based on the relative size of a station's DMA among the 211 generally recognized DMAs in the United States as estimated by Nielsen. (b) "O&O" refers to stations owned and operated by the Company, "LMA" refers to stations to which the Company provides programming services pursuant to an LMA and "Pending" refers to stations the Company has agreed to acquire. See "-- 1997 Acquisitions." (c) Represents the number of television stations designated by Nielsen as "local" to the DMA, excluding public television stations and stations which do not meet the minimum Nielsen reporting standards (weekly cumulative audience of at least 2.5%) for the Sunday-Saturday, 6:00 a.m. to 2:00 a.m. time period. (d) The rank of each station in its market is based upon the November 1997 Nielsen estimates of the percentage of persons tuned to each station in the market from 6:00 a.m. to 2:00 a.m., Sunday-Saturday. (e) Non-License Assets acquired from River City Broadcasting, L.P. ("River City") and option exercised to acquire License Assets. Will become owned and operated upon FCC approval of transfer of License Assets and closing of acquisition of License Assets. (f) License renewal application pending. (g) WTTK currently simulcasts all of the programming aired on WTTV and the station rank applies to the combined viewership of these stations. (h) "IND" or "Independent" refers to a station that is not affiliated with any of ABC, CBS, NBC, Fox, WB or UPN. (i) The Company has agreed to sell this station to a third party. (j) The Company has agreed to assign its right to program this station to the third party to whom the Company has agreed to sell WPTZ and WNNE. (k) WNNE currently simulcasts the programming broadcast on WPTZ. (l) This station began broadcast operations in August 1997 pursuant to program test authority and does not yet have a license. This station has not yet established a rank. (m) WDBB simulcasts the programming broadcast on WTTO. (n) This station will be owned upon the completion of the Max Media Acquisition. 3 (o) The Company will provide programming services to this station upon the completion of the Max Media Acquisition. (p) KLSB simulcasts the programming broadcast of KETK. (q) This station will be owned upon the completion of the Sullivan Acquisition. (r) The Company anticipates that it will provide programming services to this station upon the completion of the Sullivan Acquisition. (s) The Company has entered into an agreement to provide programming to this station effective upon termination of the HSR Act waiting period. The Company has also entered into an agreement to acquire this station's licensee. (t) This station has begun broadcast operations pursuant to program test authority and does not yet have a license. (u) WTTV will become an affiliate of WB effective April 6, 1998. (v) KSMO will become an affiliate of WB effective March 30, 1998. Operating Strategy The Company's television operating strategy includes the following key elements: Attracting Viewership - --------------------- The Company seeks to attract viewership and expand its audience share through selective, high-quality programming. Popular Programming. The Company believes that an important factor in attracting viewership to its stations is their network affiliations with Fox, WB, ABC, NBC, CBS and UPN. These affiliations enable the Company to attract viewers by virtue of the quality first-run original programming provided by these networks and the networks' promotion of such programming. The Company also seeks to obtain, at attractive prices, popular syndicated programming that is complementary to the station's network affiliation. Examples of popular syndicated programming obtained by the Company for broadcast on its Fox, WB and UPN affiliates and independent stations are "Mad About You," "Frasier," "The Simpsons," "Home Improvement" and "Seinfeld." In addition to network programming, the Company's ABC and CBS affiliates broadcast news magazine, talk show, and game show programming such as "Hard Copy," "Entertainment Tonight," "Regis and Kathie Lee," "Wheel of Fortune" and "Jeopardy." Children's Programming. The Company seeks to be a leader in children's programming in each of its respective DMAs. The Company's nationally recognized "Kids Club" was the forerunner and model for the Fox network-wide marketing efforts promoting children's programming. Sinclair carries the Fox Children's Network ("FCN") and WB and UPN children's programming, all of which include significant amounts of animated programming throughout the week. In those markets where the Company owns or programs ABC, NBC or CBS affiliates, the Company broadcasts those networks' animated programming during weekends. In addition to this animated programming, the Company broadcasts other forms of children's programming, which may be produced by the Company or by an affiliated network or supplied by a syndicated programmer. Counter-Programming. The Company's programming strategy on its Fox, WB, UPN and independent stations also includes "counter-programming," which consists of broadcasting programs that are alternatives to the types of programs being shown concurrently on competing stations. This strategy is designed to attract additional audience share in demographic groups not served by concurrent programming on competing stations. The Company believes that implementation of this strategy enables its stations to achieve competitive rankings in households in the 18-34, 18-49 and 25-54 demographics and to offer greater diversity of programming in each of its DMAs. Local News. The Company believes that the production and broadcasting of local news can be an important link to the community and an aid to the station's efforts to expand its viewership. In addition, local news programming can provide access to advertising sources targeted specifically to local news. The Company carefully assesses the anticipated benefits and costs of producing local news prior to introduction at a Company station because a significant investment in capital equipment is required and substantial operating expenses are incurred in introducing, developing and producing local news programming. The Company currently provides local news programming at WBFF and WNUV in Baltimore, WLFL in Raleigh/Durham, KDNL in St. Louis, KABB in San Antonio, KOVR in Sacramento, WPGH in Pittsburgh and WLOS in Asheville and Greenville/Spartanburg/Anderson. The Company also 4 broadcasts news programs on WDKY in Lexington, which are produced in part by the Company and in part through the purchase of production services from an independent third party, and on WTTV in Indianapolis, which are produced by a third party in exchange for a limited number of advertising spots. River City provides the Company certain services with respect to the production of news programming and on air talent on WTTE in Columbus. Pursuant to an agreement, River City provides these services to the Company in return for a fee equal to approximately $416,000 per year. The possible introduction of local news at the other Company stations is reviewed periodically. The Company's policy is to institute local news programming at a specific station only if the expected benefits of local news programming at the station are believed to exceed the associated costs after an appropriate start-up period. Popular Sporting Events. The Company attempts to capture a portion of advertising dollars designated to sports programming in selected DMAs. The Company's WB, UPN and independent stations generally face fewer restrictions on broadcasting live local sporting events than do their competitors that are affiliates of the major networks and Fox since affiliates of the major networks and Fox are subject to prohibitions against preemptions of network programming. The Company has been able to acquire the local television broadcast rights for certain sporting events, including NBA basketball, Major League Baseball, NFL football, NHL hockey, ACC basketball, Big Ten football and basketball, and SEC football. The Company seeks to expand its sports broadcasting in DMAs as profitable opportunities arise. In addition, the Company's stations that are affiliated with Fox, NBC, ABC and CBS broadcast certain Major League Baseball games, NFL football games and NHL hockey games as well as the Olympics and other popular sporting events. Innovative Local Sales and Marketing - ------------------------------------ The Company believes that it is able to attract new advertisers to its stations and increase its share of existing customers' advertising budgets by creating a sense of partnership with those advertisers. The Company develops such relationships by training its sales forces to offer new marketing ideas and campaigns to advertisers. These campaigns often involve the sponsorship by advertisers of local promotional events that capitalize on the station's local identity and programming franchises. For example, several of the Company's stations stage local "Kids Fairs" which allow station advertisers to reinforce their on-air advertising with their target audience. Through its strong local sales and marketing focus, the Company seeks to capture an increasing share of its revenues from local sources, which are generally more stable than national advertising. Control of Operating and Programming Costs - ------------------------------------------ By employing a disciplined approach to managing programming acquisition and other costs, the Company has been able to achieve operating margins that the Company believes are among the highest in the television broadcast industry. The Company has sought and will continue to seek to acquire quality programming for prices at or below prices paid in the past. As an owner or provider of programming services to a substantial number of television stations throughout the country, the Company believes that it is able to negotiate favorable terms for the acquisition of programming. Moreover, the Company emphasizes control of each of its stations' programming and operating costs through program-specific profit analysis, detailed budgeting, tight control over staffing levels and detailed long-term planning models. Attract and Retain High Quality Management - ------------------------------------------ The Company believes that much of its success is due to its ability to attract and retain highly skilled and motivated managers, both at the corporate and local station levels. A portion of the compensation provided to regional managers, general managers, sales managers and other station managers is based on their achieving certain operating results. The Company also provides its corporate and station managers with deferred compensation plans offering options to acquire Class A Common Stock. Community Involvement - --------------------- Each of the Company's stations actively participates in various community activities and offers many community services. The Company's activities include broadcasting programming of local interest and sponsorship of community and charitable events. The Company also encourages its station employ- 5 ees to become active members of their communities and to promote involvement in community and charitable affairs. The Company believes that active community involvement by its stations provides its stations with increased exposure in their respective DMAs and ultimately increases viewership and advertising support. Establish LMAs - -------------- The Company believes that it can attain significant growth in operating cash flow through the utilization of LMAs. By expanding its presence in a market in which it owns a station, the Company can improve its competitive position with respect to a demographic sector. In addition, by providing programming services to an additional station in a market, the Company is able to realize significant economies of scale in marketing, programming, overhead and capital expenditures. After giving effect to all pending acquisitions and dispositions, the Company will provide programming services pursuant to an LMA to an additional station in 18 of the 37 television markets in which the Company will own or program a station. Programming and Affiliations The Company continually reviews its existing programming inventory and seeks to purchase the most profitable and cost-effective syndicated programs available for each time period. In developing its selection of syndicated programming, the Company balances the cost of available syndicated programs with their potential to increase advertising revenue and the risk of their reduced popularity during the term of the program contract. The Company seeks to purchase only those programs with contractual periods that permit programming flexibility and which complement a station's overall programming strategy. Programs that can perform successfully in more than one time period are more attractive due to the long lead time and multi-year commitments inherent in program purchasing. Of the 35 stations owned or provided programming services by the Company, 11 stations are Fox affiliates, 10 stations are WB affiliates, four stations are ABC affiliates, two stations are NBC affiliates, two stations are UPN affiliates, and one station is a CBS affiliate. The networks produce and distribute programming in exchange for each station's commitment to air the programming at specified times and for commercial announcement time during the programming. In addition, networks other than Fox and UPN pay each affiliated station a fee for each network-sponsored program broadcast by the stations. On August 21, 1996, the Company entered into an agreement with Fox (the "Fox Agreement") which, among other things, provides that the affiliation agreements between Fox and eight stations owned or provided programming services by the Company (except as noted below) would be amended to have new five-year terms commencing on the date of the Fox Agreement. Fox has the option to extend the affiliation agreements for additional five-year terms and must extend all of the affiliation agreements if it extends any (except that Fox may selectively renew affiliation agreements if any station has breached its affiliation agreement). The Fox Agreement also provides that the Company will have the right to purchase, for fair market value, any station Fox acquires in a market currently served by a Company-owned Fox affiliate (other than the Norfolk, Virginia and Raleigh/Durham, North Carolina markets) if Fox determines to terminate the affiliation agreement with the Company's station in that market and operate the station acquired by Fox as a Fox affiliate. The Fox Agreement confirmed that the affiliation agreements for WTVZ-TV (Norfolk) and WLFL-TV (Raleigh/Durham) will terminate on August 31, 1998. The Fox Agreement also includes provisions limiting the ability of the Company to preempt Fox programming except where it has existing programming conflicts or where the Company preempts to serve a public purpose. On July 4, 1997, the Company entered into the WB Agreement, pursuant to which the Company agreed that certain stations affiliated with UPN would terminate their affiliations with UPN at the end of the current affiliation term in January 1998, and would enter into affiliation agreements with WB effective as of that date. With respect to the following stations, the Company did not renew their affiliation agreements with UPN when their agreements expired on January 15, 1998: WCWB-TV, Pittsburgh, Pennsylvania, WNUV-TV, Baltimore, Maryland, WSTR-TV, Cincinnati, Ohio, KRRT-TV, San Antonio, Texas, KOCB-TV, Oklahoma City, Oklahoma, KSMO-TV, Kansas City, Missouri, KUPN-TV, Las 6 Vegas, Nevada, WCGV-TV, Milwaukee, Wisconsin, and WABM-TV, Birmingham, Alabama. Additionally, the Company cancelled its UPN affiliation agreement with WTTV-TV/WTTK-TV, Indianapolis, Indiana. These stations (other than WCGV-TV, and WABM-TV, which will either operate as independents or enter into new affiliation agreements with WB or another network) entered into ten-year affiliation agreements with WB which became effective on January 16, 1998 (other than WTTV-TV/ WTTK-TV, with respect to which the affiliation agreement is expected to begin April 6, 1998 and KSMO-TV, with respect to which the affiliation agreement is expected to begin March 30, 1998). Pursuant to the WB Agreement, the WB affiliation agreements of WVTV-TV, Milwaukee, Wisconsin, and WTTO-TV, Birmingham, Alabama (whose programming is simulcast on WDBB-TV, Tuscaloosa, Alabama), have been extended to January 16, 2008. In addition, WFBC-TV in the Asheville, North Carolina and Greenville/Spartanburg/Anderson, South Carolina market will become affiliated with WB on November 1, 1999 when WB's current affiliation with another station in that market expires. WTVZ-TV, Norfolk, Virginia and WLFL-TV, Raleigh/Durham North Carolina, will become affiliated with WB when their affiliations with Fox expire. These Fox affiliations are scheduled to expire on August 31, 1998. Under the terms of the WB Agreement, WB has agreed to pay the Company $64 million in aggregate amount in monthly installments during the first eight years commencing on January 16, 1998 in consideration for the Company's entering into affiliation agreements with WB. In addition, WB will be obligated to pay an additional $10 million aggregate amount in monthly installments in each of the following two years provided that WB is in the business of supplying programming as a television network during each of those years. The affiliation agreements relating to stations that have been acquired by the Company are terminable by the network upon transfer to the Company of the License Assets of the station. The Company does not seek consents of the affected network to the transfer of License Assets in connection with its acquisitions. As of the date of this Form 10-K, no network has terminated an affiliation agreement following transfer of License Assets to the Company. RADIO BROADCASTING The following table sets forth certain information regarding the radio stations (i) owned and/or operated by the Company or (ii) which the Company has an option or has agreed to acquire:
RANKING OF STATION RANK EXPIRATION GEOGRAPHIC STATION'S PRIMARY IN PRIMARY DATE MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC OF FCC SERVED/STATION (A) REVENUE (B) FORMAT TARGET (C) TARGET (D) LICENSE - ----------------------------- ------------- --------------------------- -------------- -------------- ----------- Los Angeles, California ..... 1 KBLA-AM(e) Korean N/A N/A 12/1/05 St. Louis, Missouri ......... 18 KPNT-FM Alternative Rock Adults 18-34 2 2/1/05 WVRV-FM Modern Adult Contemporary Adults 18-34 7 12/1/04 WRTH-AM Adult Standards Adults 25-54 23 2/1/05 WIL-FM Country Adults 25-54 1 2/1/05 KIHT-FM 70s Rock Adults 25-54 9 2/1/05 Portland, Oregon ............ 22 KKSN-AM (h) Adult Standards Adults 25-54 22 2/1/06 KKSN-FM (h)(u) 60s Oldies Adults 25-54 1 2/1/06 KKRH-FM (h)(u) 70s Rock Adults 25-54 9 2/1/06 Kansas City, Missouri ....... 29 KCAZ-AM (e)(t) Childrens N/A N/A 6/1/05 KCFX-FM 70s Rock Adults 25-54 2 2/1/05 KQRC-FM Active Rock Adults 18-34 2 6/1/05 KCIY-FM Smooth Jazz Adults 25-54 9 2/1/05 KXTR-FM Classical Adults 25-54 13 2/1/05 Milwaukee, Wisconsin ........ 32 WEMP-AM 60s Oldies Adults 25-54 24 12/1/04 WMYX-FM Adult Contemporary Adults 25-54 6 12/1/04 WAMG-FM Rhythmic Adults 25-54 11 12/1/04
7
RANKING OF STATION RANK EXPIRATION GEOGRAPHIC STATION'S PRIMARY IN PRIMARY DATE MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC OF FCC SERVED/STATION (A) REVENUE (B) FORMAT TARGET (C) TARGET (D) LICENSE - ------------------------------- ------------- -------------------------- -------------- -------------- ------------ Nashville, Tennessee .......... 34 WLAC-FM (h) Adult Contemporary Women 25-54 8 8/1/04 WJZC-FM (h) Smooth Jazz Women 25-54 8 8/1/04 WLAC-AM (h) News/Talk/Sports Adults 35-64 8 8/1/04 New Orleans, Louisiana(r) ..... 38 WLMG-FM Adult Contemporary Women 25-54 3 6/1/04 KMEZ-FM Urban Oldies Women 25-54 12 6/1/04 WWL-AM News/Talk/Sports Adults 35-64 2 6/1/04 WSMB-AM Talk/Sports Adults 35-64 17 6/1/04 WBYU-AM (g) Adult Standards Adults 25-54 16 6/1/04 WEZB-FM (g)(i) Adult Contemporary Adults 25-54 9 6/1/04 WRNO-FM (g) 70s Rock Adults 25-54 7 6/1/04 WLTS-FM(p) Adult Contemporary Women 25-54 5 6/1/04 WTKL-FM(p) Oldies Adults 25-54 5 6/1/04 Memphis, Tennessee ............ 40 WRVR-FM Soft Adult Contemporary Women 25-54 1 8/1/04 WJCE-AM Urban Oldies Women 25-54 19 8/1/04 WOGY-FM Country Adults 25-54 9 8/1/04 Norfolk, Virginia(r) .......... 41 WGH-AM Sports Talk Country Adults 25-54 18 10/1/03 WGH-FM Country Adults 25-54 3 10/1/03 WVCL-FM (j) 60s Oldies Adults 25-54 9 10/1/03 WFOG-FM (o) Soft Adult Contemporary Women 25-54 4 10/1/03 WPTE-FM (o) Adult Contemporary Adults 18-34 3 10/1/03 WWDE-FM (o) Adult Contemporary Women 25-54 4 10/1/03 WNVZ-FM (o) Contemporary Hit Radio Women 18-49 2 10/1/03 Buffalo, New York ............. 42 WMJQ-FM Adult Contemporary Women 25-54 3 6/1/98 WKSE-FM Contemporary Hit Radio Women 18-49 2 6/1/98 WBEN-AM News/Talk/Sports Adults 35-64 3 6/1/98 WWKB-AM Country Adults 35-64 18 6/1/98 WGR-AM Sports Adults 25-54 10 6/1/98 WWWS-AM Urban Oldies Adults 25-54 14 6/1/98 Greensboro/Winston Salem/High Point, North Carolina ............. 52 WMQX-FM (o) Oldies Adults 25-54 5 12/1/03 WQMG-FM (o) Urban Adult Contemporary Adults 25-54 4 12/1/03 WJMH-FM (o) Urban Adults 18-34 1 12/1/03 WQMG-AM (o) Gospel Adults 35-64 9 12/1/03 Rochester, New York ........... 53 WBBF-AM (h) Adult Standards Adults 25-54 13 6/1/98 WBEE-FM (h) Country Adults 25-54 1 6/1/98 WKLX-FM (h) 60s Oldies Adults 25-54 6 6/1/98 WQRV-FM (h) Classic Hits Adults 25-54 12 6/1/98 Asheville, North Carolina Greenville/Spartanburg, South Carolina .............. 60 WFBC-FM(k) Contemporary Hit Radio Women 18-49 2 12/1/03 WORD-AM (k) News/Talk Adults 35-64 8 12/1/03 WYRD-AM (k) News/Talk Adults 35-64 14 12/1/03 WSPA-AM (k) Full Service/Talk Adults 35-64 21 12/1/03 WSPA-FM (k) Soft Adult Contemporary Women 25-54 1 12/1/03 WOLI-FM (k) Oldies Adults 25-54 12 12/1/03 WOLT-FM (k) Oldies Adults 25-54 16 12/1/03
8
RANKING OF STATION RANK EXPIRATION GEOGRAPHIC STATION'S PRIMARY IN PRIMARY DATE MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC OF FCC SERVED/STATION (A) REVENUE (B) FORMAT TARGET (C) TARGET (D) LICENSE - ------------------------ ------------- ------------------------ -------------- -------------- ------------ Wilkes-Barre/Scranton, Pennsylvania .......... 68 WKRZ-FM (l) Contemporary Hit Radio Adults 18-49 1 8/1/98 WGGY-FM Country Adults 25-54 3 8/1/98 WGGI-FM(q) Country Adults 25-54 21 8/1/98 WILK-AM (m) News/Talk/Sports Adults 35-64 5 8/1/98 WGBI-AM (m) News/Talk/Sports Adults 35-64 35 8/1/98 WWSH-FM (n) Soft Hits Women 25-54 23 8/1/98 WILP-AM (m) News/Talk/Sports Adults 35-64 40 8/1/98 WWFH-FM (n) Soft Hits Women 25-54 12 8/1/98 WKRF-FM (l) Contemporary Hit Radio Adults 18-49 30 8/1/98 WILT-AM(m)(s) News/Talk/Sports Adults 35-64 40 8/1/98
- ---------- (a) Actual city of license may differ from the geographic market served. (b) Ranking of the principal radio market served by the station among all U.S. radio markets by 1996 aggregate gross radio broadcast revenue according to Duncan's Radio Market Guide -- 1997 Edition. (c) Due to variations that may exist within programming formats, the primary demographic target of stations with the same programming format may be different. (d) All information concerning ratings and audience listening information is derived from the Fall 1997 Arbitron Metro Area Ratings Survey (the "Fall 1997 Arbitron"). Arbitron is the generally accepted industry source for statistical information concerning audience ratings. Due to the nature of listener surveys, other radio ratings services may report different rankings; however, the Company does not believe that any radio ratings service other than Arbitron is accorded significant weight in the radio broadcast industry. "Station Rank in Primary Demographic Target" is the ranking of the station among all radio stations in its market that are ranked in its target demographic group and is based on the station's average persons share in the primary demographic target in the applicable Metro Survey Area. Source: Average Quarter Hour Estimates, Monday through Sunday, 6:00 a.m. to midnight, Fall 1997 Arbitron. (e) Programming is provided to this station by a third party pursuant to an LMA. (f) License renewal application pending. (g) The Company has the right to acquire the assets of this station in the Heritage Acquisition, subject to FCC approval, and has an agreement to sell such assets to a third party. (h) The Company has agreed to sell this station to a third party, which currently programs the station pursuant to an LMA. (i) An application for review of the grant of this station's license renewal is pending. (j) EEO reporting conditions for 1997, 1998 and 1999 were placed on this station's most recent license renewal. (k) The Company has exercised its option to acquire Keymarket of South Carolina, Inc. ("Keymarket" or "KSC"), which owns and operates WYRD-AM, WORD-AM and WFBC-FM, and provides sales services pursuant to a JSA or LMA and has an option to acquire WOLI-FM and WOLT-FM. The Company has also agreed to acquire WSPA-AM and WSPA-FM, which KSC programs pursuant to an LMA. FCC approval of the Company's acquisition of WYRD-AM, WORD-AM, WFBC-FM, WSPA-AM, and WSPA-FM is pending. (l) WKRZ-FM and WKRF-FM simulcast their programming. (m) WILK-AM, WGBI-AM, WILP-AM and WILT-AM simulcast their programming. (n) WWSH-FM and WWFH-FM simulcast their programming. (o) The Company has the right to acquire this radio station in conjunction with the Max Media Acquisition. (p) The Company provides sales and programming services to this station pursuant to an LMA and has an option to acquire substantially all the assets of this station. (q) The Company provides sales and programming services to this radio station pursuant to an LMA and has received FCC approval to acquire substantially all the assets of this station. (r) The Company intends to sell two FM stations and one AM station in the New Orleans market and two FM stations in the Norfolk market in order to comply with current FCC or DOJ guidelines. (s) The Company provides sales and programming services to this station pursuant to an LMA. 9 (t) A third party has exercised their option to purchase this station, the closing of which is subject to FCC approval. (u) A petition to deny the transfer of the licenses of these stations was filed with the FCC objecting to the acquisition of such licenses by the proposed assignee. Radio Operating Strategy The Company's radio strategy is to operate a cluster of radio stations in selected geographic markets throughout the country. In each geographic market, the Company employs broadly diversified programming formats to appeal to a variety of demographic groups within the market. The Company seeks to strengthen the identity of each of its stations through its programming and promotional efforts, and emphasizes that identity to a far greater degree than the identity of any local radio personality. The Company believes that its strategy of appealing to diverse demographic groups in selected geographic markets allows it to reach a larger share of the overall advertising market while realizing economies of scale and avoiding dependence on one demographic or geographic market. The Company realizes economies of scale by combining sales and marketing forces, back office operations and general management in each geographic market. At the same time, the geographic diversity of its portfolio of radio stations helps lessen the potential impact of economic downturns in specific markets and the diversity of target audiences served helps lessen the impact of changes in listening preferences. In addition, the geographic and demographic diversity allows the Company to avoid dependence on any one or any small group of advertisers. The Company's group of radio stations includes the top billing station group in four markets and one of the top three billing station groups in each of its markets other than Los Angeles, Milwaukee, Portland, Rochester and Nashville. Through ownership or LMAs, the group also includes duopolies in 12 of its 13 markets. Depending on the programming format of a particular station, there are a predetermined number of advertisements broadcast each hour. The Company determines the optimum number of advertisements available for sale during each hour without jeopardizing listening levels (and the resulting ratings). Although there may be shifts from time to time in the number of advertisements available for sale during a particular time of day, the total number of advertisements available for sale on a particular station normally does not vary significantly. Any change in net radio broadcasting revenue, with the exception of those instances where stations are acquired or sold, is generally the result of pricing adjustments made to ensure that the station effectively uses advertising time available for sale, an increase in the number of commercials sold or a combination of these two factors. Large, well-trained local sales forces are maintained by the Company in each of its radio markets. The Company's principal goal is to utilize its sales efforts to develop long-standing customer relationships through frequent direct contacts, which the Company believes provide it with a competitive advantage. Additionally, in some radio markets, duopolies permit the Company to offer creative advertising packages to local, regional and national advertisers. Each radio station owned by the Company also engages a national independent sales representative to assist it in obtaining national advertising revenues. These representatives obtain advertising through national advertising agencies and receive a commission from the radio station based on its gross revenue from the advertising obtained. BROADCASTING ACQUISITION STRATEGY On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act") was signed into law. The 1996 Act represents the most sweeping overhaul of the country's telecommunications laws since the Communications Act of 1934, as amended (the "Communications Act"). The 1996 Act relaxes the broadcast ownership rules and simplifies the process for renewal of broadcast station licenses. The Company believes that the enactment of the 1996 Act has presented a unique opportunity to build a larger and more diversified broadcasting company. Additionally, the Company expects that the opportunity to act as one of the consolidators of the industry will enable the Company to gain additional influence with program suppliers, television networks, other vendors, and alternative delivery media. 10 The additions to the Company's management team as a result of the River City Acquisition have given it additional resources to take advantage of these developments. In implementing its acquisition strategy, the Company seeks to identify and pursue favorable station or group acquisition opportunities primarily in the 15th to 75th largest DMAs and Metro Service Areas ("MSAs"). In assessing potential acquisitions, the Company examines opportunities to improve revenue share, audience share and/or cost control. Additional factors considered by the Company in a potential acquisition include geographic location, demographic characteristics and competitive dynamics of the market. The Company also considers the opportunity for cross-ownership of television and radio stations and the opportunity it may provide for cross-promotion and cross-selling. In conjunction with its acquisitions, the Company may determine that certain of the acquired stations may not be consistent with the Company's strategic plan. In such an event, the Company reviews opportunities for swapping such stations with third parties for other stations or selling such stations outright. The Heritage, Max Media, and Sullivan Acquisitions may provide such opportunities. Certain terms of the Company's acquisitions in 1998 and 1997, and other pending acquisitions, are described below. 1998 ACQUISITIONS Sullivan Acquisition. In February 1998, the Company entered into merger agreements by which the Company agreed to acquire all of the issued and outstanding capital stock of Sullivan Broadcast Holdings, Inc. ("Sullivan Holdings") and Sullivan Broadcasting Company II, Inc. ("Sullivan II" and, together with Sullivan Holdings, "Sullivan") for an aggregate purchase price expected to be approximately $950 million to $1 billion, less the amount of outstanding indebtedness of Sullivan Holdings assumed by the Company (the "Sullivan Acquisition"). The Sullivan Acquisition will be accomplished by two separate merger closings. At the initial closing, the Company will acquire all of the issued and outstanding capital stock of Sullivan Holdings, after which the Company will indirectly own all of the operating assets (excluding the License Assets) of, and pursuant to LMAs will provide programming services to, 13 additional television stations (the "Sullivan Stations") in the following markets: Nashville, Tennessee; Buffalo, New York; Oklahoma City, Oklahoma; Greensboro/Winston-Salem/High Point, North Carolina; Dayton, Ohio; Charleston/Huntington, West Virginia; Richmond, Virginia; Las Vegas, Nevada; Rochester, New York; Madison, Wisconsin; and Utica, New York. The purchase price to be paid at the initial closing will be based on a multiple of Sullivan's projected 1998 cash flow calculated as of the time of the initial closing. As part of the total consideration to be paid at the initial closing, the Company, at its option, may issue to the Sullivan shareholders up to $100 million of the Company's Class A Common Stock based on an average closing price of the Class A Common Stock. The initial closing is subject to termination of the applicable waiting period under the HSR Act and is expected to occur during the second quarter of 1998. At the second closing, the Company will acquire all of the issued and outstanding capital stock of Sullivan II. The second closing is subject to, among other things, FCC approval and is expected to close during the third quarter of 1998. FCC regulations require the Company to obtain waivers from the FCC of multiple ownership rules prior to the second closing. Although the Company is confident that it will receive FCC consents for the merger with Sullivan II, there can be no assurance that such consents will be obtained. After the second closing, the Company will indirectly own the License Assets of six of the 13 Sullivan Stations, and will continue to program the remaining seven Sullivan Stations pursuant to seven LMAs, five with Sullivan Broadcast Company III, Inc. ("Sullivan III"), which at the time of the second closing will hold the License Assets for such stations, and two with the existing owners of the License Assets of such stations. In connection with the Sullivan Acquisition, Glencairn, Ltd. ("Glencairn") has entered into a plan of merger with Sullivan III which, if completed, would result in Glencairn's ownership of all the issued and outstanding capital stock of Sullivan III. After the merger, the Company intends to enter into an 11 LMA with Glencairn and continue to provide programming services to the five stations the License Assets of which are acquired by Glencairn in the merger. Montecito Acquisition. In February 1998, the Company entered into an agreement to acquire all of the capital stock of Montecito for approximately $33 million. Montecito owns all of the issued and outstanding stock of Channel 33, Inc., which owns and operates KFBT-TV in Las Vegas, Nevada. Sinclair cannot acquire Montecito unless and until FCC rules permit Sinclair to own the broadcast license for more than one station in the Las Vegas market, or unless Sinclair no longer owns the broadcast license for KUPN-TV in Las Vegas. The Company will operate KFBT-TV through an LMA, upon expiration of the applicable HSR Act waiting period. The Company expects to be able to enter into the LMA in the second quarter of 1998. Columbus Purchase Option. In connection with the Company's 1996 acquisition of the radio and television broadcasting assets of River City Broadcasting, L.P. ("River City"), the Company acquired a three-year option to purchase the assets of WSYX-TV in Columbus, Ohio (the "Columbus Option"). The exercise price for the Columbus Option is approximately $100 million plus an amount of indebtedness relating to the WSYX-TV assets on the date of exercise (such indebtedness not to exceed $135 million). The exercise price is expected to be financed through borrowings under the Company's Bank Credit Agreement. Pursuant to the Columbus Option, the Company is required to make certain quarterly "Option Extension Fee" payments, as defined in the Columbus Option . These fees began December 31, 1996, and continue until the exercise price on the Columbus Option is paid. The Option Extension Fees are calculated as 8% per annum of the option exercise price through the first anniversary of the date of grant, 15% per annum of the option exercise price through the second anniversary of the date of grant and 25% per annum of the option exercise price thereafter. As of December 31, 1997, the Company incurred Option Extension Fees and other costs relating to WSYX-TV totaling $22.9 million. The Company currently intends to pay $100 million of the option exercise price prior to May 31, 1998 (the date on which the Option Extension fee of 25% per annum goes into effect) in order to extinguish the Company's obligations to make continuing Option Extension Fee payments. Due to the Company's ownership of another television station in the Columbus, Ohio market, the Antitrust Division of the DOJ is currently reviewing the Company's acquisition of and the right to operate WSYX-TV pursuant to an LMA. The Company has entered into an agreement with the DOJ pursuant to which the Company is required to notify the DOJ 10 business days before it begins programming WSYX-TV pursuant to on LMA or exercises the Columbus Option or enters into a LMA with respect to WSYX-TV, which will give the DOJ the opportunity to enjoin the Company's action, if it chooses to do so. The Company has agreed to sell the License Assets of WTTE-TV in Columbus, Ohio to Glencairn and to enter into an LMA with Glencairn to provide programming services to WTTE-TV. The FCC has approved this transaction, but the Company does not believe that this transaction will be completed unless the Company acquires WSYX-TV. Other Dispositions. The Company has entered into on agreement to sell three radio stations in the Nashville, Tennessee market for approximately $35 million. The Company expects the closing to occur in the fourth quarter of 1998. 1997 ACQUISITIONS Max Media Acquisition. On December 2, 1997, the Company entered into agreements to acquire, directly or indirectly, all of the equity interests of Max Media. As a result of this transaction, the Company will acquire, or acquire the right to program pursuant to LMAs, nine television stations and eight radio stations in eight markets. The television stations serve the following markets: Dayton, Ohio; Syracuse, New York; Paducah, Kentucky and Cape Girardeau, Missouri; Tri-Cities, Tennessee/Virginia; Tyler/Longview, Texas; and Charleston, South Carolina. The radio stations serve the Norfolk, Virginia and Greensboro/Winston Salem/High Point, North Carolina markets. The aggregate purchase price is approximately $255 million payable in cash at closing (less a deposit of $12.8 million paid at the time of signing the acquisition agreement), a portion of which will be used to retire existing debt of Max Media at closing. Max Media's television station WKEF-TV in Dayton, Ohio has an overlapping service area with the Company's television stations WTTE-TV in Columbus, Ohio and WSTR-TV in Cincinnati, 12 Ohio as well as with Company LMA station WTTV-TV in Indianapolis, Indiana. In addition, Max Media's television station WEMT-TV in Tri-Cities, Tennessee/Virginia has an overlapping service area with the Company's television station WLOS-TV in Asheville, North Carolina and Greenville/ Spartanburg/Anderson, South Carolina and Max Media's television station KBSI-TV in Paducah, Kentucky and Cape Girardeau, Missouri has an overlapping service area with the Company's television station KDNL-TV in St. Louis, Missouri. Furthermore, the Company owns a television station and three radio stations in the Norfolk, Virginia market, where four of Max Media's radio stations are located. Consequently, the Company has requested various waivers from the FCC to allow the Company to complete the Max Media Acquisition. There can be no assurance that such waivers will be granted. As a result of the Max Media Acquisition and the Heritage Acquisition, the Company intends to dispose of two of the FM radio stations in the Norfolk, Virginia radio market that it has agreed to acquire from Heritage and Max Media in order to be in compliance with the FCC regulations that limit the number of radio stations that can be owned in a market. The Company has sought FCC approval to assign the licenses of such radio stations and an additional radio station it presently owns in the Norfolk, Virginia market to an independent trustee. The Max Media Acquisition is subject to approval by the FCC and termination of the applicable waiting period under the HSR Act, and is expected to close in the second quarter of 1998. The transaction is expected to be financed through borrowings under the Company's Bank Credit Agreement. Lakeland Acquisition. On November 14, 1997, the Company entered into a definitive agreement to acquire 100% of the stock of Lakeland Group Television, Inc. In the Lakeland Acquisition, the Company will acquire television station KLGT in Minneapolis/St. Paul, Minnesota. The purchase price is approximately $50 million in cash plus the assumption of certain indebtedness of Lakeland not to exceed $2.5 million. KLGT-TV, Channel 23, is the WB affiliate in Minneapolis, the nation's 14th largest market. The Company intends to finance the purchase price from borrowings under the Bank Credit Agreement. The Lakeland Acquisition is subject to, among other things, approval by the FCC and termination of the applicable waiting period under the HSR Act, and is expected to close in the first or second quarter of 1998. Heritage Acquisition. On July 16, 1997, the Company entered into the Heritage Acquisition Agreements with certain subsidiaries of Heritage. The aggregate purchase price of the Heritage Acquisition is approximately $630 million, less deposits paid of $65.5 million and amounts paid in January 1998 relating to the closing of certain television assets of $215 million. Pursuant to the Heritage Acquisition Agreements, the Company obtained the right to acquire the assets of five television stations (the interests in three of which the Company has agreed to dispose or described herein), programming rights under LMAs with respect to two additional television stations (one of which the Company has agreed to dispose as described herein), and the assets of 24 radio stations (11 of which the Company has agreed to dispose as described herein). On January 29, 1998, the Company closed on the acquisitions of the Heritage television stations serving the Charleston/Huntington market, Mobile and Pensacola market and the Oklahoma City market for an aggregate purchase price of $215 million. Simultaneously with the closing, the Company disposed of television station KOKH-TV in Oklahoma City to Sullivan Broadcasting Company, Inc. for an aggregate sale price of $60 million. Also simultaneously with the closing, the Company entered into purchase option agreements pursuant to which the Company has the option to acquire KOKH-TV from Sullivan for an aggregate purchase price of $60 million and Sullivan has the option to acquire from the Company television station WCHS-TV in the Charleston/Huntington, West Virginia market for an aggregate purchase price of $30 million. In consideration for the execution of the purchase option agreements, the Company made an option grant payment to Sullivan of $45 million and Sullivan made an option grant payment to the Company of $15 million. In connection with the Sullivan Acquisition, the Company will reacquire KOKH-TV. On February 27, 1998 the Company closed on its acquisition of all of the Heritage radio stations except the three stations in the New Orleans market. On March 6, 1998, the Company closed on the acquisition of the Heritage television stations serving the Burlington, Vermont and Plattsburgh, New York market for an aggregate purchase price of $75 million. In January 1998, the Company entered into an agreement with Entercom pursuant to which the Company will sell to Entercom the Portland, Oregon and Rochester, New York radio stations which the 13 Company acquired from Heritage for an aggregate sales price of approximately $126.5 million. Subject to approval by the FCC and termination of the applicable waiting period under the HSR Act, the Company anticipates it will close on the sale of the Portland and Rochester radio stations to Entercom during the second quarter of 1998. Entercom is operating these stations pursuant to an LMA pending closing of the sale. In February 1998, the Company entered into an agreement with STC pursuant to which STC has agreed to acquire the License and Non-License Assets of Burlington, Vermont and Plattsburgh, New York television stations WPTZ-TV, WNNE-TV, and the Non-License Assets of WFFF-TV for $75 million. The Company expects to close the sale to STC during the second quarter of 1998 subject to, among other conditions, approval by the FCC and termination of the applicable waiting period under the HSR Act. Acquisition of the Heritage radio stations in the New Orleans market is conditioned on, among other things, FCC approval and the expiration of the applicable waiting period under the HSR Act. The Company has entered into an agreement to divest certain radio stations it owns or has the right to acquire in the New Orleans market and expects to receive FCC approval and clearance under the HSR Act in connection with such disposition. In addition, the Company intends to dispose of two of the FM radio stations in the Norfolk, Virginia radio market that it has agreed to acquire from Heritage and Max Media in order to be in compliance with FCC regulations that limit the number of radio stations that can be owned in a market. See "-- Max Media Acquisition." A third party has also exercised its option to acquire from the Company radio station KCAZ in Kansas City, Missouri. Las Vegas Acquisition. On January 30, 1997, the Company entered into an agreement to acquire the assets of KUPN-TV, the UPN affiliate in Las Vegas, Nevada, for approximately $87.0 million. The Company completed this acquisition on May 30, 1997. ONGOING DISCUSSIONS In furtherance of its acquisition strategy, the Company routinely reviews and conducts investigations of potential television, radio station and related businesses acquisitions. When the Company believes a favorable opportunity exists, the Company seeks to enter into discussions with the owners of such businesses regarding the possibility of an acquisition, disposition or station swap. At any given time, the Company may be in discussions with one or more such business owners. The Company is in serious negotiations with various parties relating to the disposition and acquisition of television, radio and related properties which would be disposed of and acquired for aggregate consideration of approximately $75 million and $60 million, respectively. There can be no assurance that any of these or other negotiations will lead to definitive agreement or, if agreements are reached, that any transactions would be consummated. LOCAL MARKETING AGREEMENTS The Company currently has LMA arrangements with television stations in nine markets in which it owns a television station: Pittsburgh, Pennsylvania (WCWB), Baltimore, Maryland (WNUV), Raleigh/ Durham, North Carolina (WRDC), Milwaukee, Wisconsin (WVTV), Birmingham, Alabama (WABM), San Antonio, Texas (KRRT), Asheville, North Carolina and Greenville/Spartanburg/Anderson, South Carolina (WFBC), Mobile, Alabama and Pensacola, Florida (WFGX), and Burlington, Vermont and Plattsburgh, New York (WFFF). The Company will provide programming under an LMA to a station in a tenth market where it owns a television station (KFBT, Las Vegas) upon expiration of the applicable HSR Act waiting period. In addition, the Company has an LMA arrangement with a station in the Tuscaloosa, Alabama market (WDBB), which is adjacent to Birmingham. In each of these markets other than Pittsburgh, Tuscaloosa, Mobile and Pensacola, Las Vegas and Burlington and Plattsburgh, the LMA arrangement is with Glencairn and the Company owns the Non-License Assets of the stations. The Company also has LMA arrangements with radio stations in two markets in which it owns radio stations, Wilkes-Barre/Scranton, Pennsylvania and New Orleans, Louisiana. In addition, the Company entered into two LMAs with respect to WTTV and WTTK in Indianapolis, Indiana. At the Company's request, the FCC has withheld action on an application for the Company's acquisition of WTTV and 14 WTTK in Indianapolis (and a pending application for the Controlling Stockholders to divest their attributable interests in WIIB) until the FCC completes its pending rulemaking proceeding considering the cross-interest policy. In addition, in connection with the pending acquisitions, the Company will enter into certain LMAs. See "-- 1998 Acquisitions and "-- 1997 Acquisitions." The Company believes that it is able to increase its revenues and improve its margins by providing programming services to stations in selected DMAs and MSAs where the Company already owns a station. In certain instances, single station operators and stations operated by smaller ownership groups do not have the management expertise or the operating efficiencies available to the Company as a multi-station broadcaster. The Company seeks to identify such stations in selected markets and to provide such stations with programming services pursuant to LMAs. In addition to providing the Company with additional revenue opportunities, the Company believes that these LMA arrangements have assisted certain stations whose operations may have been marginally profitable to continue to air popular programming and contribute to diversity of programming in their respective DMAs and MSAs. In many cases where the Company enters into LMA arrangements in connection with a station whose acquisition by the Company is pending FCC approval, the Company (i) obtains an option to acquire the station assets essential for broadcasting a television or radio signal in compliance with regulatory guidelines, generally consisting of the FCC license, transmitter, transmission lines, technical equipment, call letters and trademarks, and certain furniture, fixtures and equipment (the "License Assets") and (ii) acquires the remaining assets (the "Non-License Assets") at the time it enters into the option. Following acquisition of the Non-License Assets, the License Assets continue to be owned by the owner-operator and holder of the FCC license, which enters into an LMA with the Company. After FCC approval for transfer of the License Assets is obtained, the Company exercises its option to acquire the License Assets and become the owner-operator of the station, and the LMA arrangement is terminated. USE OF DIGITAL TELEVISION TECHNOLOGY The Company believes that television broadcasting may be enhanced significantly by the development and increased availability of digital broadcasting service technology. This technology has the potential to permit the Company to provide viewers multiple channels of digital television over each of its existing standard channels, to provide certain programming in a high definition television format and to deliver various forms of data, including data on the Internet, to home and business computers. These additional capabilities may provide the Company with additional sources of revenue, although the Company may be required to incur significant additional costs in connection therewith. The Company is currently considering plans to provide high definition television ("HDTV"), to provide multiple channels of television including the provision of additional broadcast programming and transmitted data on a subscription basis, and to continue its current TV program channels on its allocated digital television ("DTV") channels. The FCC has granted authority for the Company to conduct experimental DTV multicasting operations in Baltimore, Maryland. The 1996 Act allows the FCC to charge a spectrum fee to broadcasters who use the digital spectrum to offer subscription-based services, and the FCC has opened a rulemaking to consider the spectrum fees to be charged to broadcasters for such use. In addition, Congress has held hearings on broadcasters' plans for the use of their digital spectrum. The Company cannot predict what future actions the FCC or Congress might take with respect to DTV, nor can it predict the effect of the FCC's present DTV implementation plan or such future actions on the Company's business. DTV technology is not currently available to the viewing public and a successful transition from the current analog broadcast format to a digital format may take many years. There can be no assurance that the Company's efforts to take advantage of the new technology will be commercially successful. FEDERAL REGULATION OF TELEVISION AND RADIO BROADCASTING The ownership, operation and sale of television and radio stations are subject to the jurisdiction of the FCC, which acts under authority granted by the Communications Act. Among other things, the FCC assigns frequency bands for broadcasting; determines the particular frequencies, locations and operating power of stations; issues, renews, revokes and modifies station licenses; regulates equipment used by stations; adopts and implements regulations and policies that directly or indirectly affect the ownership, 15 operation and employment practices of stations; and has the power to impose penalties for violations of its rules or the Communications Act. The following is a brief summary of certain provisions of the Communications Act, the 1996 Act and specific FCC regulations and policies. Reference should be made to the Communications Act, the 1996 Act, FCC rules and the public notices and rulings of the FCC for further information concerning the nature and extent of federal regulation of broadcast stations. License Grant and Renewal. Television and radio stations operate pursuant to broadcasting licenses that are granted by the FCC for maximum terms of eight years. Television and radio station licenses are subject to renewal upon application to the FCC. During certain periods when renewal applications are pending, competing applicants may file for the radio or television frequency being used by the renewal applicant. During the same periods, petitions to deny license renewal applications may be filed by interested parties, including members of the public. The FCC is required to hold hearings on renewal applications if it is unable to determine that renewal of a license would serve the public interest, convenience and necessity, or if a petition to deny raises a "substantial and material question of fact" as to whether the grant of the renewal application would be prima facie inconsistent with the public interest, convenience and necessity. However, the FCC is prohibited from considering competing applications for a renewal applicant's frequency, and is required to grant the renewal application, if the FCC finds: (i) that the station has served the public interest, convenience and necessity; (ii) that there have been no serious violations by the licensee of the Communications Act or the rules and regulations of the FCC; and (iii) that there have been no other violations by the licensee of the Communications Act or the rules and regulations of the FCC that, when taken together, would constitute a pattern of abuse. All of the stations that the Company currently owns and operates or provides programming services to pursuant to LMAs, or intends to acquire or provide programming services pursuant to LMAs in connection with pending acquisitions, are presently operating under regular licenses, which expire as to each station on the dates set forth under "-- Television Broadcasting" and "-- Radio Broadcasting," above. Although renewal of license is granted in the vast majority of cases even when petitions to deny are filed, there can be no assurance that the licenses of such stations will be renewed. Ownership Matters General - ------- The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to permit the assignment or transfer of control of, or the grant or renewal of, a broadcast license, the FCC considers a number of factors pertaining to the licensee, including compliance with various rules limiting common ownership of media properties, the "character" of the licensee and those persons holding "attributable" interests therein, and compliance with the Communications Act's limitations on alien ownership. To obtain the FCC's prior consent to assign a broadcast license or transfer control of a broadcast licensee, an appropriate application must be filed with the FCC. If the application involves a "substantial change" in ownership or control, the application must be placed on public notice for a period of approximately 30 days during which petitions to deny the application may be filed by interested parties, including members of the public. If the application does not involve a "substantial change" in ownership or control, it is a "pro forma" application. The "pro forma" application is not subject to petitions to deny or a mandatory waiting period, but is nevertheless subject to having informal objections filed against it. If the FCC grants an assignment or transfer application, interested parties have approximately 30 days from public notice of the grant to seek reconsideration or review of that grant. Generally, parties that do not file initial petitions to deny or informal objections against the application face difficulty in seeking reconsideration or review of the grant. The FCC normally has approximately an additional 10 days to set aside such grant on its own motion. When passing on an assignment or transfer application, the FCC is prohibited from considering whether the public interest might be served by an assignment or transfer to any party other than the assignee or transferee specified in the application. 16 The FCC generally applies its ownership limits to "attributable" interests held by an individual, corporation, partnership or other association. In the case of corporations holding, or through subsidiaries controlling, broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporation's stock (or 10% or more of such stock in the case of insurance companies, investment companies and bank trust departments that are passive investors) are generally attributable, except that, in general, no minority voting stock interest will be attributable if there is a single holder of more than 50% of the outstanding voting power of the corporation. The FCC has pending a rulemaking proceeding that, among other things, seeks comment on whether the FCC should modify its attribution rules by (i) raising the attribution stock benchmark from 5% to 10%; (ii) raising the attribution stock benchmark for passive investors from 10% to 20%; (iii) restricting the availability of the single majority shareholder exemption; and (iv) attributing certain interests such as non-voting stock, debt and certain holdings by limited liability corporations in certain circumstances. More recently, the FCC has solicited comment on proposed rules that would (i) treat an otherwise nonattributable equity or debt interest in a licensee as an attributable interest where the interest holder is a program supplier or the owner of a broadcast station in the same market and the equity and/or debt holding is greater than a specified benchmark; (ii) treat a licensee of a television station which, under an LMA, brokers more than 15% of the time on another television station serving the same market, as having an attributable interest in the brokered station; and (iii) in certain circumstances, treat the licensee of a broadcast station that sells advertising time on another station in the same market pursuant to a JSA as having an attributable interest in the station whose advertising is being sold. The Controlling Stockholders hold attributable interests in two entities owning media properties, namely: Channel 63, Inc., licensee of WIIB-TV, a UHF television station in Bloomington, Indiana, and Bay Television, Inc., licensee of WTTA-TV, a UHF television station in St. Petersburg, Florida. All of the issued and outstanding shares of Channel 63, Inc. are owned by the Controlling Stockholders. All of the issued and outstanding shares of Bay Television, Inc. are owned by the Controlling Stockholders (75%) and Robert L. Simmons (25%), a former stockholder of the Company. The Controlling Stockholders have agreed to divest their attributable interests in Channel 63, Inc. and the Company believes that, after doing so, such holdings will not materially restrict its ability to acquire or program additional broadcast stations. Under its "cross-interest" policy, the FCC considers certain "meaningful" relationships among competing media outlets in the same market, even if the ownership rules do not specifically prohibit the relationship. Under this policy, the FCC may consider significant nonattributable equity or debt interests in a media outlet combined with an attributable interest in another media outlet in the same market, joint ventures, and common key employees among competitors. The cross-interest policy does not necessarily prohibit all of these interests, but requires that the FCC consider whether, in a particular market, the "meaningful" relationships between competitors could have a significant adverse effect upon economic competition and program diversity. Heretofore, the FCC has not applied its cross-interest policy to LMAs and JSAs between broadcast stations. In its ongoing rulemaking proceeding concerning the attribution rules, the FCC has sought comment on, among other things, (i) whether the cross-interest policy should be applied only in smaller markets, and (ii) whether non-equity financial relationships such as debt, when combined with multiple business interrelationships such as LMAs and JSAs, raise concerns under the cross-interest policy. Moreover, in its most recent proposals in its ongoing attribution rulemaking proceeding, the FCC has proposed treating television LMAs, television and radio JSAs, and presently nonattributable debt or equity interests as attributable interests in certain circumstances without regard to the cross-interest policy. The Communications Act prohibits the issuance of broadcast licenses to, or the holding of a broadcast license by, any corporation of which more than 20% of the capital stock is owned of record or voted by non-U.S. citizens or their representatives or by a foreign government or a representative thereof, or by any corporation organized under the laws of a foreign country (collectively, "Aliens"). The Communications Act also authorizes the FCC, if the FCC determines that it would be in the public interest, to prohibit the issuance of a broadcast license to, or the holding of a broadcast license by, any corporation directly or indirectly controlled by any other corporation of which more than 25% of the capital stock is owned of record or voted by Aliens. The Company has been advised that the FCC staff has interpreted this provision to require a finding that such grant or holding would be in the public interest before a broadcast license may be granted to or held by any such corporation and that the FCC staff has made such a finding only in limited 17 circumstances. The FCC has issued interpretations of existing law under which these restrictions in modified form apply to other forms of business organizations, including partnerships. As a result of these provisions, the licenses granted to Subsidiaries of the Company by the FCC could be revoked if, among other restrictions imposed by the FCC, more than 25% of the Company's stock were directly or indirectly owned or voted by Aliens. The Company and the Subsidiaries are domestic corporations, and the Controlling Stockholders are all United States citizens. The Amended and Restated Articles of Incorporation of the Company (the "Amended Certificate") contain limitations on Alien ownership and control that are substantially similar to those contained in the Communications Act. Pursuant to the Amended Certificate, the Company has the right to repurchase Alien-owned shares at their fair market value to the extent necessary, in the judgment of the Board of Directors, to comply with the Alien ownership restrictions. Television - ---------- National Ownership Rule. Prior to the 1996 Act, FCC rules generally prohibited an individual or entity from having an attributable interest in more than 12 television stations nationwide, or in television stations reaching more than 25% of the national television viewing audience. Pursuant to the 1996 Act, the FCC has modified its rules to eliminate any limitation on the number of television stations an individual or entity may own nationwide, subject to the restriction that no individual or entity may have an attributable interest in television stations reaching more than 35% of the national television viewing audience. Historically, VHF stations have shared a larger portion of the market than UHF stations. Therefore, only half of the households in the market area of any UHF station are included when calculating whether an entity or individual owns television stations reaching more than 35% of the national television viewing audience. All but six of the stations owned and operated by the Company, or to which the Company provides programming services, are UHF. Upon completion of all pending acquisitions and dispositions, the Company will reach approximately 14% of U.S. television households using the FCC's method of calculation. Duopoly Rule. On a local level, the television "duopoly" rule generally prohibits a single individual or entity from having an attributable interest in two or more television stations with overlapping Grade B service areas. While the 1996 Act did not eliminate the television duopoly rule, it did direct the FCC to initiate a rulemaking proceeding to determine whether to retain, modify, or eliminate the rule. The FCC has pending a rulemaking proceeding in which it has proposed, among other options, to modify the television duopoly rule to permit the common ownership of television stations in different DMAs, so long as the Grade A signal contours of the stations do not overlap. Pending resolution of its rulemaking proceeding, the FCC has adopted an interim waiver policy that permits the common ownership of television stations in different DMAs with no overlapping Grade A signal contours, conditioned on the final outcome of the rulemaking proceeding. The FCC has also sought comment on whether common ownership of two television stations in a market should be permitted (i) where one or more of the commonly owned stations is UHF, (ii) where one of the stations is in bankruptcy or has been off the air for a substantial period of time and (iii) where the commonly owned stations have very small audience or advertising shares, are located in a very large market, and/or a specified number of independently owned media voices would remain after the acquisition. Local Marketing Agreements. A number of television stations, including certain of the Company's stations, have entered into what have commonly been referred to as local marketing agreements, or LMAs. While these agreements may take varying forms, pursuant to a typical LMA, separately owned and licensed television stations agree to enter into cooperative arrangements of varying sorts, subject to compliance with the requirements of antitrust laws and with the FCC's rules and policies. Under these types of arrangements, separately owned stations could agree to function cooperatively in terms of programming, advertising sales, etc., subject to the requirement that the licensee of each station maintain independent control over the programming and operations of its own station. One typical type of LMA is a programming agreement between two separately owned television stations serving a common service area, whereby the licensee of one station programs substantial portions of the broadcast day on the other licensee's station, subject to ultimate editorial and other controls being exercised by the latter licensee, and sells advertising time during such program segments. Such arrangements are an extension of the concept of "time brokerage" agreements, under which a licensee of a station sells blocks of time on its station to an entity or entities which program the blocks of time and which sell their own com- 18 mercial advertising announcements during the time periods in question. The staff of the FCC's Mass Media Bureau has held that LMAs are not contrary to the Communications Act, provided that the licensee of the station which is being substantially programmed by another entity maintains complete responsibility for and control over the programming and operations of its broadcast station and assures compliance with applicable FCC rules and policies. At present, FCC rules permit television station LMAs, and the licensee of a television station brokering time on another television station is not considered to have an attributable interest in the brokered station. However, in connection with its ongoing rulemaking proceeding regarding the television duopoly rule, the FCC has proposed to adopt rules providing that the licensee of a television station which brokers more than 15% of the time on another television station serving the same market would be deemed to have an attributable interest in the brokered station for purposes of the national and local multiple ownership rules. In connection with this proceeding, the FCC has solicited detailed information from parties to television LMAs as to the terms and characteristics of such LMAs. The 1996 Act provides that nothing therein "shall be construed to prohibit the origination, continuation, or renewal of any television local marketing agreement that is in compliance with the regulations of the [FCC]." The legislative history of the 1996 Act reflects that this provision was intended to grandfather television LMAs that were in existence upon enactment of the 1996 Act, and to allow television LMAs consistent with the FCC's rules subsequent to enactment of the 1996 Act. In its pending rulemaking proceeding regarding the television duopoly rule, the FCC has proposed to adopt a grandfathering policy providing that, in the event that television LMAs become attributable interests, LMAs that are in compliance with existing FCC rules and policies and were entered into before November 5, 1996, would be permitted to continue in force until the original term of the LMA expires. Under the FCC's proposal, television LMAs that are entered into, renewed, or assigned after November 5, 1996 would have to be terminated if LMAs are made attributable interests and the LMA in question resulted in a violation of the television multiple ownership rules. The Company's LMAs with television stations WPTT in Pittsburgh, Pennsylvania, WNUV in Baltimore, Maryland, WVTV in Milwaukee, Wisconsin, WRDC in Raleigh/Durham, North Carolina, WABM in Birmingham, Alabama, and WDBB in Tuscaloosa, Alabama, were in existence on both the date of enactment of the 1996 Act and November 5, 1996. The Company's LMAs with television stations WTTV and WTTK in Indianapolis, Indiana were entered into subsequent to the date of enactment of the 1996 Act but prior to November 5, 1996. The Company's LMA with television station KRRT in San Antonio, Texas was in existence on the date of enactment of the 1996 Act, but was assumed by the Company subsequent to that date but prior to November 5, 1996. The licensee's rights under the Company's LMA with KRRT-TV were assumed by Glencairn subsequent to November 5, 1996. The Company's LMAs with television stations WFGX-TV in Mobile, Alabama and Pensacola, Florida and WFFF-TV in Burlington, Vermont and Plattsburgh, New York were in existence on both the date of enactment of the 1996 Act and November 5, 1996, but were assumed by the Company subsequent to November 5, 1996. The Company's LMA with WFBC-TV in Asheville, North Carolina and Greenville/Spartanburg/Anderson, South Carolina, was entered into by the Company subsequent to the date of enactment of the 1996 Act but prior to November 5, 1996, and the licensee's rights under that LMA were assumed by Glencairn subsequent to November 5, 1996. The Company's LMA with KFBT in Las Vegas, Nevada (which will be effective upon expiration of the HSR waiting period) was entered into subsequent to November 5, 1996. The Company cannot predict if any or all of its LMAs will be grandfathered. The Conference Agreement adopted as part of the Balanced Budget Act of 1997 (the "Balanced Budget Act") clarifies Congress' intent with respect to LMAs and duopolies. The Conference Agreement states as follows: "The conferees do not intend that the duopoly and television-newspaper cross-ownership relief provided herein should have any bearing upon the [FCC's] current proceedings, which concerns more immediate relief. The conferees expect that the [FCC] will proceed with its own independent examination in these matters. Specifically, the conferees expect that the [FCC] will provide additional relief (e.g., VHF/UHF combinations) that it finds to be in the public interest, and will implement the permanent grandfather requirement for local marketing agreements as provided in the Telecommunications Act of 1996." 19 The TV duopoly rule currently prevents the Company from acquiring the licenses of television stations with which it has LMAs in those markets where the Company owns a television station. As a result, if the FCC were to decide that the provider of programming services under a television LMA should be treated as having an attributable interest in the brokered station, and if it did not relax its television duopoly rule, the Company could be required to modify or terminate those of its LMAs that were not in existence on the date of enactment of the 1996 Act or on November 5, 1996. Furthermore, if the FCC adopts its present proposal with respect to the grandfathering of television LMAs, the Company could be required to terminate even those LMAs that were in effect prior to the date of enactment of the 1996 Act or prior to November 5, 1996, after the initial term of the LMA or upon assignment of the LMA. In such an event, the Company could be required to pay termination penalties under certain of such LMAs. Further, if the FCC were to find, in connection with any of the Company's LMAs, that the owners/licensees of the stations with which the Company has LMAs failed to maintain control over their operations as required by FCC rules and policies, the licensee of the LMA station and/or the Company could be fined or set for hearing, the outcome of which could be a monetary forfeiture or, under certain circumstances, loss of the applicable FCC license. The Company is unable to predict the ultimate outcome of possible changes to these FCC rules and the impact such changes may have on its broadcasting operations. On June 1, 1995, the Chief of the FCC's Mass Media Bureau released a Public Notice concerning the processing of television assignment and transfer of control applications proposing LMAs. Due to the pendency of the ongoing rulemaking proceeding concerning attribution of ownership, the Mass Media Bureau has placed certain restrictions on the types of television assignment and transfer of control applications involving LMAs that it will approve during the pendency of the rulemaking. Specifically, the Mass Media Bureau has stated that it will not approve arrangements where a time broker seeks to finance a station acquisition and hold an option to purchase the station in the future. The Company believes that none of the Company's LMAs fall within the ambit of this Public Notice. Radio - ----- National Ownership Rule. Prior to the 1996 Act, the FCC's rules limited an individual or entity from holding attributable interests in more than 20 AM and 20 FM radio stations nationwide. Pursuant to the 1996 Act, the FCC has modified its rules to eliminate any limitation on the number of radio stations a single individual or entity may own nationwide. Local Ownership Rule. Prior to the 1996 Act, the FCC's rules generally permitted an individual or entity to hold attributable interests in no more than four radio stations in a local market (no more than two of which could be in the same service (AM or FM)), and then only if the aggregate audience share of the commonly owned stations did not exceed 25%. In markets with fewer than 15 commercial radio stations, an individual or entity could hold an attributable interest in no more than three radio stations in the market (no more than two of which could be in the same service), and then only if the number of the commonly owned stations did not exceed 50% of the total number of commercial radio stations in the market. Pursuant to the 1996 Act, the limits on the number of radio stations one entity may own locally have been increased as follows: (i) in a market with 45 or more commercial radio stations, an entity may own up to eight commercial radio stations, not more than five of which are in the same service (AM or FM); (ii) in a market with between 30 and 44 (inclusive) commercial radio stations, an entity may own up to seven commercial radio stations, not more than four of which are in the same service; (iii) in a market with between 15 and 29 (inclusive) commercial radio stations, an entity may own up to six commercial radio stations, not more than four of which are in the same service; and (iv) in a market with 14 or fewer commercial radio stations, an entity may own up to five commercial radio stations, not more than three of which are in the same service, except that an entity may not own more than 50% of the stations in such market. These numerical limits apply regardless of the aggregate audience share of the stations sought to be commonly owned. FCC ownership rules continue to permit an entity to own one FM and one AM station in a local market regardless of market size. Irrespective of FCC rules governing radio ownership, however, the DOJ and the Federal Trade Commission have the authority to determine, and in certain radio transactions have determined, that a particular transaction presents antitrust con- 20 cerns. Moreover, in certain recent cases the FCC has signaled a willingness to independently examine issues of market concentration notwithstanding a transaction's compliance with the numerical station limits. The FCC has also indicated that it may propose further revisions to its radio multiple ownership rules. Local Marketing Agreements. As in television, a number of radio stations have entered into LMAs. The FCC's multiple ownership rules specifically permit radio station LMAs to be entered into and implemented, so long as the licensee of the station which is being programmed under the LMA maintains complete responsibility for and control over programming and operations of its broadcast station and assures compliance with applicable FCC rules and policies. For the purposes of the multiple ownership rules, in general, a radio station being programmed pursuant to an LMA by an entity is not considered an attributable ownership interest of that entity unless that entity already owns a radio station in the same market. However, a licensee that owns a radio station in a market, and brokers more than 15% of the time on another station serving the same market (i.e., a station whose principal community contour overlaps that of the owned station), is considered to have an attributable ownership interest in the brokered station for purposes of the FCC's multiple ownership rules. As a result, in a market in which the Company owns a radio station, the Company would not be permitted to enter into an LMA with another local radio station which it could not own under the local ownership rules, unless the Company's programming constituted 15% or less of the other local station's programming time on a weekly basis. The FCC's rules also prohibit a broadcast licensee from simulcasting more than 25% of its programming on another station in the same broadcast service (i.e., AM-AM or FM-FM) through a time brokerage or LMA arrangement where the brokered and brokering stations serve substantially the same area. Joint Sales Agreements. A number of radio (and television) stations have entered into cooperative arrangements commonly known as joint sales agreements, or JSAs. While these agreements may take varying forms, under the typical JSA, a station licensee obtains, for a fee, the right to sell substantially all of the commercial advertising on a separately-owned and licensed station in the same market. The typical JSA also customarily involves the provision by the selling licensee of certain sales, accounting, and "back office" services to the station whose advertising is being sold. The typical JSA is distinct from an LMA in that a JSA (unlike an LMA) normally does not involve programming. The FCC has determined that issues of joint advertising sales should be left to enforcement by antitrust authorities, and therefore does not generally regulate joint sales practices between stations. Currently, stations for which a licensee sells time under a JSA are not deemed by the FCC to be attributable interests of that licensee. However, in connection with its ongoing rulemaking proceeding concerning the attribution rules, the FCC is considering whether JSAs should be considered attributable interests or within the scope of the FCC's cross-interest policy, particularly when JSAs contain provisions for the supply of programming services and/or other elements typically associated with LMAs. If JSAs become attributable interests as a result of changes in the FCC rules, the Company may be required to terminate any JSA it might have with a radio station which the Company could not own under the FCC's multiple ownership rules. Other Ownership Matters - ----------------------- There remain in place after the 1996 Act a number of additional cross-ownership rules and prohibitions pertaining to licensees of television and radio stations. FCC rules, the Communications Act, or both generally prohibit an individual or entity from having an attributable interest in both a television station and a radio station, a daily newspaper, or a cable television system that is located in or serves the same market area. Antitrust Regulation. The DOJ and the Federal Trade Commission have increased their scrutiny of the television and radio industry since the adoption of the 1996 Act, and have indicated their intention to review matters related to the concentration of ownership within markets (including LMAs and JSAs) even when the ownership or LMA or JSA in question is permitted under the laws administered by the FCC or by FCC rules and regulations. For instance, the DOJ has for some time taken the position that an LMA entered into in anticipation of a station's acquisition with the proposed buyer of the station constitutes a change in beneficial ownership of the station which, if subject to filing under the HSR Act, cannot be implemented until the waiting period required by that statute has ended or been terminated. 21 Radio/Television Cross-Ownership Rule. The FCC's radio/television cross-ownership rule (the "one to a market" rule) generally prohibits a single individual or entity from having an attributable interest in a television station and a radio station serving the same market. However, in each of the 25 largest local markets in the United States, provided that there remain at least 30 separately owned television and radio stations in the particular market after the acquisition in question, the FCC has traditionally employed a policy that presumptively allows waivers of the one to a market rule to permit the common ownership of one AM, one FM and one TV station in the market. The 1996 Act directs the FCC to extend this policy to each of the top 50 markets. Moreover, the FCC has pending a rulemaking proceeding in which it has solicited comment on whether the one to a market rule should be eliminated altogether. The Company has pending several requests for waivers of the one to a market rule in connection with its applications to acquire radio stations in the Max Media Acquisition and from Keymarket of South Carolina, Inc. and Spartan Radiocasting, Inc., in markets where the Company owns or proposes to own a television station. However, the FCC does not apply its presumptive waiver policy in cases involving the common ownership of one television station, and two or more radio stations in the same service (AM or FM), in the same market. Pending its ongoing rulemaking proceeding to reexamine the one to a market rule, the FCC has stated that it will consider waivers of the rule in such instances on a case-by-case basis, considering (i) the public service benefits that will arise from the joint operation of the facilities such as economies of scale, cost savings and programming and service benefits; (ii) the types of facilities involved; (iii) the number of media outlets owned by the applicant in the relevant market; (iv) the financial difficulties of the stations involved; and (v) the nature of the relevant market in light of the level of competition and diversity after joint operation is implemented. Generally, any such waivers that are granted, and which allow common ownership of a television station and more than two same-service radio stations in the same market, are temporary and conditioned on the outcome of the rulemaking proceeding. The Company obtained such temporary, conditional waivers of the one to a market rule in connection with its acquisition of the Heritage radio stations in the Kansas City and St. Louis markets. In its ongoing rulemaking proceeding to reexamine the one to a market rule, the FCC has proposed the following options for modifying the rule in the event it is not eliminated: (i) extending the presumptive waiver policy to any television market in which a specified number of independently owned media "voices" would remain after common ownership of a television station and one or more radio stations is effectuated; (ii) extending the presumptive waiver policy to entities that seek to own more than one FM and/or one AM radio station; (iii) reducing the minimum number of independently owned voices that must remain after a transaction is effectuated; and (iv) modifying the five-factor case-by-case test for waivers. Local Television/Cable Cross-Ownership Rule. While the 1996 Act eliminates a previous statutory prohibition against the common ownership of a television broadcast station and a cable system that serve the same local market, the 1996 Act leaves the current FCC rule in place. The legislative history of the Act indicates that the repeal of the statutory ban should not prejudge the outcome of any FCC review of the rule. Broadcast Network/Cable Cross-Ownership Rule. The 1996 Act directs the FCC to eliminate its rules which formerly prohibited the common ownership of a broadcast network and a cable system, subject to the provision that the FCC revise its rules as necessary to ensure carriage, channel positioning, and non-discriminatory treatment of non-affiliated broadcast stations by cable systems affiliated with a broadcast network. In March 1996, the FCC issued an order implementing this legislative change. Broadcast/Daily Newspaper Cross-Ownership Rule. The FCC's rules prohibit the common ownership of a radio or television broadcast station and a daily newspaper in the same market. The 1996 Act does not eliminate or modify this prohibition. In October 1996, however, the FCC initiated a rulemaking proceeding to determine whether it should liberalize its waiver policy with respect to cross-ownership of a daily newspaper and one or more radio stations in the same market. Dual Network Rule. The 1996 Act directs the FCC to repeal its rule which formerly prohibited an entity from operating more than one television network. In March 1996, the FCC issued an order implementing this legislative change. Under the modified rule, a network entity is permitted to operate 22 more than one television network, provided, however, that ABC, CBS, NBC, and/or Fox are prohibited from merging with each other or with another network television entity such as WB or UPN. The 1996 Act requires the FCC to review its broadcast ownership rules every two years to "determine whether any of such rules are necessary in the public interest as the result of competition," and to repeal or modify any rules that are determined to be no longer in the public interest. In March 1998, the FCC initiated a rulemaking proceeding to review certain of its broadcast ownership rules pursuant to the statutory mandate, including: (i) the rule limiting ownership of television stations nationally to stations reaching 35% of the national television audience; (ii) the rule attributing only 50% of television households in a market to the audience reach of a UHF television station for purposes of the 35% national audience reach limit; (iii) the rule prohibiting common ownership of a broadcast station and a daily newspaper in the same market; (iv) the rule prohibiting common ownership of a broadcast television station and a cable system in the same market; (v) the local radio multiple ownership rules; and (vi) the dual network rule. Additionally, the FCC stated that its already-pending proceedings to review the television duopoly and "one to a market" rules satisfy the 1996 Act's biennial review requirements. Expansion of the Company's broadcast operations on both a local and national level will continue to be subject to the FCC's ownership rules and any changes the FCC or Congress may adopt. Concomitantly, any further relaxation of the FCC's ownership rules may increase the level of competition in one or more of the markets in which the Company's stations are located, more specifically to the extent that any of the Company's competitors may have greater resources and thereby be in a superior position to take advantage of such changes. Must-Carry/Retransmission Consent Pursuant to the Cable Act of 1992, television broadcasters are required to make triennial elections to exercise either certain "must-carry" or "retransmission consent" rights in connection with their carriage by cable systems in each broadcaster's local market. By electing the must-carry rights, a broadcaster demands carriage on a specified channel on cable systems within its Area of Dominant Influence, in general as defined by the Arbitron 1991-92 Television Market Guide. These must-carry rights are not absolute, and their exercise is dependent on variables such as (i) the number of activated channels on a cable system; (ii) the location and size of a cable system; and (iii) the amount of programming on a broadcast station that duplicates the programming of another broadcast station carried by the cable system. Therefore, under certain circumstances, a cable system may decline to carry a given station. Alternatively, if a broadcaster chooses to exercise retransmission consent rights, it can prohibit cable systems from carrying its signal or grant the appropriate cable system the authority to retransmit the broadcast signal for a fee or other consideration. In October 1996, the Company elected must-carry or retransmission consent with respect to each of its markets based on its evaluation of the respective markets and the position of the Company's owned or programmed station(s) within the market. The Company's stations continue to be carried on all pertinent cable systems, and the Company does not believe that its elections have resulted in the shifting of its stations to less desirable cable channel locations. Certain of the Company's stations affiliated with Fox are required to elect retransmission consent because Fox's retransmission consent negotiations on behalf of the Company resulted in agreements which extend into 1998. Therefore, the Company will need to negotiate retransmission consent agreements for these Fox-affiliated stations to attain carriage on the relevant cable systems for the balance of this triennial period (i.e., through December 31, 1999). For subsequent elections beginning with the election to be made by October 1, 1999, the must-carry market will be the station's DMA, in general as defined by the Nielsen DMA Market and Demographic Rank Report of the prior year. Syndicated Exclusivity/Territorial Exclusivity The FCC has imposed syndicated exclusivity rules and expanded existing network nonduplication rules. The syndicated exclusivity rules allow local broadcast television stations to demand that cable operators black out syndicated non-network programming carried on "distant signals" (i.e., signals of broadcast stations, including so-called "superstations," which serve areas substantially removed from the cable system's local community). The network non-duplication rules allow local broadcast network television affiliates to require that cable operators black out duplicative network programming carried on 23 distant signals. However, in a number of markets in which the Company owns or programs stations affiliated with a network, a station that is affiliated with the same network in a nearby market is carried on cable systems in the Company's market. This is not in violation of the FCC's network nonduplication rules. However, the carriage of two network stations on the same cable system could result in a decline of viewership adversely affecting the revenues of the Company owned or programmed station. Restrictions on Broadcast Advertising Advertising of cigarettes and certain other tobacco products on broadcast stations has been banned for many years. Various states restrict the advertising of alcoholic beverages. Congressional committees have examined legislation proposals which would eliminate or severely restrict the advertising of beer and wine. Although no prediction can be made as to whether any or all of such proposals will be enacted into law, the elimination of all beer and wine advertising would have an adverse effect upon the revenues of the Company's stations, as well as the revenues of other stations which carry beer and wine advertising. The FCC has imposed commercial time limitations in children's television programming pursuant to legislation. In television programs designed for viewing by children of 12 years of age and under, commercial matter is limited to 12 minutes per hour on weekdays and 10.5 minutes per hour on weekends. In granting renewal of the license for WBFF-TV, the FCC imposed a fine of $10,000 on the Company alleging that the station had exceeded these limitations. The Company has appealed this fine and the appeal is pending. In granting renewal of the license for WTTV-TV and WTTK-TV, stations that the Company programs pursuant to an LMA, the FCC imposed a fine of $15,000 on WTTV-TV and WTTK-TV's licensee alleging that the stations had exceeded these limitations. In granting renewal of the license for WTTE-TV, the FCC imposed a fine of $10,000 on the Company alleging that the station had exceeded these limitations. The Company has appealed this fine and the appeal is pending. The Communications Act and FCC rules also impose regulations regarding the broadcasting of advertisements by legally qualified candidates for elective office. Among other things, (i) stations must provide "reasonable access" for the purchase of time by legally qualified candidates for federal office; (ii) stations must provide "equal opportunities" for the purchase of equivalent amounts of comparable broadcast time by opposing candidates for the same elective office; and (iii) during the 45 days preceding a primary or primary run-off election and during the 60 days preceding a general or special election, legally qualified candidates for elective office may be charged no more than the station's "lowest unit charge" for the same class of advertisement, length of advertisement, and daypart. Recently, both the President of the United States and the Chairman of the FCC have called for rules that would require broadcast stations to provide free airtime to political candidates. The Company cannot predict the effect of such a requirement on its advertising revenues. Programming and Operation General. The Communications Act requires broadcasters to serve the "public interest." The FCC has relaxed or eliminated many of the more formalized procedures it had developed in the past to promote the broadcast of certain types of programming responsive to the needs of a station's community of license. FCC licensees continue to be required, however, to present programming that is responsive to their communities' issues, and to maintain certain records demonstrating such responsiveness. Complaints from viewers concerning a station's programming may be considered by the FCC when it evaluates renewal applications of a licensee, although such complaints may be filed at any time and generally may be considered by the FCC at any time. Stations also must pay regulatory and application fees, and follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identifications, the advertisement of contests and lotteries, obscene and indecent broadcasts, and technical operations, including limits on radio frequency radiation. In addition, licensees must develop and implement affirmative action programs designed to promote equal employment opportunities, and must submit reports to the FCC with respect to these matters on an annual basis and in connection with a renewal application. Failure to observe these or other rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of a renewal for a "short" (i.e., less than the full) license term, or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license. 24 Children's Television Programming. Pursuant to rules adopted in 1996, television stations are required to broadcast a minimum of three hours per week of "core" children's educational programming, which the FCC defines as programming that (i) has serving the educational and informational needs of children 16 years of age and under as a significant purpose; (ii) is regularly scheduled, weekly and at least 30 minutes in duration; and (iii) is aired between the hours of 7:00 a.m. and 10:00 p.m. Furthermore, "core" children's educational programs, in order to qualify as such, are required to be identified as educational and informational programs over the air at the time they are broadcast, and are required to be identified in the children's programming reports required to be placed in stations' public inspection files. Additionally, television stations are required to identify and provide information concerning "core" children's programming to publishers of program guides and listings. Television Violence. The 1996 Act contains a number of provisions relating to television violence. First, pursuant to the 1996 Act, the television industry has developed a ratings system which the FCC has approved. Furthermore, also pursuant to the 1996 Act the FCC has adopted rules requiring certain television sets to include the so-called "V-chip," a computer chip that allows blocking of rated programming. Under these rules, half of television receiver models with picture screens 13 inches or greater will be required to have the "V-chip" by July 1, 1999, and all such models will be required to have the "V-chip" by January 1, 2000. In addition, the 1996 Act requires that all television license renewal applications filed after May 1, 1995 contain summaries of written comments and suggestions received by the station from the public regarding violent programming. Closed Captioning. The 1996 Act directs the FCC to adopt rules requiring closed captioning of all broadcast television programming, except where captioning would be "economically burdensome." The FCC has recently adopted such rules. The rules require generally that (i) 95% of all new programming first published or exhibited on or after January 1, 1998 must be closed captioned within eight years, and (ii) 75% of "old" programming which first aired prior to January 1, 1998 must be closed captioned within 10 years, subject to certain exemptions. Digital Television The FCC has taken a number of steps to implement digital television ("DTV") broadcasting service in the United States. In December 1996, the FCC adopted a DTV broadcast standard and, in April 1997, adopted decisions in several pending rulemaking proceedings that establish service rules and a plan for implementing DTV. The FCC adopted a DTV table of allotments that provides all authorized television stations with a second channel on which to broadcast a DTV signal. In February 1998, the FCC made slight revisions to the DTV rules and table of allotments in acting upon a number of appeals in the DTV proceeding. The FCC has attempted to provide DTV coverage areas that are comparable to stations' existing service areas. The FCC has ruled that television broadcast licensees may use their digital channels for a wide variety of services such as high-definition television, multiple standard definition television programming, audio, data, and other types of communications, subject to the requirement that each broadcaster provide at least one free video channel equal in quality to the current technical standard. DTV channels will generally be located in the range of channels from channel 2 through channel 51. The FCC is requiring that affiliates of ABC, CBS, Fox and NBC in the top 10 television markets begin digital broadcasting by May 1, 1999 (many stations affiliated with these networks in the top 10 markets have voluntarily committed to begin digital broadcasting by November 1998), and that affiliates of these networks in markets 11 through 30 begin digital broadcasting by November 1999. The FCC's plan calls for the DTV transition period to end in the year 2006, at which time the FCC expects that television broadcasters will cease non-digital broadcasting and return one of their two channels to the government, allowing that spectrum to be recovered for other uses. Under the Balanced Budget Act, however, the FCC is authorized to extend the December 31, 2006 deadline for reclamation of a television station's non-digital channel if, in any given case: (i) one or more television stations affiliated with ABC, CBS, NBC or Fox in a market is not broadcasting digitally, and the FCC determines that such stations have "exercised due diligence" in attempting to convert to digital broadcasting; or (ii) less than 85% of the television households in the station's market subscribe to a multichannel video service (cable, wireless cable or DBS) that carries at least one digital channel from each of the local stations in that market, and less than 85% of the television households in the market can receive digital signals off the air using 25 either a set-top converter box for an analog television set or a new DTV television set. The Balanced Budget Act also directs the FCC to auction the non-digital channels by September 30, 2002 even though they are not to be reclaimed by the government until at least December 31, 2006. The Balanced Budget Act also permits broadcasters to bid on the non-digital channels in cities with populations greater than 400,000, provided the channels are used for DTV. Thus, it is possible a broadcaster could own two channels in a market. The FCC has concluded a separate proceeding in which it reallocated television channels 60 through 69 to other services while protecting existing television stations on those channels from interference during the DTV transition period. Additionally, the FCC will open a separate proceeding to consider to what extent the cable must-carry requirements will apply to DTV signals. Implementation of digital television will improve the technical quality of television signals received by viewers. Under certain circumstances, however, conversion to digital operation may reduce a station's geographic coverage area or result in some increased interference. The FCC's DTV allotment plan allows present UHF stations that move to DTV channels considerably less signal power than present VHF stations that move to UHF DTV channels. Additionally, the DTV transmission standard adopted by the FCC may not allow certain stations to provide a DTV signal of adequate strength to be reliably received by certain viewers using inside television set antennas. Implementation of digital television will also impose substantial additional costs on television stations because of the need to replace equipment and because some stations will need to operate at higher utility costs and there can be no assurance that the Company's television stations will be able to increase revenue to offset such costs. The FCC is also considering imposing new public interest requirements on television licensees in exchange for their receipt of DTV channels. The Company is currently considering plans to provide HDTV, to provide multiple channels of television, including the provision of additional broadcast programming and transmitted data on a subscription basis, and to continue its current TV program channels on its allocated DTV channels. The 1996 Act allows the FCC to charge a spectrum fee to broadcasters who use the digital spectrum to offer subscription-based services. The FCC has opened a rulemaking to consider the spectrum fees to be charged to broadcasters for such use. In addition, Congress has held hearings on broadcasters' plans for the use of their digital spectrum. The Company cannot predict what future actions the FCC might take with respect to DTV, nor can it predict the effect of the FCC's present DTV implementation plan or such future actions on the Company's business. Proposed Changes The Congress and the FCC have under consideration, and in the future may consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, the operation, ownership and profitability of the Company's broadcast stations, result in the loss of audience share and advertising revenues for the Company's broadcast stations, and affect the ability of the Company to acquire additional broadcast stations or finance such acquisitions. In addition to the changes and proposed changes noted above, such matters may include, for example, the license renewal process, spectrum use fees, political advertising rates, potential restrictions on the advertising of certain products (beer, wine and hard liquor, for example), and the rules and policies to be applied in enforcing the FCC's equal employment opportunity regulations. Other matters that could affect the Company's broadcast properties include technological innovations and developments generally affecting competition in the mass communications industry, such as direct radio and television broadcast satellite service, the continued establishment of wireless cable systems and low power television stations, digital television and radio technologies, and the advent of telephone company participation in the provision of video programming service. Other Considerations The foregoing summary does not purport to be a complete discussion of all provisions of the Communications Act or other congressional acts or of the regulations and policies of the FCC. For further information, reference should be made to the Communications Act, other congressional acts, and regulations and public notices promulgated from time to time by the FCC. There are additional regulations and policies of the FCC and other federal agencies that govern political broadcasts, public affairs programming, equal employment opportunity, and other matters affecting the Company's business and operations. 26 ENVIRONMENTAL REGULATION Prior to the Company's ownership or operation of its facilities, substances or waste that are or might be considered hazardous under applicable environmental laws may have been generated, used, stored or disposed of at certain of those facilities. In addition, environmental conditions relating to the soil and groundwater at or under the Company's facilities may be affected by the proximity of nearby properties that have generated, used, stored or disposed of hazardous substances. As a result, it is possible that the Company could become subject to environmental liabilities in the future in connection with these facilities under applicable environmental laws and regulations. Although the Company believes that it is in substantial compliance with such environmental requirements, and has not in the past been required to incur significant costs in connection therewith, there can be no assurance that the Company's costs to comply with such requirements will not increase in the future. The Company presently believes that none of its properties have any condition that is likely to have a material adverse effect on the Company's financial condition or results of operations. COMPETITION The Company's television and radio stations compete for audience share and advertising revenue with other television and radio stations in their respective DMAs or MSA's, as well as with other advertising media, such as newspapers, magazines, outdoor advertising, transit advertising, yellow page directories, direct mail and local cable and wireless cable systems. Some competitors are part of larger organizations with substantially greater financial, technical and other resources than the Company. Television Competition. Competition in the television broadcasting industry occurs primarily in individual DMAs. Generally, a television broadcasting station in one DMA does not compete with stations in other DMAs. The Company's television stations are located in highly competitive DMAs. In addition, certain of the Company's DMAs are overlapped by both over-the-air and cable carriage of stations in adjacent DMAs, which tends to spread viewership and advertising expenditures over a larger number of television stations. Broadcast television stations compete for advertising revenues primarily with other broadcast television stations, radio stations and cable system operators serving the same market. ABC, CBS and NBC programming generally achieves higher household audience levels than Fox, WB and UPN programming and syndicated programming aired by independent stations. This can be attributed to a combination of factors, including the efforts of ABC, CBS and NBC to reach a broader audience, generally better signal carriage available when broadcasting over VHF channels 2 through 13 versus broadcasting over UHF channels 14 through 69 and the higher number of hours of ABC, CBS and NBC programming being broadcast weekly. However, greater amounts of advertising time are available for sale during Fox, UPN and WB programming and non-network syndicated programming, and as a result the Company believes that the Company's programming typically achieves a share of television market advertising revenues greater than its share of a market's audience. Television stations compete for audience share primarily on the basis of program popularity, which has a direct effect on advertising rates. A large amount of the Company's prime time programming is supplied by Fox and WB, and to a lesser extent UPN, ABC, CBS and NBC. In those periods, the Company's affiliated stations are totally dependent upon the performance of the networks' programs in attracting viewers. Non-network time periods are programmed by the station primarily with syndicated programs purchased for cash, cash and barter, or barter-only, and also through self-produced news, public affairs and other entertainment programming. Television advertising rates are based upon factors which include the size of the DMA in which the station operates, a program's popularity among the viewers that an advertiser wishes to attract, the number of advertisers competing for the available time, the demographic makeup of the DMA served by the station, the availability of alternative advertising media in the DMA (including radio and cable), the aggressiveness and knowledge of sales forces in the DMA and development of projects, features and programs that tie advertiser messages to programming. The Company believes that its sales and programming strategies allow it to compete effectively for advertising within its DMAs. 27 Other factors that are material to a television station's competitive position include signal coverage, local program acceptance, network affiliation, audience characteristics and assigned broadcast frequency. Historically, the Company's UHF broadcast stations have suffered a competitive disadvantage in comparison to stations with VHF broadcast frequencies. This historic disadvantage has gradually declined through (i) carriage on cable systems, (ii) improvement in television receivers, (iii) improvement in television transmitters, (iv) wider use of all channel antennae, (v) increased availability of programming, and (vi) the development of new networks such as Fox, WB and UPN. The broadcasting industry is continuously faced with technical changes and innovations, the popularity of competing entertainment and communications media, changes in labor conditions, and governmental restrictions or actions of federal regulatory bodies, including the FCC, any of which could possibly have a material effect on a television station's operations and profits. There are sources of video service other than conventional television stations, the most common being cable television, which can increase competition for a broadcast television station by bringing into its market distant broadcasting signals not otherwise available to the station's audience, serving as a distribution system for national satellite-delivered programming and other non-broadcast programming originated on a cable system and selling advertising time to local advertisers. Other principal sources of competition include home video exhibition, direct-to-home broadcast satellite television ("DBS") entertainment services and multichannel multipoint distribution services ("MMDS"). Moreover, technology advances and regulatory changes affecting programming delivery through fiber optic telephone lines and video compression could lower entry barriers for new video channels and encourage the development of increasingly specialized "niche" programming. The 1996 Act permits telephone companies to provide video distribution services via radio communication, on a common carrier basis, as "cable systems" or as "open video systems," each pursuant to different regulatory schemes. The Company is unable to predict the effect that technological and regulatory changes will have on the broadcast television industry and on the future profitability and value of a particular broadcast television station. The FCC authorizes DBS services throughout the United States. Currently, two FCC permitees, DirecTV and United States Satellite Broadcasting, provide subscription DBS services via high-power communications satellites and small dish receivers, and other companies provide direct-to-home video service using lower powered satellites and larger receivers. Additional companies are expected to commence direct-to-home operations in the near future. DBS and MMDS, as well as other new technologies, will further increase competition in the delivery of video programming. The Company cannot predict what other video technologies might be considered or implemented in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its business. The Company believes that television broadcasting may be enhanced significantly by the development and increased availability of DTV technology. This technology has the potential to permit the Company to provide viewers multiple channels of digital television over each of its existing standard channels, to provide certain programming in a high definition television format and to deliver various forms of data, including data on the Internet, to home and business computers. These additional capabilities may provide the Company with additional sources of revenue. The Company is currently considering plans to provide HDTV, to provide multiple channels of television including the provision of additional broadcast programming and transmitted data on a subscription basis, and to continue its current TV program channels on its allocated DTV channels. The Company has obtained FCC authority to conduct experimental DTV multicasting operations in Baltimore, Maryland. The 1996 Act allows the FCC to charge a spectrum fee to broadcasters who use the digital spectrum to offer subscription-based services. The FCC has opened a rulemaking to consider the spectrum fees to be charged to broadcasters for such use. In addition, Congress has held hearings on broadcasters' plans for the use of their digital spectrum. The Company cannot predict what future actions the FCC or Congress might take with respect to DTV, nor can it predict the effect of the FCC's present DTV implementation plan or such future actions on the Company's business. DTV technology is not currently available to the viewing public and a successful transition from the current analog television format to a digital format may take many years. There can be no assurance that the Company's efforts to take advantage of the new technology will be commercially successful. 28 The Company also competes for programming, which involves negotiating with national program distributors or syndicators that sell first-run and rerun packages of programming. The Company's stations compete for exclusive access to those programs against in-market broadcast station competitors for syndicated products. Cable systems generally do not compete with local stations for programming, although various national cable networks from time to time have acquired programs that would have otherwise been offered to local television stations. Public broadcasting stations generally compete with commercial broadcasters for viewers but not for advertising dollars. Historically, the cost of programming has increased because of an increase in the number of new independent stations and a shortage of quality programming. However, the Company believes that over the past five years program prices generally have stabilized. The Company believes it competes favorably against other television stations because of its management skill and experience, the ability of the Company historically to generate revenue share greater than its audience share, its network affiliations and its local program acceptance. In addition, the Company believes that it benefits from the operation of multiple broadcast properties, affording it certain nonquantifiable economies of scale and competitive advantages in the purchase of programming. Radio Competition. Radio broadcasting is a highly competitive business, and each of the radio stations operated by the Company competes for audience share and advertising revenue directly with other radio stations in its geographic market, as well as with other media, including television, cable television, newspapers, magazines, direct mail and billboard advertising. The audience ratings and advertising revenue of each of such stations are subject to change, and any adverse change in a particular market could have a material adverse effect on the revenue of such radio stations located in that market. There can be no assurance that any one of the Company's radio stations will be able to maintain or increase its current audience ratings and radio advertising revenue market share. The Company attempts to improve each radio station's competitive position with promotional campaigns designed to enhance and reinforce its identities with the listening public. Extensive market research is conducted in order to identify specific demographic groups and design a programming format for those groups. The Company seeks to build a strong listener base composed of specific demographic groups in each market, and thereby attract advertisers seeking to reach these listeners. Aside from building its stations' identities and targeting its programming to specific demographic groups, management believes that the Company also obtains a competitive advantage by operating duopolies or multiple stations in the nation's larger mid-size markets. The radio broadcasting industry is also subject to competition from new media technologies that are being developed or introduced, such as the delivery of audio programming by cable television systems and by digital audio broadcasting ("DAB"). DAB may provide a medium for the delivery by satellite or terrestrial means of multiple new audio programming formats to local and national audiences. The FCC has issued licenses for two satellite DAB systems. Historically, the radio broadcasting industry has grown in terms of total revenues despite the introduction of new technologies for the delivery of entertainment and information, such as television broadcasting, cable television, audio tapes and compact disks. There can be no assurance, however, that the development or introduction in the future of any new media technology will not have an adverse effect on the radio broadcast industry. EMPLOYEES As of December 31, 1997, the Company had approximately 2,262 employees. With the exception of certain of the employees of KOVR-TV, KDNL-TV, WBEN-AM and WWL-AM, none of the employees is represented by labor unions under any collective bargaining agreement. No significant labor problems have been experienced by the Company, and the Company considers its overall labor relations to be good. 29 ITEM 2. PROPERTIES Generally, each of the Company's stations has facilities consisting of offices, studios and tower sites. Transmitter and tower sites are located to provide maximum signal coverage of the stations' markets. The following table generally describes the Company's principal owned and leased real property in each of its markets of operation:
TELEVISION PROPERTIES TYPE OF FACILITY AND USE - ------------------------------- ------------------------------------------------ Pittsburgh Market Station Site for WPGH Space on WPGH Tower Site Baltimore Market WBFF Studio and Company Offices WBFF Parking Lot Space on Main WBFF Tower for Antenna Space on Main WBFF Tower for Transmission Disks Space on Main WBFF Tower for Receivers Milwaukee Market WVTV Studio Site WVTV Transmitter Site land WVTV Transmitter Site Building WCGV Studio Site WCGV Studio/Transmitter Site Raleigh/Durham Mkt WLFL / WRDC Studio Site WLFL Tower Site Land Columbus Market WTTE Studio Site WTTE Office Space WTTE Tower Site Norfolk Market WTVZ Studio Site Birmingham Market WTTO Tower and Old WTTO Studio WTTO Studio Site WABM Studio Site Flint/Saginaw/Bay City Market WSMH Studio & Office Site WSMH Transmitter Site Tuscaloosa Market WDBB Transmitter Site Kansas City Market KSMO Studio & Office Site KSMO Transmitter bldg. Cincinnati Market WSTR Studio & Office Site WSTR Transmitter Site W66AQ Translator Peoria Market WYZZ Studio & Office Site WYZZ Transmitter Site -- real property only WYZZ Transmitter Site -- tower, transmitter, building, and equipment Oklahoma City Market KOCB Studio & Office Site KOCB Transmitter Site Lexington Market WDKY Studio & Office Site WDKY Transmitter Site APPROXIMATE TELEVISION PROPERTIES OWNED OR LEASED(A) SIZE (SQ. FEET) - ------------------------------- ----------------------------- ------------------- Pittsburgh Market Leased (expires 10/01/2028) 25,500 Leased (expires 02/23/2039) On site of station Baltimore Market Leased (expires 12/31/2010) 39,000 Leased (month to month) N/A Leased (expires 06/01/2007) N/A Leased (expires 04/01/2011) N/A Leased (expires 08/01/2012) N/A Milwaukee Market Owned 37,800 Leased (expires 01/30/2030) N/A Owned 6,200 Owned 22,296 Leased (expires 12/31/2029) N/A Raleigh/Durham Mkt Leased (expires 07/29/2021) 26,600 Leased (expires 12/31/2018) 1,800 Columbus Market Leased (expires 12/31/2002) 14,400 Leased (expires 06/01/2003) 4,500 Leased (month to month) 1,000 Norfolk Market Leased (expires 07/31/2009) 15,000 Birmingham Market Owned 9,500 Leased (expires 1/31/2016) 9,750 Leased (expires 1/31/2016) 9,750 Flint/Saginaw/Bay City Market Owned 13,800 Leased (expires 11/13/2004) N/A Tuscaloosa Market Leased (month to month) 678 Kansas City Market Leased (expires 02/28/2001) 11,055 Leased (expires 12/10/2010) 1,200 Cincinnati Market Owned 14,800 Owned 6,600 Owned N/A Peoria Market Owned 6,000 Leased (expires 12/01/2001) 1,100 Owned N/A Oklahoma City Market Owned 12,000 Owned Included above Lexington Market Leased (expires 12/31/2010) 12,000 Owned 2,900
30
APPROXIMATE TELEVISION PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED(A) SIZE (SQ. FEET) - ------------------------------- --------------------------------------- ----------------------------- --------------------- Indianapolis Market WTTV/WTTK Studio & Office Site (bldg) Owned 19,900 WTTV/WTTK Studio & Office Site (lot) Owned 18.5 acres WTTV Transmitter Site/lot Owned 2,730/41.25 acres WTTK Transmitter Site/lot Owned 800/30 acres Bloomington microwave site (bldg.) Owned 216 Bloomington microwave site (land) Leased (expires 07/05/2077) 216 Sacramento Market KOVR Studio & Office Site Owned 42,600 KOVR Stockton Office Site Leased (expires 03/31/1999) 1,000 KOVR Transmitter Site 50% Ownership N/A KOVR Back-up Transmitter Site 1/3 Ownership N/A Mt. Oso Microwave Site Leased (expires 02/28/2001) N/A Volmer Peak Microwave Site Leased (expires 06/30/2000) N/A Downtown Sacramento Microwave Site Leased (expires 05/31/1999) N/A Elverta Microwave Site Leased (expires 07/31/1999) N/A San Antonio Market KABB/KRRT Studio & Office Site Owned by KABB 22,460 1200/1200/ KABB Transmitter bldg/tower/land Owned by KABB 35.562 acres KRRT Transmitter land Leased (expires 06/30/2007) 103.854 acres Asheville/Spartanburg WFBC/WLOS Studio & Office Site Owned by WLOS 28,000 Market WLOS Transmitter tower, bldg, land Leased (expires 12/31/2001) WFBC Transmitter Site Owned by WFBC 45.6 acres WFBC/WAXA studio Owned 6,000 St. Louis Market KDNL Studio & Office (Lot) Owned 53,550 KDNL Studio & Office (building) Owned 41,372 (TV) KDNL Transmitter Site (2 buildings) Owned 1,600 & 1,330 Des Moines Market KDSM Studio & Office Site Owned 13,000 KDSM Transmitter bldg/tower Owned 2,000 KDSM Transmitter land Leased (expires 11/08/2034) 40 Acres KDSM Translator tower/shed Leased (expires 12/31/98) 48 Las Vegas Market KUPN Studio & Office Site Leased (expires 6/26/99) 14,000 KUPN Transmitter Site/bldg. Owned .04 acres KUPN Microwave Transmitter Site Owned N/A KUPN Microwave Relay Site Owned N/A Plattsburgh/Burlington Market WPTZ Station Site Owned 12,400 WPTZ Studio & Office site Leased (expires 6/30/1998) 3,919 WPTZ Transmitter site Owned N/A WPTZ Tower and building site Leased (expires 10/31/2000) N/A WPTZ Tower and building site Leased (expires 5/30/2000) N/A WPTZ Tower and building site Leased (expires 10/31/2000) N/A WNNE Studio & Office site Leased (expires 1/31/2001) 8,500 WNNE Tower site Leased (expires 5/31/2003) N/A WNNE Transmitter building Owned 1,150 Pensacola/Mobile Market WEAR Studio & Office site Owned 22,400 WEAR Transmitter site Owned N/A WEAR Mobile Sales Office Site Leased (expires 6/30/1998) 1.164 WFGX Studio & Transmitter site Leased (expires 4/30/2000) 5,000 Charleston Market WCHS Studio & Office site Owned 15,776 WCHS Transmitter site Owned 3,712
APPROXIMATE RADIO PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED SIZE (SQ. FEET) - ------------------ -------------------------------- ----------------------------- ---------------- Buffalo Market WWKB/WKSE Studio & Office Site Leased (expires 09/30/1998) 5,000 WWKB/WKSE Office Site Leased (expires 09/30/1998) 5,200 WBEN/WMJQ Studio & Office Site Leased (expires 12/31/1998) 7,750 WBEN Transmitter Site Owned 1,024 WWKB Transmitter Site Owned 2,600 WMJQ Transmitter Site Leased (expires 12/31/1998) 825 WKSE Transmitter Site Owned 6,722 WWWS Transmitter Site/bldg. Leased (expires 5/24/2001 1,000/225
31
APPROXIMATE RADIO PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED SIZE (SQ. FEET) - ------------------------------ --------------------------------------------- ----------------------------- ---------------- Memphis Market WJCE/WRVR/WOGY Studio & Office Site Leased (expires 12/02/98) 10,000 WJCE Transmitter Site Leased (expires 03/27/2035) 2,262 WRVR Transmitter Site Leased (expires 12/31/2003) 169 WOGY Transmitter Site (on 4.5 acres) Owned 340 New Orleans Market WWL/WSMB/WLMG/KMEZ Studio & Office Site Leased (expires 08/31/2002) 11,553 WWL Transmitter Site (on 64.62 acres) Owned 2,300 WSMB Transmitter Site (on 3,600 sq. ft) Owned 3,600 WLMG Transmitter Site Leased (expires 10/27/2014) N/A KMEZ Transmitter Site Leased (expires 03/14/2001) N/A WLAC-AM / WLAC-FM / WJZC / Road Gang /IRN Nashville/Russellville Studio & Office Site Leased (expires 06/30/1999) 18,800 Market Gang/IRN Studio & Office Site WLAC-AM Transmitter Site (+ 27.69 acres) Owned 5,800 WLAC-FM Transmitter Site (+18.12 acres) 1/3 Owned (3-way ownership) 2,700 WJZC Transmitter Site (land) Leased (expires 09/27/2019) 400 WJZC Transmitter Site (tower & building) Owned 1,324 Wilkes Barre/Scranton Market WILK/WGBI/WGGY/WKRZ Studio & Office Site Leased (expires 12/31/1998) 14,000 WILK Transmitter Site Leased (expires 08/31/1999) 1,000 WGBI Transmitter Site Leased (expires 02/28/2000) 1,000 WGGY Transmitter Site Leased (expires 02/28/2000) 300 WKRZ Transmitter Site Owned 4,052 (bldg) WKRF Office Site Leased (month to month) 100 WKRF Transmitter Site Leased (month to month) 1 acre WWSH Transmitter Site/bldg. Owned 1 acre/120 WWFH Transmitter Site and office/land Owned 2,320/1 acre WILP Transmitter Site/bldg. Owned 1 acre/750 St. Louis Market KPNT/WVRV Studio & Office Site Owned 1,753 (radio) KPNT Transmitter Site Owned 7450 WVRV Transmitter Site Owned 7,278 WVRV back up building Owned 240 Los Angeles Market KBLA Studio & Office Site- building Owned 6,000 KBLA Transmitter Site -- land Owned 3 acres Milwaukee Market WEMP, WAMG and WMYX Studio and Office Site Owned 9.200 WEMP/WMYX Transmitter site Owned 3,200 WAMG Transmitter site Owned N/A Kansas City Market KCFX, KCIY, and KXTR Studio and Office Site Leased (expires 2/28/2018) 20,914 KQRC Studio and Office Site Leased (expires 5/31/1999) 3,500 KCAZ Studio, Office and Transmitter site Owned 5,000 KCFX Transmitter site Leased (expires 6/25/2000 N/A KXTR Transmitter site Leased (expires 3/20/2002) N/A KCIY Transmitter site Leased (expires 7/25/2007) N/A
32
APPROXIMATE RADIO PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED SIZE (SQ. FEET) - ------------------ ---------------------------------------------- ---------------------------- ---------------- WGH/(AM), WGH/(FM) and WVCL Studio and Office Norfolk Market Site Leased (expires 8/30.2007) 15,737 WGH-AM/FM Transmitter site Owned 1,000 WGH Nighttime Transmitter site Owned 1,800 WVCL Transmitter site Leased (expires N/A) N/A St. Louis Market WRTH, WIL and KIHT Studio and Office Site Leased (expires 3/15/2004) 12,000 WRTH Transmitter site Owned N/A WIL Transmitter site Leased (expires 5/31/1998) N/A KIHT Main FM Transmitter site Leased (expries 4/28/2000) N/A KIHT Auxilliary FM Transmitter site Leased (expires 3/15/2004 N/A
- ---------- (a) Lease expiration dates assume exercise of all renewal options of the lessee. The Company believes that all of its properties, both owned and leased, are generally in good operating condition, subject to normal wear and tear, and are suitable and adequate for the Company's current business operations. ITEM 3. LEGAL PROCEEDINGS On July 14, 1997, Sinclair publicly announced that it had reached an agreement for certain of its owned and/or programmed television stations which were affiliated with UPN to become affiliated with WB beginning January 16, 1998. On August 1, 1997, UPN informed Sinclair that it did not believe Sinclair or its affiliates had provided proper notice of its intention not to extend the UPN affiliation agreements beyond January 15, 1998, and, accordingly, that these agreements had been automatically renewed through January 15, 2001. In August 1997, UPN filed an action (the "California Action") in Los Angeles Superior Court against the Company, seeking declaratory relief and specific performance or, in the alternative, unspecified damages and alleging that neither the Company nor its affiliates provided proper notice of their intention not to extend the current UPN affiliations beyond January 15, 1998. Certain subsidiaries of the Company filed an action (the "Baltimore Action") in the Circuit Court for Baltimore City seeking declaratory relief that their notice was effective to terminate the affiliations on January 15, 1998. On December 9, 1997, the court in the Baltimore Action ruled that Sinclair gave timely and proper notice to effectively terminate the affiliations as of January 15, 1998 and granted Sinclair's motion for summary judgment. Based on the decision in the Baltimore Action, the court in the Los Angeles Superior Court has stayed all proceedings in the California Action. Following an appeal by UPN, the court of Special Appeals of Maryland upheld the ruling in the Baltimore Action and UPN is seeking further appellate review by the Maryland Court of Appeals. Although the Company believes that proper notice of intention not to extend was provided to UPN, there can be no assurance that the Company and its subsidiaries will prevail in these proceedings or that the outcome of these proceedings, if adverse to the Company and its subsidiaries, will not have a material adverse effect on the Company. The Company currently and from time to time is involved in litigation incidental to the conduct of its business. Except as described above, the Company is not a party to any lawsuit or proceeding that in the opinion of the Company will have a material adverse effect. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's stockholders during the fourth quarter of 1997. 33 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Price Range of Common Stock Effective June 13, 1995, the common stock of the Company was listed for trading on the Nasdaq stock market under the symbol SBGI. The following table sets forth for the periods indicated the high and low sales prices on the Nasdaq stock market. 1995 HIGH LOW ---- ----------- ----------- Second Quarter (from June 13) .......... $ 29.00 $ 23.25 Third Quarter .......................... 31.00 27.75 Fourth Quarter ......................... 22.50 16.25 1996 HIGH LOW ---- ----------- ------------ First Quarter ........... $ 26.50 $ 16.875 Second Quarter .......... 43.50 25.50 Third Quarter ........... 46.50 36.125 Fourth Quarter .......... 43.75 23.00 1997 HIGH LOW ---- ----------- ----------- First Quarter ........... $ 31.00 $ 23.00 Second Quarter .......... 30.875 23.00 Third Quarter ........... 40.375 24.25 Fourth Quarter .......... 46.625 33.625 As of March 16, 1998, there were approximately 77 stockholders of record of the common stock of the Company. This number does not include beneficial owners holding shares through nominee names. Based on information available to it, the Company believes it has more than 1,500 beneficial owners of its Class A Common Stock. The Company generally has not paid a dividend on its common stock and does not expect to pay dividends on its common stock in the foreseeable future. The 1997 Bank Credit Agreement and certain subordinated debt of the Company generally prohibit the Company from paying dividends on its common stock. Under the indentures governing the Company's 10% Senior Subordinated Notes due 2003, 10% Senior Subordinated Notes due 2005, 9% Senior Subordinated Notes due 2007 and 8 3/4% Senior Subordinated Notes due 2007, the Company is not permitted to pay dividends on its common stock unless certain specified conditions are satisfied, including that (i) no event of default then exists under the Indenture or certain other specified agreements relating to indebtedness of the Company and (ii) the Company, after taking account of the dividend, is in compliance with certain net cash flow requirements contained in the Indenture. In addition, under certain senior unsecured debt of the Company, the payment of dividends is not permissible during a default thereunder. ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data for the years ended December 31, 1993, 1994, 1995, 1996, and 1997 have been derived from the Company's audited Consolidated Financial Statements. The Consolidated Financial Statements for the years ended December 31, 1995, 1996 and 1997 are included elsewhere in this Form 10-K. The information below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements included elsewhere in this Form 10-K. 34 STATEMENT OF OPERATIONS DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, -------------------------------------------------------------------- 1993 1994(A) 1995(A) 1996(A) 1997(A) ------------ ------------- ------------- ------------- ------------- STATEMENT OF OPERATIONS DATA: Net broadcast revenues(b) ......................... $69,532 $118,611 $187,934 $ 346,459 $471,228 Barter revenues ................................... 6,892 10,743 18,200 32,029 45,207 ------- -------- -------- --------- -------- Total revenues ................................... 76,424 129,354 206,134 378,488 516,435 ------- -------- -------- --------- -------- Operating expenses, excluding depreciation and amortization, deferred compensation and special bonuses paid to executive of- ficers ........................................... 32,295 50,545 80,446 167,765 236,376 Depreciation and amortization(c) .................. 22,486 55,587 80,410 121,081 152,170 Amortization of deferred compensation ............. -- -- -- 739 1,636 Special bonuses paid to executive officers ........ 10,000 3,638 -- -- -- ------- -------- -------- --------- -------- Broadcast operating income ........................ 11,643 19,584 45,278 88,903 126,253 ------- -------- -------- --------- -------- Interest and amortization of debt discount expense .......................................... 12,852 25,418 39,253 84,314 98,393 Interest and other income ......................... 2,131 2,447 4,163 3,478 2,228 Subsidiary trust minority interest expense(d) -- -- -- -- 18,600 ------- -------- -------- --------- -------- Income (loss) before (provision) benefit for income taxes and extraordinary item .............. $ 922 $(3,387) $ 10,188 $ 8,067 $ 11,488 ======= ======== ======== ========= ======== Net income (loss) available to common shareholders ..................................... $(7,945) $(2,740) $ 76 $ 1,131 $(13,329) ======= ======== ======== ========= ======== Basic Earnings per share: Net income (loss) before extraordinary item ............................................ $ -- $ (0.09) $ 0.15 $ 0.03 $ (0.13) ======= ======== ======== ========= ======== Extraordinary item ............................... $ (0.27) $ -- $ (0.15) $ -- $ (0.17) ======= ======== ======== ========= ======== Net income (loss) ................................ $ (0.27) $ (0.09) $ -- $ 0.03 $ (0.37) ======= ======== ======== ========= ======== Weighted average shares outstanding (in thousands) ...................................... 29,000 29,000 32,205 37,381 35,951 ======= ======== ======== ========= ======== OTHER DATA: Broadcast cash flow(e) ............................ $37,498 $67,519 $111,124 $ 189,216 $243,406 Broadcast cash flow margin(f) ..................... 53.9 % 56.9 % 59.1 % 54.6 % 51.7 % Adjusted EBITDA(g) ................................ $35,406 $64,547 $105,750 $180,272 $229,000 Adjusted EBITDA margin(f) ......................... 50.9 % 54.4 % 56.3 % 52.0 % 48.6 % After tax cash flow(h) ............................ $20,850 $24,948 $ 54,645 $ 77,484 $104,884 Program contract payments ......................... 8,723 14,262 19,938 30,451 51,059 Capital expenditures .............................. 528 2,352 1,702 12,609 19,425 Corporate overhead expense ........................ 2,092 2,972 5,374 8,944 14,406
(Continued on following page) 35
AS OF DECEMBER 31, --------------------------------------------------------------------- 1993 1994(A) 1995(A) 1996(A) 1997(A) ------------ ------------ ------------- --------------- ------------- BALANCE SHEET AND CASH FLOW DATA: Cash and cash equivalents ....................... $ 18,036 $ 2,446 $ 112,450 $ 2,341 $ 139,327 Total assets .................................... 242,917 399,328 605,272 1,707,297 2,034,234 Total debt(i) ................................... 224,646 346,270 418,171 1,288,103 1,080,722 Company Obligated Mandatorily Redeem- able Security of Subsidiary Trust Holding Solely KDSM Senior Deben- tures(j) ....................................... -- -- -- -- 200,000 Total stockholders' equity (deficit) ............ (11,024) (13,723) 96,374 237,253 543,288 Cash flows from operating activities(k) ......... 11,230 20,781 55,986 69,298 96,625 Cash flows from investing activities(k) ......... 1,521 (249,781) (119,320) (1,012,225) (218,990) Cash flows from financing activities(k) ......... 3,462 213,410 173,338 832,818 259,351
- ---------- (a) The Company made acquisitions in 1994, 1995, 1996 and 1997 as described in the footnotes to the Consolidated Financial Statements incorporated herein by reference. The statement of operations data and other data presented for periods preceding the dates of acquisitions do not include amounts for these acquisitions and therefore are not comparable to subsequent periods. Additionally, the years in which the specific acquisitions occurred may not be comparable to subsequent periods depending on when during the year the acquisition occurred. (b) Net broadcast revenues are defined as broadcast revenues net of agency commissions. (c) Depreciation and amortization includes amortization of program contract costs and net realizable value adjustments, depreciation and amortization of property and equipment, and amortization of acquired intangible broadcasting assets and other assets including amortization of deferred financing costs and costs related to excess syndicated programming. (d) Subsidiary trust minority interest expense represents the distributions on the HYTOPS. (e) "Broadcast cash flow" is defined as broadcast operating income plus corporate overhead expense, special bonuses paid to executive officers, depreciation and amortization (including film amortization and amortization of deferred compensation, and excess syndicated programming), less cash payments for program contract rights. Cash program payments represent cash payments made for current program payables and do not necessarily correspond to program usage. Special bonuses paid to executive officers are considered unusual and non-recurring. The Company has presented broadcast cash flow data, which the Company believes are comparable to the data provided by other companies in the industry, because such data are commonly used as a measure of performance for broadcast companies. However, broadcast cash flow does not purport to represent cash provided by operating activities as reflected in the Company's consolidated statements of cash flows, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (f) "Broadcast cash flow margin" is defined as broadcast cash flow divided by net broadcast revenues. "Adjusted EBITDA margin" is defined as Adjusted EBITDA divided by net broadcast revenues. "After tax cash flow margin" is defined as after tax cash flow divided by net broadcast revenues. (g) "Adjusted EBITDA" is defined as broadcast cash flow less corporate overhead expense and is a commonly used measure of performance for broadcast companies. Adjusted EBITDA does not purport to represent cash provided by operating activities as reflected in the Company's consolidated statements of cash flows, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (h) "After tax cash flow" is defined as net income (loss) available to common shareholders plus extraordinary losses, minus extraordinary gains (before the effects of related tax benefits) plus depreciation and amortization of intangibles, (excluding film amortization), amortization of deferred compensation, amortization of excess syndicated programming, special bonuses paid to executive officers, and the deferred tax provision (or minus the deferred tax benefit). After tax cash flow is presented here not as a measure of operating results and does not purport to represent cash provided by operating activities. After tax cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (notes continued on following page). 36 (i) "Total debt" is defined as long-term debt, net of unamortized discount, and capital lease obligations, including current portion thereof. In 1992 total debt included warrants outstanding which were redeemable outside the control of the Company. The warrants were purchased by the Company for $10,400 in 1993. Total debt as of December 31, 1993 included $100,000 in principal amount of the 1993 Notes (as defined herein), the proceeds of which were held in escrow to provide a source of financing for acquisitions that were subsequently consummated in 1994 utilizing borrowings under the Bank Credit Agreement. $100,000 of the 1993 Notes was redeemed from the escrow in the first quarter of 1994. Total debt does not include the HYTOPS or the Company's preferred stock. (j) Company Obligated Mandatorily Redeemable Security of Subsidiary Trust Holding Solely KDSM Senior Debentures represents $200,000 aggregate liquidation value of the HYTOPS. (k) These items are financial statement disclosures in accordance with generally accepted accounting principles and are also presented in the Company's consolidated financial statements incorporated by reference herein. 37 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The Company is a diversified broadcasting company that currently owns or programs pursuant to Local Marketing Agreements ("LMAs") 35 television stations and, upon consummation of all pending acquisitions and dispositions, will own or program pursuant to LMAs 56 television stations. The Company owns or programs pursuant to LMAs 52 radio stations and upon consummation of all pending acquisitions and dispositions, the Company will own or program pursuant to LMAs 51 radio stations. The Company also has options to acquire two additional radio stations The operating revenues of the Company are derived from local and national advertisers and, to a much lesser extent, from television network compensation. The Company's primary operating expenses involved in owning, operating or programming the television and radio stations are syndicated program rights fees, commissions on revenues, employee salaries, news-gathering and promotion. Amortization and depreciation of costs associated with the acquisition of the stations and interest carrying charges are significant factors in determining the Company's overall profitability. Set forth below are the principal types of broadcast revenue received by the Company's stations for the periods indicated and the percentage contribution of each type to the Company's total gross broadcast revenue: BROADCAST REVENUE (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, -------------------------------------------------------------------------------- 1995 1996 1997 ------------------------- ------------------------- ------------------------ Local/regional advertising..... $ 104,299 47.5% $ 199,029 49.4% $ 287,860 52.7% National advertising .......... 113,678 51.7 191,449 47.6 250,445 45.9 Network compensation .......... 442 0.2 3,907 1.0 5,479 1.0 Political advertising ......... 197 0.1 6,972 1.7 1,189 0.2 Production .................... 1,115 0.5 1,142 0.3 1,239 0.2 --------- ----- --------- ----- --------- ----- Broadcast revenue ............. 219,731 100.0% 402,499 100.0% 546,212 100.0% ===== ===== ===== Less: agency commissions....... (31,797) (56,040) (74,984) --------- --------- --------- Broadcast revenue, net ........ 187,934 346,459 471,228 Barter revenue ................ 18,200 32,029 45,207 --------- --------- --------- Total revenue ................. $ 206,134 $ 378,488 $ 516,435 ========= ========= =========
The Company's primary types of programming and their approximate percentages of 1997 net broadcast revenue were network programming (14.9%), children's programming (5.3%) and other syndicated programming (79.8%). The Company's four largest categories of advertising and their approximate percentages of 1997 net broadcast revenue were automotive (20.0%), movies (6.7%), fast food advertising (6.4%) and retail/department stores (6.2%). No other advertising category accounted for more than 6% of the Company's net broadcast revenue in 1997. No individual advertiser accounted for more than 5% of any individual Company station's net broadcast revenue in 1997. 38 The following table sets forth certain operating data of the Company for the years ended December 31, 1995, 1996 and 1997. Capitalized terms used in this section and not defined elsewhere in this Form 10-K are defined in Notes to the Consolidated Financial Statements of the Company included elsewhere in this Form 10-K. OPERATING DATA (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------------------- 1995 1996 1997 ------------- ------------- ------------- Net broadcast revenue ..................... $ 187,934 $ 346,459 $ 471,228 Barter revenue ............................ 18,200 32,029 45,207 --------- --------- --------- Total revenue ............................. 206,134 378,488 516,435 --------- --------- --------- Operating costs ........................... 64,326 142,576 198,262 Expenses from barter arrangements ......... 16,120 25,189 38,114 Depreciation and amortization ............. 80,410 121,081 152,170 Stock-based compensation .................. -- 739 1,636 --------- --------- --------- Broadcast operating income ................ $ 45,278 $ 88,903 $ 126,253 ========= ========= ========= BROADCAST CASH FLOW (BCF) DATA: Television BCF ............................ $ 111,124 $ 175,212 $ 221,631 Radio BCF ................................. -- 14,004 21,775 --------- --------- --------- Consolidated BCF .......................... $ 111,124 $ 189,216 $ 243,406 ========= ========= ========= Television BCF margin ..................... 59.1% 57.1% 54.8% Radio BCF margin .......................... -- 35.0% 32.7% Consolidated BCF margin ................... 59.1% 54.6% 51.7% OTHER DATA: Adjusted EBITDA ........................... $ 105,750 $ 180,272 $ 229,000 Adjusted EBITDA margin .................... 56.3% 52.0% 48.6% After tax cash flow ....................... $ 54,645 $ 77,484 $ 104,884 Program contract payments ................. 19,938 30,451 51,059 Corporate expense ......................... 5,374 8,944 14,406 Capital expenditures ...................... 1,702 12,609 19,425
RESULTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1996 AND 1997 Net broadcast revenue increased $124.7 million, or 36.0%, to $471.2 million for the year ended December 31, 1997 from $346.5 million for the year ended December 31, 1996. The increase in net broadcast revenue for the year ended December 31, 1997 as compared to the year ended December 31, 1996 was comprised of $114.5 million related to television and radio station acquisitions and LMA transactions consummated during 1996 and 1997 (the "Acquisitions") and $10.2 million that resulted from an increase in net broadcast revenue on a same station basis. Also on a same station basis, revenue from local and national advertisers grew 7.7% and 4.9%, respectively, for a combined growth rate of 6.1%. Total operating costs increased $55.7 million, or 39.1%, to $198.3 million for the year ended December 31, 1997 from $142.6 million for the year ended December 31, 1996. The increase in operating costs for the year ended December 31, 1997 as compared to the year ended December 31, 1996 com- 39 prised $49.0 million related to the Acquisitions, $5.4 million from an increase in corporate overhead expenses, and $1.3 million from an increase in operating costs on a same station basis. On a same station basis, operating costs increased 1.8%. Broadcast operating income increased to $126.3 million for the year ended December 31, 1997, from $88.9 million for the year ended December 31, 1996, or 42.1%. The increase in broadcast operating income for the year ended December 31, 1997 as compared to the year ended December 31, 1996 was primarily attributable to the Acquisitions. Interest expense increased to $98.4 million for the year ended December 31, 1997 from $84.3 million for the year ended December 31, 1996, or 16.7%. The increase in interest expense for the year ended December 31, 1997 primarily related to indebtedness incurred by the Company to finance the Acquisitions. Subsidiary trust minority interest expense of $18.6 million for the year ended December 31, 1997 is related to the issuance of the HYTOPS which was completed March 12, 1997. Subsidiary trust minority interest expense was partially offset by reductions in interest expense because a portion of the proceeds of the sale of the HYTOPS was used to reduce indebtedness under the Company's Bank Credit Agreement. Interest and other income decreased to $2.2 million for the year ended December 31, 1997 from $3.5 million for the year ended December 31, 1996. This decrease was primarily due to lower average cash balances during these periods. For the reasons described above, net loss for the year ended December 31, 1997 was $10.6 million or $.37 per share compared to net income of $1.1 million or $.03 per share for the year ended December 31, 1996. Broadcast Cash Flow increased $54.2 million to $243.4 million for the year ended December 31, 1997 from $189.2 million for the year ended December 31, 1996, or 28.6%. The increase in Broadcast Cash Flow was comprised of $45.0 million relating to the Acquisitions and $9.2 million that resulted from Broadcast Cash Flow growth on a same station basis, which had Broadcast Cash Flow growth of 8.2%. The Company's Broadcast Cash Flow Margin decreased to 51.7% for the year ended December 31, 1997 from 54.6% for the year ended December 31, 1996. The decrease in Broadcast Cash Flow Margin for the year ended December 31, 1997 as compared to the year ended December 31, 1996 primarily resulted from the lower margins related to the 1996 Acquisitions. In addition, 1996 Broadcast Cash Flow Margin benefited from a non-recurring $4.7 million timing lag of program contract payments relating to the River City Acquisition and certain other acquisitions. On a same station basis, Broadcast Cash Flow Margin improved from 57.3% for the year ended December 31, 1996 to 58.9% for the year ended December 31, 1997. Adjusted EBITDA represents broadcast cash flow less corporate expenses. Adjusted EBITDA increased to $229.0 million for the year ended December 31, 1997 from $180.3 million for the year ended December 31, 1996, or 27.0%. These increases in Adjusted EBITDA for the year ended December 31, 1997 as compared to the year ended December 31, 1996 resulted from the Acquisitions and to a lesser extent, increases in net broadcast revenues on a same station basis. The Company's Adjusted EBITDA margin decreased to 48.6% for the year ended December 31, 1997 from 52.0% for the year ended December 31, 1996. This decrease in Adjusted EBITDA margin resulted primarily from the circumstances affecting broadcast cash flow margins as noted above combined with an increase in corporate expenses. Corporate overhead expenses increased to $14.4 million for the year ended December 31, 1997 from $8.9 million for the year ended December 31, 1996, or 61.8%. These increases in corporate expenses primarily resulted from costs associated with managing a larger base of operations. During 1996, the Company increased the size of its corporate staff as a result of the addition of a radio business segment and a significant increase in the number of television stations owned, operated or programmed. The costs associated with this increase in staff were only incurred during a partial period of the year ended December 31, 1996. After Tax Cash Flow increased to $104.9 million for the year ended December 31, 1997 from $77.5 million for the year ended December 31, 1996, or 35.4%. The increase in After Tax Cash Flow for the year ended December 31, 1997 as compared to the year ended December 31, 1996 primarily resulted 40 from the Acquisitions, an increase in revenue on a same station basis, a Federal income tax receivable of $10.6 million resulting from 1997 NOL carry-backs, offset by interest expense on the debt incurred to consummate the Acquisitions and subsidiary trust minority interest expense related to the private placement of the HYTOPS issued during March 1997. YEARS ENDED DECEMBER 31, 1995 AND 1996 Total revenue increased to $378.5 million, or 83.6%, for the year ended December 31, 1996 from $206.1 million for the year ended December 31, 1995. Excluding the effects of non-cash barter transactions, net broadcast revenue for the year ended December 31, 1996 increased by 84.4% over the year ended December 31, 1995. The increase in broadcast revenue was primarily the result of acquisitions and LMA transactions consummated by the Company in 1995 (the "1995 Acquisitions") and 1996. For stations owned, operated or programmed throughout 1995 and 1996, television broadcast revenue grew 2.1% for the year ended December 31, 1996 when compared to the year ended December 31, 1995. For stations owned, operated or programmed throughout 1994 and 1995, television broadcast revenue grew 12.8% for the year ended December 31, 1995 when compared to the year ended December 31, 1994. The decrease in 1996 revenue growth as compared to 1995 revenue growth primarily resulted from the loss in 1996 of the Fox affiliation at WTTO in the Birmingham market, the loss of the NBC affiliation at WRDC in the Raleigh/Durham market and decreases in ratings at WCGV and WNUV in the Milwaukee and Baltimore markets, respectively. Operating expenses excluding depreciation, amortization of intangible assets and amortization of deferred compensation and excess syndicated programming costs increased to $167.8 million, or 108.7%, for the year ended December 31, 1996 from $80.4 million for the year ended December 31, 1995. The increase in expenses for the year ended December 31, 1996 as compared to the year ended December 31, 1995 was largely attributable to operating costs associated with the 1995 and 1996 Acquisitions, an increase in LMA fees resulting from LMA transactions and an increase in corporate overhead expenses. Broadcast operating income increased to $88.9 million for the year ended December 31, 1996, from $45.3 million for the year ended December 31, 1995, or 96.2%. The increase in broadcast operating income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 was primarily attributable to the 1995 and 1996 Acquisitions. Interest expense increased to $84.3 million for the year ended December 31, 1996 from $39.3 million for the year ended December 31, 1995, or 114.5%. The increase in interest expense for the year ended December 31, 1996 was primarily related to senior bank indebtedness incurred by the Company to finance the River City Acquisition and other acquisitions. Interest and other income decreased to $3.5 million for the year ended December 31, 1996 from $4.2 million for the year ended December 31, 1995, or 16.7%. The decrease for the year ended December 31, 1996 was primarily due to lower cash balances and related interest income resulting from cash payments made in February 1996 when the Company made a $34.4 million payment relating to the WSMH acquisition and April 1996 when the Company made a $60 million down payment relating to the River City Acquisition. The decrease in interest income was offset by an increase in other income resulting from the 1995 and 1996 Acquisitions. For the reasons described above, net income for the year ended December 31, 1996 was $1.1 million or $0.03 per share compared to net income of $5.0 million or $0.15 per share for the year ended December 31, 1995 before the extraordinary loss on early extinguishment of debt. Broadcast cash flow increased to $189.2 million for the year ended December 31, 1996 from $111.1 million for the year ended December 31, 1995, or 70.3%. The increase in broadcast cash flow for the year ended December 31, 1996 as compared to the year ended December 31, 1995 primarily resulted from the 1995 and 1996 Acquisitions. For stations owned, operated or programmed throughout 1995 and 1996, broadcast cash flow grew 1.3% for the year ended December 31, 1996 when compared to the year ended December 31, 1995. For stations owned, operated or programmed throughout 1994 and 1995, broadcast cash flow grew 23.7% for the year ended December 31, 1995 when compared to the year ended December 31, 1994. The decrease in 1996 broadcast cash flow growth as compared to 1995 41 broadcast cash flow growth primarily resulted from the loss in 1996 of the Fox affiliation at WTTO in the Birmingham market, the loss of the NBC affiliation at WRDC in the Raleigh/Durham market and decreases in ratings at WCGV and WNUV in the Milwaukee and Baltimore markets, respectively. The Company's broadcast cash flow margin decreased to 54.6% for the year ended December 31, 1996 from 59.1% for the year ended December 31, 1995. Excluding the effect of radio station broadcast cash flow, television station broadcast cash flow margin decreased to 56.7% for the year ended December 31, 1996 as compared to 59.1% for the year ended December 31, 1995. The decrease in broadcast cash flow margins for the year ended December 31, 1996 as compared to the year ended December 31, 1995 primarily resulted from the lower margins of the acquired radio broadcasting assets and lower margins of certain of the acquired television stations. For stations owned, operated or programmed throughout 1996 and 1995, broadcast cash flow margins were unchanged when comparing the years ended December 31, 1996 and 1995. The Company believes that margins of certain of the acquired stations will improve as operating and programming synergies are implemented. Adjusted EBITDA increased to $180.3 million for the year ended December 31, 1996 from $105.8 million for the year ended December 31, 1995, or 70.4%. The increase in Adjusted EBITDA for the year ended December 31, 1996 as compared to the year ended December 31, 1995 resulted from the 1995 and 1996 Acquisitions. The Company's Adjusted EBITDA margin decreased to 52.0% for the year ended December 31, 1996 from 56.3% for the year ended December 31, 1995. The decrease in Adjusted EBITDA margins for the year ended December 31, 1996 as compared to the year ended December 31, 1995 primarily resulted from higher operating costs at certain of the acquired stations. After-tax cash flow increased to $77.5 million for the year ended December 31, 1996 from $54.6 million for the year ended December 31, 1995, or 41.9%. The increase in after-tax cash flow for the year ended December 31, 1996 as compared to the year ended December 31, 1995 primarily resulted from the 1995 and 1996 Acquisitions offset by interest expense on the debt incurred to consummate these acquisitions. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1997, the Company had $139.3 million in cash balances and net working capital of approximately $176.0 million. The Company's primary sources of liquidity are cash provided by operations and availability under the 1997 Bank Credit Agreement. As of March 10, 1998, the Company's cash balances decreased to approximately $10.1 million as a result of closing on certain of the Heritage television stations. Also as of March 10, 1998, approximately $239.8 million was available for borrowing under the 1997 Bank Credit Agreement. An additional $89.6 million is available to the Company under its Revolving Credit Commitment to the extent future acquisitions provide incremental EBITDA. In addition, the 1997 Bank Credit Agreement provides for a Tranche C term loan in the amount of up to $400 million which can be utilized upon approval by the agent bank and upon raising sufficient commitments to fund the additional loans. Net cash flows from operating activities increased to $96.6 million for the year ended December 31, 1997 from $69.3 million for the year ended December 31, 1996. The Company made income tax payments of $6.5 million for the year ended December 31, 1997 as compared to $6.8 million for the year ended December 31, 1996. The Company made interest payments on outstanding indebtedness of $98.5 million during the year ended December 31, 1997 as compared to $82.8 million for the year ended December 31, 1996. Additional interest payments for the year ended December 31, 1997 as compared to the year ended December 31, 1996 primarily related to additional interest costs on indebtedness incurred to finance the 1996 Acquisitions. The Company made subsidiary trust minority interest expense payments of $17.6 million for the year ended December 31, 1997 related to the issuance of HYTOPS completed in March 1997. Program rights payments increased to $51.1 million for the year ended December 31, 1997 from $30.5 million for the year ended December 31, 1996, primarily as a result of the 1996 Acquisitions. Net cash flows used in investing activities decreased to $219.0 million for the year ended December 31, 1997 from $1.0 billion for the year ended December 31, 1996. During the year ended December 31, 1997, the Company made cash payments of $87.5 million to acquire the license and non-license assets of 42 KUPN-TV in Las Vegas, Nevada, utilizing indebtedness under the 1997 Bank Credit Agreement and existing cash balances. During the year ended December 31, 1997, the Company incurred option extension payments and other costs of $16.0 million relating to WSYX-TV in Columbus, Ohio. The Company made purchase option exercise payments of $11.1 million during the year ended December 31, 1997 exercising options to acquire certain FCC licenses related to the River City Acquisition. The Company made payments for property and equipment of $19.4 million for the year ended December 31, 1997. During the year ended December 31, 1997, the Company made deposits and incurred other costs relating to the Heritage Acquisition, the Max Media Acquisition and other acquisitions of $66.1 million, $12.8 million and $3.4 million, respectively. The Company anticipates that future requirements for capital expenditures will include capital expenditures incurred during the ordinary course of business (which will include costs associated with the implementation of digital television technology) and the cost of additional acquisitions of television and radio stations if suitable acquisitions can be identified on acceptable terms. Net cash flows provided by financing activities decreased to $259.4 million for the year ended December 31, 1997 from $832.8 million for the year ended December 31, 1996. In March 1997, the Company completed issuance of the HYTOPS. The Company utilized $135 million of the approximately $192.8 million net proceeds of the issuance of the HYTOPS to repay outstanding debt and retained the remainder for general corporate purposes, which included the acquisition of KUPN-TV in Las Vegas, Nevada. The Company made payments totaling $4.6 million to repurchase 186,000 shares of Class A Common Stock during the year ended December 31, 1997. In May 1997, the Company made payments of $4.7 million related to the amendment of its 1996 Bank Credit Agreement. In the fourth quarter of 1996, the Company negotiated the prepayment of syndicated program contract liabilities for excess syndicated programming assets. In the first quarter of 1997, the Company made final cash payments of $1.4 million related to these negotiations. In July 1997, the Company issued $200.0 million aggregate principal amount of 9% Senior Subordinated Notes due 2007 and utilized $162.5 million of the approximately $195.6 million net proceeds to repay outstanding indebtedness, retaining the remainder to pay a portion of the $63 million cash down payment relating to the Heritage Acquisition. In December 1997, the Company completed an issuance of $250 million aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2007. The Company received net proceeds from the issuance of $244.0 million of which $106.2 million was used to repurchase $98.1 million aggregate principal amount of the 10% Senior Subordinated Notes due 2003. The Company retained the remainder of the net proceeds for general corporate purposes which included closing the acquisition of the Heritage television stations serving the Mobile/Pensacola and Charleston/Huntington markets in January 1998. The Company received net proceeds from the 1997 Preferred Stock Issuance and the 1997 Common Stock Issuance of approximately $166.9 million and $151.0 million, respectively. The Company used the majority of these funds to repay existing borrowings under the 1997 Bank Credit Agreement. Contemporaneously with the 1997 Preferred Stock Issuance and the 1997 Common Stock Issuance, the Company and the lenders under the 1997 Bank Credit Agreement entered into an amendment to the 1997 Bank Credit Agreement, the effect of which was to recharacterize $275 million of indebtedness from the Tranche A term loan under the 1997 Bank Credit Agreement to amounts owing under the revolving credit facility under the 1997 Bank Credit Agreement. The Company used $285.7 million of the net proceeds from the 1997 Common Stock Issuance and the 1997 Preferred Stock Issuance to repay outstanding borrowings under the revolving credit facility, $8.9 million to repay outstanding amounts under the Tranche A term loan and the remaining net proceeds of approximately $23.3 million for general corporate purposes. The Company has entered into agreements to acquire additional television stations and radio stations in the Heritage Acquisition, the Lakeland Acquisition, the Max Media Acquisition and the Sullivan Acquisition. The Company also has an option to acquire the assets of WSYX-TV, Columbus, Ohio. The aggregate cash consideration needed to complete the purchase of the remaining stations under the Heritage Acquisition and to complete the Lakeland Acquisition, the Max Media Acquisition and the Sullivan Acquisition and to exercise the WSYX-TV option is expected to be approximately $1.6 billion (net of anticipated proceeds from sales of stations involved in these acquisitions). 43 The Company anticipates that funds from operations, existing cash balances and availability of the revolving credit facility under the 1997 Bank Credit Agreement will be sufficient to meet its working capital, capital expenditure commitments (other than commitments for pending acquisitions described above) and debt service requirements for the foreseeable future. The Company intends to finance pending acquisitions through a combination of available cash, the net proceeds of the Offering, and available borrowings under the 1997 Bank Credit Agreement. The current terms of the 1997 Bank Credit Agreement do not allow the Company to borrow an amount sufficient to finance all of the pending acquisitions. The Company intends to begin discussions with its banks to refinance the Bank Credit Agreement promptly upon the completion of the Offering. The Company believes that such a refinancing can be accomplished on terms reasonably satisfactory to the Company, but there can be no assurance that the Company will be able to obtain such an amendment on satisfactory terms. The 1997 Bank Credit Agreement and the indentures relating to the Company's 8 3/4% Senior Subordinated Notes due 2007, 9% Senior Subordinated Notes due 2007 and 10% Senior Subordinated Notes due 2005 restrict the incurrence of additional indebtedness and the use of proceeds of an equity issuance, but these restrictions are not expected to restrict the incurrence of indebtedness or use of proceeds of an equity issuance to finance the pending acquisitions. INCOME TAXES Income tax provision increased to $16.0 million for the year ended December 31, 1997 from a provision of $6.9 million for the year ended December 31, 1996. The Company's effective tax rate increased to 139.1% for the year ended December 31, 1997 from 86.0% for the year ended December 31, 1996. The increase in the Company's effective tax rate for the year ended December 31, 1997 as compared to the year ended December 31, 1996 primarily resulted from non-deductible goodwill amortization resulting from certain 1995 and 1996 stock acquisitions, a tax liability related to the dividends paid on the Company's Series C Preferred Stock (see Note 9, sub-note (a) to the Company's Consolidated Financial Statements), and state franchise taxes which are not based upon pre-tax income. Management believes that pre-tax income and "earnings and profits" will increase in future years which result in a lower effective tax rate and utilization of certain tax deductions related to dividends paid on the Company's Series C Preferred Stock. As of December 31, 1997, the Company has a net deferred tax liability of $21.5 million as compared to a net deferred tax asset of $782,000 as of December 31, 1996. This change in deferred taxes primarily relates to deferred tax liabilities associated with book and tax differences relating to the depreciation and amortization of fixed assets and intangible assets, a deferred tax liability generated as a result of a reduction in basis of Series C Preferred Stock (see Note 9, sub-note (a) to the Company's Consolidated Financial Statements), offset by deferred tax assets resulting from Federal and state net operating tax losses (NOL's) incurred during 1997. During the year ended December 31, 1997, the Company carried back certain Federal NOL's to be applied against prior years Federal taxes paid. These Federal NOL carry-backs resulted in an income tax receivable of $10.6 million as of December 31, 1997. The Company's income tax provision increased to $6.9 million for the year ended December 31, 1996 from $5.2 million for the year ended December 31, 1995. The Company's effective tax rate increased to 86% for the year ended December 31, 1996 from 51% for the year ended December 31, 1995. The increase for the year ended December 31, 1996 as compared to the year ended December 31, 1995 primarily related to certain financial reporting and income tax differences attributable to certain 1995 and 1996 Acquisitions (primarily non-deductible goodwill resulting from stock acquisition), and state franchise taxes which are independent of pre-tax income. The net deferred tax asset decreased to $782,000 as of December 31, 1996 from $21.0 million at December 31, 1995. The decrease in the Company's net deferred tax asset as of December 31, 1996 as compared to December 31, 1995 is primarily due to the Company recording deferred tax liabilities of $18.1 million relating to the acquisition of all of the outstanding stock of Superior in May 1996, adjustments related to certain 1995 acquisitions, and resulting differences between the book and tax basis of the underlying assets. 44 SEASONALITY The Company's results usually are subject to seasonal fluctuations, which result in fourth quarter broadcast operating income typically being greater than first, second and third quarter broadcast operating income. This seasonality is primarily attributable to increased expenditures by advertisers in anticipation of holiday season consumer spending and an increase in viewership during this period. YEAR 2000 Certain computer programs have been written using two digits rather than four to define the applicable year, which could result in the computer recognizing a date using "00" as the year 1900 rather than the year 2000. This, in turn, could result in major system failures and in miscalculations, and is generally referred to as the "Year 2000" problem. The Company and all of its subsidiaries have implemented computer systems which run substantially all of the Company's principal data processing and financial reporting software applications. The applications software used in these systems are Year 2000 compliant. Presently, the Company does not believe that Year 2000 compliance will result in any material investments, nor does the Company anticipate that the Year 2000 problem will have material adverse effects an the business operations or financial performance of the Company. In addition, the Company is not aware of any Year 2000 problems of its customers, suppliers or network affiliates that will have a material adverse effect on the business, operations or financial performance of the Company. There can be no assurance, however, that the Year 2000 problem will not adversely affect the Company and its business. ITEM 7A. QUANTITIVE AND QUALITATIVE DISCUSSION ABOUT MARKET PRICE Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statement and supplementary data of the Company required by this item are filed as exhibits hereto, are listed under Item 14(a)(1) and (2), and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL DISCLOSURE None 45 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below is certain information relating to the Company's executive officers, directors, certain key employees and persons expected to become executive officers, directors or key employees.
NAME AGE TITLE - ------------------------------- ----- ------------------------------------------------- David D. Smith ................ 47 President, Chief Executive Officer, Director and Chairman of the Board Frederick G. Smith ............ 48 Vice President and Director J. Duncan Smith ............... 43 Vice President, Secretary and Director Robert E. Smith ............... 34 Vice President, Treasurer and Director David B. Amy .................. 45 Chief Financial Officer Barry Drake ................... 46 Chief Operating Officer, SCI Radio Robert Gluck .................. 39 Regional Director, SCI Michael Granados .............. 43 Regional Director, SCI Steven M. Marks ............... 41 Regional Director, SCI Stuart Powell ................. 56 Regional Director, SCI John T. Quigley ............... 54 Regional Director, SCI Frank Quitoni ................. 53 Regional Director, SCI Frank W. Bell ................. 42 Vice President, Programming, SCI Radio M. William Butler ............. 45 Vice President/Group Program Director, SCI Lynn A. Deppen ................ 40 Vice President, Engineering, SCI Radio Michael Draman ................ 48 Vice President/TV Sales and Marketing, SCI Stephen A. Eisenberg .......... 55 Vice President/Director of National Sales, SCI Nat Ostroff ................... 57 Vice President/New Technology Delbert R. Parks, III ......... 45 Vice President/Operations and Engineering, SCI Robert E. Quicksilver ......... 43 Vice President/General Counsel, SCI Thomas E. Severson ............ 34 Corporate Controller Michael E. Sileck ............. 37 Vice President/Finance, SCI Robin A. Smith ................ 41 Chief Financial Officer, SCI Radio Patrick J. Talamantes ......... 33 Director of Corporate Finance, Treasurer of SCI Lawrence E. McCanna ........... 54 Director Basil A. Thomas ............... 82 Director
In addition to the foregoing, the following persons have agreed to serve as executive officers and/or directors of the Company as soon as permissible under the rules of the FCC and applicable laws.
NAME AGE TITLE - ------------------------------ ----- ----------------------------------------------- Barry Baker .................. 45 Executive Vice President of the Company, Chief Executive Officer of SCI and Director Kerby Confer ................. 56 Chief Executive Officer, SCI Radio Roy F. Coppedge, III ......... 49 Director
In connection with the River City Acquisition, the Company agreed to increase the size of the Board of Directors from seven members to nine to accommodate the prospective appointment of each of Barry Baker and Roy F. Coppedge, III or such other designee as Boston Ventures Limited Partnership IV and Boston Ventures Limited Partnership IVA (collectively "Boston Ventures") may select. Mr. Baker and Mr. Confer currently serve as consultants to the Company. The Company's obligation to appoint Mr. Coppedge or another designee of Boston Ventures will end its Boston Ventures sells shares as expected in a pending offering. Members of the Board of Directors are elected for one-year terms and until their successors are duly elected and qualified. Executive officers are appointed by the Board of Directors annually to serve for one-year terms and until their successors are duly appointed and qualified. David D. Smith has served as President, Chief Executive Officer and Chairman of the Board since September 1990. Prior to that, he served as General Manager of WPTT, Pittsburgh, Pennsylvania, from 1984, and assumed the financial and engineering responsibility for the Company, including the construction 46 of WTTE, Columbus, Ohio, in 1984. In 1980, Mr. Smith founded Comark Television, Inc., which applied for and was granted the permit for WPXT-TV in Portland, Maine and which purchased WDSI-TV in Chattanooga, Tennessee. WPXT-TV was sold one year after construction and WDSI-TV was sold two years after its acquisition. From 1978 to 1986, Mr. Smith co-founded and served as an officer and director of Comark Communications, Inc., a company engaged in the manufacture of high power transmitters for UHF television stations. His television career began with WBFF in Baltimore, where he helped in the construction of the station and was in charge of technical maintenance until 1978. David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith are brothers. Frederick G. Smith has served as Vice President of the Company since 1990 and as a Director since 1986. Prior to joining the Company in 1990, Mr. Smith was an oral and maxillofacial surgeon engaged in private practice and was employed by Frederick G. Smith, M.S., D.D.S., P.A., a professional corporation of which Mr. Smith was the sole officer, director and stockholder. J. Duncan Smith has served as Vice President, Secretary and a Director of the Company since 1988. Prior to that, he worked for Comark Communications, Inc. installing UHF transmitters. In addition, he also worked extensively on the construction of WPTT in Pittsburgh, WTTE in Columbus, WIIB in Bloomington and WTTA in St. Petersburg, as well as on the renovation of the new studio, offices and news facility for WBFF in Baltimore. Robert E. Smith has served as Vice President, Treasurer and a Director of the Company since 1988. Prior to that, he served as Program Director at WBFF from 1986 to 1988. Prior to that, he assisted in the construction of WTTE and also worked for Comark Communications, Inc. installing UHF transmitters. David B. Amy has served as Chief Financial Officer ("CFO") since October of 1994. In addition, he serves as Secretary of Sinclair Communications, Inc., the Company subsidiary which owns and operates the broadcasting operations. Prior to his appointment as CFO, Mr. Amy served as the Corporate Controller of the Company beginning in 1986 and has been the Company's Chief Accounting Officer since that time. Mr. Amy has over thirteen years of broadcast experience, having joined the Company as a business manager for WPTT in Pittsburgh. Mr. Amy received an MBA degree from the University of Pittsburgh in 1981. Barry Drake has served as Chief Operating Officer of SCI Radio since completion of the River City Acquisition. Prior to that time, he was Chief Operating Officer -- Keymarket Radio Division of River City since July 1995. Prior to that time, he was President and Chief Operating Officer of Keymarket since 1988. From 1985 through 1988, Mr. Drake performed the duties of the President of each of the Keymarket broadcasting entities, with responsibility for three stations located in Houston, St. Louis and Detroit. Robert Gluck has served as Regional Director of the Company since August 1997. As Regional Director, Mr. Gluck is responsible for the Milwaukee and Raleigh/Durham markets. Prior to joining the Company, Mr. Gluck served as General Manager at WTIC-TV in the Hartford-New Haven market. Prior to joining WTIC-TV in 1988, Mr. Gluck served as National Sales Manager and Local Sales Manager of WLVI-TV in Boston. Before joining WLVI-TV, Mr. Gluck served in various sales and management capacities with New York national sales representative firms. Michael Granados has served as a Regional Director of the Company since July 1996. As a Regional Director, Mr. Granados is responsible for the San Antonio, Des Moines, Peoria and Las Vegas markets. Prior to July 1996, Mr. Granados has served in various positions with the Company and, before the River City Acquisition, with River City. He served as the General Sales Manager of KABB from 1989 to 1993, the Station Manager and Director of Sales of WTTV from 1993 to 1994 and the General Manager of WTTV prior to his appointment as Regional Director in 1996. Steven M. Marks has served as Regional Director for the Company since October 1994. As Regional Director, Mr. Marks is responsible for the Baltimore, Norfolk, Flint and Birmingham markets. Prior to his appointment as Regional Director, Mr. Marks served as General Manager for WBFF since July 1991. From 1986 until joining WBFF in 1991, Mr. Marks served as General Sales Manager at WTTE. Prior to that time, he was national sales manager for WFLX-TV in West Palm Beach, Florida. Stuart Powell has served as a Regional Director since December 15, 1997. As a Regional Director, Mr. Powell is responsible for the Pittsburgh, Kansas City and Lexington markets. Prior to joining the Company, Mr. Powell served as Vice President and General Manager at WXIX-TV in the Cincinnati 47 market. Prior to joining WXIX-TV in 1992, Mr. Powell served as General Manager of WFLD in Chicago. Before joining WFLD, Mr. Powell served in various sales and management capacities with Scripps Howard in Phoenix and Kansas City. John T. Quigley has served as a Regional Director of the Company since June 1996. As Regional Director, Mr. Quigley is responsible for the Columbus, Cincinnati, and Oklahoma City markets. Prior to that time, Mr. Quigley served as general manager of WTTE since July 1985. Prior to joining WTTE, Mr. Quigley served in broadcast management positions at WCPO-TV in Cincinnati, Ohio and WPTV-TV in West Palm Beach, Florida. Frank Quitoni has served as a Regional Director since completion of the River City Acquisition. As Regional Director, Mr. Quitoni is responsible for the St. Louis, Sacramento, Indianapolis and Asheville/ Greenville/Spartanburg markets. Prior to joining the Company, he was Vice President of Operations for River City since 1995. Mr. Quitoni had served as the Director of Operations and Engineering for River City since 1994. Prior thereto Mr. Quitoni served as a consultant to CBS beginning in 1989. Mr. Quitoni was the Director of Olympic Operations for CBS Sports for the 1992 Winter Olympic Games and consulted with CBS for the 1994 Winter Olympic Games. Mr. Quitoni was awarded the Technical Achievement Emmy for the 1992 and 1994 CBS Olympic broadcasts. Frank W. Bell has served as Vice President/Radio Programming of SCI Radio since the Company's acquisition of the assets of River City in 1996. Prior to that time, he served in the same capacity in the Keymarket Radio Division of River City Broadcasting since 1995, and for Keymarket Communications since 1987. From 1981 through 1987, Mr. Bell owned and operated several radio stations in Pennsylvania and Kansas. Before that, he served two years as a Regional Manager for the National Association of Broadcasters. M. William Butler has served as Vice President/Group Program Director, SCI since 1997. From 1995 to 1997, Mr. Butler served as Director of Programming at KCAL, the Walt Disney Company station in Los Angeles, California. From 1991 to 1995, he was Director of Marketing and Programming at WTXF in Philadelphia, Pennsylvania and prior to that he held the same position at WLVI in Boston, Massachusetts. Mr. Butler attended the Graduate Business School of the University of Cincinnati from 1975 to 1976. Lynn A. Deppen has served as Director of Engineering/Radio Division of SCI Radio since the Company's acquisition of the assets of River City in 1996. Prior to that time, he served in the same position for the Keymarket Radio Division of River City Broadcasting since 1995, and for Keymarket Communications since 1985. Mr. Deppen has owned and operated his own technical consulting firm as well as radio stations in Pennsylvania, New York and Ohio. Michael Draman has served as Vice President/TV Sales and Marketing, SCI since 1997. From 1995 until joining the Company, Mr. Draman served as Vice President of Revenue Development for New World Television. From 1983 to 1995, he was Director of Sales and Marketing for WSVN in Miami, Florida. Mr. Draman attended The American University and The Harvard Business School and served with the U.S. Marine Corps in Vietnam. Stephen A. Eisenberg has served as Director of National Sales, SCI since November 1996. Prior to joining the Company, he worked since 1975 in various capacities at Petry Television, including most recently as Vice President/Director of Sales with total national sales responsibility for KTTV in Los Angeles, California, KCPQ-TV in Seattle, Washington, WTNH-TV in New Haven, Connecticut, WKYC-TV in Cleveland, Ohio, WBIR-TV in Knoxville, Tennessee, WKEF-TV in Dayton, Ohio and WTMJ-TV in Milwaukee, Wisconsin. Mr. Eisenberg received an MS degree in Journalism from Northwestern's Medill School and a BA degree from Brooklyn College. Nat Ostroff has served as Vice President for New Technology since joining the Company in January of 1996. From 1984 until joining the Company, he was the President and CEO of Comark Communication Inc., a leading manufacturer of UHF transmission equipment. While at Comark, Mr. Ostroff was nominated and awarded a Prime Time Emmy Award for outstanding engineering achievement for the development of new UHF transmitter technologies in 1993. In 1968, Mr. Ostroff founded Acrodyne 48 Industries Inc., a manufacturer of TV transmitters and a public company and served as its first President and CEO. Mr. Ostroff holds a BSEE degree from Drexel University and an MEEE degree from New York University. He is a member of several industry organizations, including, AFCCE, IEEE and SBE. Delbert R. Parks III has served as Vice President of Operations and Engineering since the completion of the River City Acquisition. Prior to that time, he was Director of Operations and Engineering for WBFF and Sinclair since 1985, and has been with the Company for 25 years. He is responsible for planning, organizing and implementing operational and engineering policies and strategies as they relate to television and computer systems. Currently, he is consolidating facilities for Sinclair's television stations and has just completed a digital facility for Sinclair's news and technical operation in Pittsburgh. Mr. Parks was also a Lieutenant Colonel in the Maryland Army National Guard and commanded the 1st Battalion, 175th Infantry (Light). Robert E. Quicksilver has served as Vice President/General Counsel, SCI since completion of the River City Acquisition. Prior to that time he served as General Counsel of River City since September 1994. From 1988 to 1994, Mr. Quicksilver was a partner of the law firm of Rosenblum, Goldenhersh, Silverstein and Zafft, P.C. in St. Louis. Mr. Quicksilver holds a B.A. from Dartmouth College and a J.D. from the University of Michigan. Thomas E. Severson has served as Corporate Controller since January 1997. Prior to that time, Mr. Severson served as Assistant Controller of the Company since 1995. Prior to joining the Company, Mr. Severson held positions in the audit departments of KPMG Peat Marwick LLP and Deloitte & Touche LLP from 1991 to 1995. Mr. Severson is a graduate of the University of Baltimore and is a Certified Public Accountant. Michael E. Sileck has served as Vice President/Finance of SCI since completion of the River City Acquisition. Prior to that time he served as the Director of Finance for River City since 1993. Mr. Sileck joined River City in July 1990 as Director of Finance and Business Affairs for KDNL-TV. Mr. Sileck is an active member of the Broadcast Cable Financial Management Association ("BCFM") and was a Director of BCFM from 1993 to 1996. Mr. Sileck, a Certified Public Accountant, received a B.S. degree in Accounting from Wayne State University and an M.B.A. in Finance from Oklahoma City University. Robin A. Smith has served as Chief Financial Officer, SCI Radio since June 1996. From 1993 until joining the Company, Ms. Smith served as Vice President and Chief Financial Officer of the Park Lane Group of Menlo Park, California, which owned and operated small market radio stations. From 1982 to 1993, she served as Vice President and Treasurer of Edens Broadcasting, Inc. in Phoenix, Arizona, which owns and operates radio stations in major markets. Ms. Smith is a graduate of the Arizona State University and is a Certified Public Accountant. Patrick J. Talamantes has served as Director of Corporate Finance and Treasurer of SCI since completion of the River City Acquisition. Prior to that time, he served as Treasurer for River City since April 1995. From 1991 to 1995, he was a Vice President with Chemical Bank, where he completed financings for clients in the cable, broadcasting, publishing and entertainment industries. Mr. Talamantes holds a B.A. degree from Stanford University and an M.B.A. from the Wharton School at the University of Pennsylvania. Lawrence E. McCanna has served as a Director of the Company since July 1995. Mr. McCanna has been a partner of the accounting firm of Gross, Mendelsohn & Associates, P.A., since 1972 and has served as its managing partner since 1982. Mr. McCanna has served on various committees of the Maryland Association of Certified Public Accountants and was chairman of the Management of the Accounting Practice Committee. He is also a former member of the Management of an Accounting Practice Committee of the American Institute of Certified Public Accountants. Mr. McCanna is a member of the board of directors of Maryland Special Olympics. Basil A. Thomas has served as a Director of the Company since November 1993. He is of counsel to the Baltimore law firm of Thomas & Libowitz, P.A. and has been in the private practice of law since 1983. From 1961 to 1968, Judge Thomas served as an Associate Judge on the Municipal Court of Baltimore City and, from 1968 to 1983, he served as an Associate Judge of the Supreme Bench of Baltimore City. Judge Thomas is a trustee of the University of Baltimore and a member of the American Bar Association and the Maryland 49 State Bar Association. Judge Thomas attended the College of William & Mary and received his L.L.B. from the University of Baltimore. Judge Thomas is the father of Steven A. Thomas, a senior attorney and founder of Thomas & Libowitz, counsel to the Company. Barry Baker has been the Chief Executive Officer of River City since 1989, and is the President of the corporate general partner of River City and Better Communications, Inc. ("BCI"). The principal business of both River City and BCI is television and radio broadcasting. In connection with the River City Acquisition, the Company agreed to appoint Mr. Baker Executive Vice President of the Company and to elect him as a Director at such time as he is eligible to hold those positions under applicable FCC regulations. He currently serves as a consultant to the Company. Kerby Confer served as a member of the Board of Representatives and Chief Executive Officer -- Keymarket Radio Division of River City since July 1995. Prior thereto, Mr. Confer served as Chairman of the Board and Chief Executive Officer of Keymarket since its founding in December 1981. Prior to engaging in the acquisition of various radio stations in 1975, Mr. Confer held a number of jobs in the broadcast business, including serving as Managing Partner of a radio station in Annapolis, Maryland from 1969 to 1975. From 1966 to 1969, he hosted a pop music television show on WBAL-TV (Baltimore) and WDCA-TV (Washington, D.C.). Prior thereto, Mr. Confer served as program director or producer/director for radio and television stations owned by Susquehanna Broadcasting and Plough Broadcasting Company, Inc. Mr. Confer currently provides services to the Company and is expected to become Chief Executive Officer of SCI Radio at such time as he is eligible to hold this position under applicable FCC regulations. Roy F. Coppedge, III is a general partner of the general partner of each of the Boston Ventures partnerships, limited partnerships primarily involved in the business of investments. Mr. Coppedge is a director of Continental Cablevision, Inc., and American Media, Inc. and a member of the Board of Representatives of Falcon Holding Group, L.P. In connection with the River City Acquisition, the Company agreed to elect Mr. Coppedge as a Director at such time as he is eligible to hold that position under applicable FCC regulations. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth certain information regarding the annual and long-term compensation by the Company for services rendered in all capacities during the year ended December 31, 1997 by the Chief Executive Officer and the four other executive officers of the Company as to whom the total annual salary and bonus exceeded $100,000 in 1997: SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION NAME AND SECURITIES UNDERLYING ALL OTHER PRINCIPAL POSITION YEAR SALARY BONUS (A) OPTIONS GRANTED (#) COMPENSATION (B) - ------------------------------------------ ------ --------------- ----------- ----------------------- ----------------- David D. Smith President and Chief Executive Officer ... 1997 $ 1,354,490 $ 98,224 -- $ 6,306 1996 767,308 317,913 -- 6,748 1995 450,000 343,213 -- 4,592 Frederick G. Smith Vice President .......................... 1997 273,000 -- -- 5,912 1996 260,000 233,054 -- 6,704 1995 260,000 258,354 -- 20,361 J. Duncan Smith Secretary ................................ 1997 283,500 -- -- 15,569 1996 270,000 243,485 -- 18,494 1995 270,000 268,354 -- 21,467 Robert E. Smith Secretary ............................... 1997 259,615 -- -- 5,539 1996 250,000 233,054 -- 6,300 1995 250,000 258,354 -- 4,592 David B. Amy Chief Financial Officer ................. 1997 189,000 50,000 -- 10,140 1996 173.582 31,000 25,000 7,766 1995 132,310 20,000 7,500 7,868
- ---------- 50 (a) The bonuses reported in this column represent amounts awarded and paid during the fiscal years noted but relate to the fiscal year immediately prior to the year noted. (b) All other compensation consists of income deemed received for personal use of Company-leased automobiles, the Company's 401 (k) contribution, life insurance and long-term disability coverage. In addition to the foregoing, Mr. Barry Baker and Mr. Kerby Confer have agreed to serve as executive officers and/or directors of the Company as soon as permissible under the rules of the FCC and applicable laws and have received consulting fees during the year ended December 31, 1997 of $1,179,856 and $328,568 respectively. STOCK OPTIONS No grants of stock options were made during 1997 to the Named Executive Officers. The following table shows the number of stock options exercised during 1997 and the 1997 year-end value of the stock options held by the Named Executive Officers:
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS "IN-THE-MONEY" OPTIONS AT DECEMBER 31, 1997 AT DECEMBER 31, 1997(A) SHARES ACQUIRED VALUE ----------------------------- ---------------------------- NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---------------------------- ----------------- --------- ------------- --------------- ------------- -------------- David D. Smith ............. -- $-- -- -- $-- $ -- Frederick G. Smith ......... -- -- -- -- -- -- J. Duncan Smith ............ -- -- -- -- -- -- Robert E. Smith ............ -- -- -- -- -- -- David B. Amy ............... -- -- 11,500 21,000 226,363 212,613
- ---------- (a) An "In-the-Money" option is an option for which the option price of the underlying stock is less than the market price at December 31, 1997, and all of the value shown reflects stock price appreciation since the granting of the option. DIRECTOR COMPENSATION Directors of the Company who also are employees of the Company serve without additional compensation. Independent directors receive $15,000 annually. These independent directors also receive $1,000 for each meeting of the Board of Directors attended and $500 for each committee meeting attended. In addition, the independent directors are reimbursed for any expenses incurred in connection with their attendance at such meetings. EMPLOYMENT AGREEMENTS The Company has entered into an employment agreement with David D. Smith, President and Chief Executive Officer of the Company. David Smith's employment agreement has an initial term of three years and is renewable for additional one-year terms, unless either party gives notice of termination not less than 60 days prior to the expiration of the then current term. The Company's Compensation Committee has approved an increase in Mr. Smith's total compensation to $1,200,000. Mr. Smith is also entitled to participate in the Company's Executive Bonus Plan based upon the performance of the Company during the year. The employment agreement provides that the Company may terminate Mr. Smith's employment prior to expiration of the agreement's term as a result of (i) a breach by Mr. Smith of any material covenant, promise or agreement contained in the employment agreement; (ii) a dissolution or winding up of the Company; (iii) the disability of Mr. Smith for more than 210 days in any twelve month period (as determined under the employment agreement); or (iv) for cause, which includes conviction of certain crimes, breach of a fiduciary duty to the Company or the stockholders, or repeated failure to exercise or undertake his duties as an officer of the Company (each, a "Termination Event"). In June 1995, the Company entered into an employment agreement with Frederick G. Smith, Vice President of the Company. Frederick Smith's employment agreement has an initial term of three years and is renewable for additional one-year terms, unless either party gives notice of termination not less 51 than 60 days prior to the expiration of the then current term. Under the agreement, Mr. Smith receives a base salary of $260,000 and is also entitled to participate in the Company's Executive Bonus Plan based upon the performance of the Company and Mr. Smith during the year. The employment agreement provides that the Company may terminate Mr. Smith's employment prior to expiration of the agreement's term as a result of a Termination Event. In June 1995, the Company entered into an employment agreement with J. Duncan Smith, Vice President and Secretary of the Company. J. Duncan Smith's employment agreement has an initial term of three years and is renewable for additional one-year terms, unless either party gives notice of termination not less than 60 days prior to the expiration of the then current term. Under the agreement, Mr. Smith receives a base salary of $270,000 and is also entitled to participate in the Company's Executive Bonus Plan based upon the performance of the Company and Mr. Smith during the year. The employment agreement provides that the Company may terminate Mr. Smith's employment prior to expiration of the agreement's term as a result of a Termination Event. In June 1995, the Company entered into an employment agreement with Robert E. Smith, Vice President and Treasurer of the Company. Robert E. Smith's employment agreement has an initial term of three years and is renewable for additional one-year terms, unless either party gives notice of termination not less than 60 days prior to the expiration of the then current term. Under the agreement, Mr. Smith receives a base salary of $250,000 and is also entitled to participate in the Company's Executive Bonus Plan based upon the performance of the Company and Mr. Smith during the year. The employment agreement provides that the Company may terminate Mr. Smith's employment prior to expiration of the agreement's term as a result of a Termination Event. In connection with the River City Acquisition, the Company entered into an employment agreement (the "Baker Employment Agreement") with Barry Baker pursuant to which Mr. Baker will become President and Chief Executive Officer of SCI and Executive Vice President of the Company at such time as Mr. Baker is able to hold those positions consistent with applicable FCC regulations. Until such time as Mr. Baker is able to become an officer of the Company, he serves as a consultant to the Company pursuant to a consulting agreement and receives compensation that he would be entitled to as an officer under the Baker Employment Agreement. While Mr. Baker acts as consultant to the Company he will not direct employees of Sinclair in the operation of its television stations and will not perform services relating to any shareholder, bank financing or regulatory compliance matters with respect to the Company. In addition, Mr. Baker will remain the Chief Executive Officer of River City and will devote a substantial amount of his business time and energies to those services. Mr. Baker receives a base salary of approximately $1,135,200 per year, subject to annual increases of 7 1/2% on January 1 each year. Mr. Baker is also entitled to receive a bonus equal to 2% of the amount by which the Broadcast Cash Flow (as defined in the Baker Employment Agreement) of SCI for a year exceeds the Broadcast Cash Flow for the immediately preceding year. Mr. Baker has received options to acquire 1,382,435 shares of the Class A Common Stock (or 3.33% of the common equity of Sinclair determined on a fully diluted basis as of the date of the River City Acquisition). The option became exercisable with respect to 50% of the shares upon closing of the River City Acquisition, and became exercisable with respect to an additional 25% of the shares on the first anniversary of the closing of the River City Acquisition, and will become exercisable with respect to the remaining 25% on the second anniversary of the closing of the River City Acquisition. The exercise price of the option is approximately $30.11 per share. The term of the Baker Employment Agreement extends until May 31, 2001, and is automatically extended to the third anniversary of any Change of Control (as defined in the Baker Employment Agreement). If the Baker Employment Agreement is terminated as a result of a Series B Trigger Event (as defined below), then Mr. Baker shall be entitled to a termination payment equal to the amount that would have been paid in base salary for the remainder of the term of the agreement plus bonuses that would be paid for such period based on the average bonus paid to Mr. Baker for the previous three years, and all options shall vest immediately upon such termination. In addition, upon such a termination, Mr. Baker shall have the option to purchase from the Company for the fair market value thereof either (i) all broadcast operations of Sinclair in the St. Louis, Missouri DMA or (at the option of Mr. Baker) the Asheville, North Carolina/ Greenville/Spartanburg, South Carolina DMA or (ii) all of the Company's radio broadcast operations. Mr. Baker shall also have the right following such a termination to receive quarterly payments (which may be paid either in cash or, at the Company's option, in additional shares of Class A Common Stock) equal to 52 5.00% of the fair market value (on the date of each payment) of all stock options and common stock issued pursuant to the exercise of such stock options or pursuant to payments of this obligation in shares of Class A Common Stock and held by him at the time of such payment (except that the first such payment shall be 3.75% of such value). The fair market value of unexercised options for such purpose shall be equal to the market price of underlying shares less the exercise price of the options. Following termination of Mr. Baker's employment agreement, the Company shall have the option to purchase the options and shares from Mr. Baker at their market value. A "Series B Trigger Event" means the termination of Barry Baker's employment with the Company prior to the expiration of the initial five-year term of the Baker Employment Agreement (i) by the Company for any reason other than "for cause" (as defined in the Baker Employment Agreement) or (ii) by Barry Baker under certain circumstances, including (a) on 60 days' prior written notice given at any time within 180 days following a Change of Control; (b) if Mr. Baker is not elected (and continued) as a director of Sinclair or SCI, as President and Chief Executive Officer of SCI or as Executive Vice President of Sinclair, or Mr. Baker shall be removed from any such board or office; (c) upon a material breach by Sinclair or SCI of the Baker Employment Agreement which is not cured; (d) if there shall be a material diminution in Mr. Baker's authority or responsibility, or certain of his economic benefits are materially reduced, or Mr. Baker shall be required to work outside Baltimore; or (e) the effective date of his employment as contemplated by clause (b) shall not have occurred by August 31, 1997. Mr. Baker cannot be appointed to such positions with the Company or SCI until the Company or SCI takes certain actions with respect to WTTV and WTTK in Indianapolis and WTTE or WSYX in Columbus. The Company has not taken these actions as of the date of this Form 10-K and, accordingly, Mr. Baker is able to terminate the Baker Employment Agreement at any time. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Other than as follows, no Named Executive Officer is a director of a corporation that has a director or executive officer who is also a director of the Company. Each of David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith (the "Controlling Stockholders") (all of whom are directors of the Company and Named Executive Officers) is a director and/or executive officer of each of various other corporations controlled by the Controlling Stockholders. During 1996, none of the Named Executive Officers participated in any deliberations of the Company's Board of Directors or the Compensation Committee relating to compensation of the Named Executive Officers. The members of the Compensation Committee are Messrs. Thomas and McCanna. Mr. Thomas is of counsel to the law firm of Thomas & Libowitz, and is the father of Steven A. Thomas, a senior attorney and founder of Thomas & Libowitz, P.A. During 1997, the Company paid Thomas & Libowitz, P.A., approximately $919,058 in fees and expenses for legal services. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth as of the date hereof the number and percentage of outstanding shares of the Company's Common Stock beneficially owned by (i) all persons known by the Company to beneficially own more than 5% of the Company's Common Stock, (ii) each director and each Named Executive Officer who is a stockholder, and (iii) all director and executive officers as a group. Unless noted otherwise, the business address of each of the following is 2000 West 41st Street, Baltimore, MD 21211: 53
SHARES OF CLASS B SHARES OF SERIES B SHARES OF CLASS A COMMON STOCK PREFERRED STOCK COMMON STOCK PRERCENT OF BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED TOTAL ---------------------- -------------------- ---------------------- VOTING NAME NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT POWER (A) - ----------------------------------------- ------------ --------- ---------- --------- ------------ --------- ------------ David D. Smith(b) ....................... 6,924,999 27.5% 6,935,057 32.5% 25.7% Frederick G. Smith (b)(c) ............... 5,922,795 23.5% 5,926,853 29.2% 22.0% J. Duncan Smith (b)(d) .................. 6,569,994 26.2% 6,570,020 31.4% 24.4% Robert E. Smith (b)(e) .................. 5,748,644 22.8% 5,748,702 28.6% 21.3% David B. Amy (f) ........................ 102,258 * * Basil A. Thomas ......................... 2,000 * * Lawrence E. McCanna ..................... 300 * * Barry Baker (g)(h) ...................... 72,016 6.9% 1,644,311 10.3% * Putnam Investments, Inc. ................ 4,393,534 23.4% * One Post Office Square Boston, Massachusetts 02109 T. Rowe Price Associates, Inc. (i) ...... 933,500 6.1% * 100 East Pratt Street Baltimore, Maryland 21202 Lynn & Mayer Inc. ....................... 819,000 5.4% * 520 Madison Avenue New York, New York 10022 The Equitable Companies Incorporated..... 807,047 5.3% * 787 Seventh Avenue New York, New York 10019 ............... Better Communications, Inc. (h) ......... 134,858 12.1% 490,393 3.3% * 1215 Cole Street St. Louis, Missouri 63106 BancBoston Investments (h) .............. 150,335 13.3% 546,673 3.7% 150 Royal Street Canton, Massachusetts 02021 Pyramid Ventures, Inc. .................. 152,995 13.5% 556,345 3.7% * 1215 Cole Street St. Louis, Missouri 63106 Boston Ventures Limited Partnership IV (h) ..................... 253,800 20.6% 922,909 6.0% * 21 Custom House Street 10th Floor Boston, Massachusetts 02110 Boston Ventures Limited Partnership IVA (h) .................... 142,745 12.8% 519,073 3.5% * 21 Custom House Street 10th Floor Boston, Massachusetts 02110 All directors and executive officers as a group (7 persons) ........ 25,166,432 100,0% -- -- 25,285,785 63.7% 93.4%
- ---------- *Less than 1% (a) Holders of Class A Common Stock are entitled to one vote per share and holders of Class B Common Stock are entitled to ten votes per share except for votes relating to "going private" and certain other transactions. The Class A Common Stock, the Class B Common Stock and the Series B Preferred Stock vote altogether as a single class except as otherwise may be required by Maryland law on all matters presented for a vote, with each share of Series B Preferred Stock entitled to 3.64 votes on all such matters. Holders of Class B Common Stock may at any time convert their shares into the same number of shares of Class A Common Stock and holders of Series B Preferred Stock may at any time convert each share of Series B Preferred Stock into 3.64 shares of Class A Common Stock. (b) Shares of Class A Common Stock beneficially owned includes shares of Class B Common Stock beneficially owned, each of which is convertible into one share of Class A Common Stock. (c) Includes 430,145 shares held in irrevocable trusts established by Frederick G. Smith for the benefit of his children and as to which Mr. Smith has the power to acquire by substitution of trust property. Absent such substitution, Mr. Smith would have no power to vote or dispose of the shares. (d) Includes 456,695 shares held in irrevocable trusts established by J. Duncan Smith for the benefit of his children and as to which Mr. Smith has the power to acquire by substitution of trust property. Absent such substitution, Mr. Smith would have no power to vote or dispose of the shares. (e) Includes 782,855 shares held in irrevocable trusts established by Robert E. Smith for the benefit of his children and as to which Mr. Smith has the power to acquire by substitution of trust property. Absent such substitution, Mr. Smith would have no power to vote or dispose of the shares. (f) Includes 100,000 shares of Class A Common Stock that may be acquired upon exercise of options granted in 1995, 1996 and 1998 pursuant to the Incentive Stock Option Plan and Long Term Incentive Plan. 54 (g) Consists of 1,382,435 shares of Class A Common Stock that may be acquired upon exercise of options granted in 1996 pursuant to the Long Term Incentive Plan. (h) Shares of Class A Common Stock beneficially owned includes 3.64 shares for each share of Series B Preferred Stock beneficially owned as each share of Series B Preferred Stock is immediately convertible into approximately 3.64 shares of Class A Common Stock. (i) These securities are owned by various individual and institutional investors to which T. Rowe Price Associates, Inc. ("Price Associates") serves as investment advisor with power to direct investments and/or sole voting power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, beneficial owner of such securities. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Since December 31, 1996, the Company has engaged in the following transactions with persons who are, or are members of the immediate family of, directors, persons expected to become a director, officers or beneficial owners of 5% or more of the issued and outstanding Common Stock, or with entities in which such persons or certain of their relatives have interests. WPTT NOTE In connection with the sale of WPTT in Pittsburgh by the Company to WPTT, Inc., WPTT, Inc., issued to the Company a 15-year senior secured term note of $6.0 million (the "WPTT Note"). The Company subsequently sold the WPTT Note to the late Julian S. Smith and Carolyn C. Smith, the parents of the Controlling Stockholders and both former stockholders of the Company, in exchange for the payment of $50,000 and the issuance of a $6.6 million note, which bears interest at 7.21% per annum and requires payments of interest only through September 2001. Monthly principal payments of $109,317 plus interest are payable with respect to this note commencing in November 2001 and ending in September 2006, at which time the remaining principal balance plus accrued interest, if any, is due. During the year ended December 31, 1997, the Company received $439,000 in interest payments on this note. At December 31, 1997, the balance on this note was $6.6 million. WIIB NOTE In September 1990, the Company sold all the stock of Channel 63, Inc., the owner of WIIB in Bloomington, Indiana, to the Controlling Stockholders for $1.5 million. The purchase price was delivered in the form of a note issued to the Company which was refinanced in June 1992 (the "WIIB Note"). The WIIB Note bears interest at 6.88% per annum, is payable in monthly principal and interest payments of $16,000 until September 30, 2000, at which time a final payment of approximately $431,000 is due. Principal and interest paid in 1997 on the WIIB Note was $211,000. As of December 31, 1997, $842,000 in principal amount of the WIIB Note remained outstanding. BAY CREDIT FACILITY In connection with the capitalization of Bay Television, Inc., the Company agreed on May 17, 1990 to loan the Controlling Stockholders up to $3.0 million (the "Bay Credit Facility"). Each of the loans to the Controlling Stockholders pursuant to the Bay Credit Facility is evidenced by an amended and restated secured note totaling $2.6 million due December 31, 1999 accruing interest at a fixed rate equal to 6.88%. Principal and interest are payable over six years commencing on March 31, 1994, and are required to be repaid quarterly and $530,000 was paid in 1997. $660,000 is payable in 1998 and $718,000 is payable in 1999. As of December 31, 1997, approximately $1.3 million in principal amount was outstanding under this note. AFFILIATED LEASES From 1987 to 1992, the Company entered into five lease transactions with CCI, a corporation wholly owned by the Controlling Stockholders, to lease certain facilities from CCI. Four of these leases are 10-year leases for rental space on broadcast towers, two of which are capital leases having renewable terms of 10 years. The other lease is a month-to-month lease for a portion of studio and office space at 55 which certain satellite dishes are located. Aggregate annual rental payments related to these leases were $641,000 in 1997. The aggregate annual rental payments related to these leases are scheduled to be $679,000 in 1998 and $700,000 in 1999. In January 1991, CTI entered into a 10-year capital lease with KIG, a corporation wholly owned by the Controlling Stockholders, pursuant to which CTI leases both an administrative facility and studios for station WBFF and the Company's present corporate offices. Additionally, in June 1991, CTI entered into a one-year renewable lease with KIG pursuant to which CTI leases parking facilities at the administrative facility. Payments under these leases with KIG were $481,000 in 1997. The aggregate annual rental payments related to the administrative facility are scheduled to be $519,000 in 1998 and $540,000 in 1999. During 1997, the Company chartered airplanes owned by certain companies controlled by the Controlling Stockholders and incurred expenses of approximately $736,000 related to these charters. TRANSACTIONS WITH GERSTELL Gerstell LP, an entity wholly owned by the Controlling Stockholders, was formed in April 1993 to acquire certain personal and real property interests of the Company in Pennsylvania. In a transaction that was completed in September 1993, Gerstell LP acquired the WPGH office/studio, transmitter and tower site for an aggregate purchase price of $2.2 million. The purchase price was financed in part by a $2.1 million note from Gerstell LP bearing interest at 6.18% with principal payments beginning on November 1, 1994 and a final maturity date of October 1, 2013. Principal and interest paid in 1997 on the note was $183,000. At December 31, 1997, $1.9 million in principal amount of the note remained outstanding. Following the acquisition, Gerstell LP leased the office/studio, transmitter and tower site to WPGH, Inc. (a subsidiary of the Company) for $14,875 per month and $25,000 per month, respectively. The leases have terms of seven years, with four seven-year renewal periods. Aggregate annual rental payment related to these leases was $561,000 in 1997. The Company believes that the leases with Gerstell LP are on terms and conditions customary in similar leases with independent third parties. STOCK REDEMPTIONS On September 30, 1990, the Company issued certain notes (the "Founders' Notes") maturing on May 31, 2005, payable to the late Julian S. Smith and Carolyn C. Smith, former majority owners of the Company and the parents of the Controlling Stockholders. The Founders' Notes, which were issued in consideration for stock redemptions equal to 72.65% of the then outstanding stock of the Company, have principal amounts of $7.5 million and $6.7 million, respectively. The Founders' Notes include stated interest rates of 8.75%, which were payable annually from October 1990 until October 1992, then payable monthly commencing April 1993 to December 1996, and then semiannually thereafter until maturity. The effective interest rate approximates 9.4%. The Founders' Notes are secured by security interests in substantially all of the assets of the Company and its Subsidiaries, and are personally guaranteed by the Controlling Stockholders. Principal and interest payments on the Founders' Note issued to the estate of Julian S. Smith are payable, in various amounts, each April and October, beginning October 1991 until October 2004, with a balloon payment due at maturity in the amount of $5.0 million. Additionally, monthly interest payments commenced on April 1993 and continued until December 1996. Principal and interest paid in 1997 on this Founders' Note was $653,000 at December 31, 1997, $5.8 million in principal amount of this Founders' Note remained outstanding. Principal payments on the Founders' Note issued to Carolyn C. Smith are payable, in various amounts, each April and October, beginning October 1991 until October 2002. Principal and interest paid in 1997 on this Founders' Note was $1.1 million. At December 31, 1997, $3.7 million in principal amount of this Founders' Note remained outstanding. RELATIONSHIP WITH GLENCAIRN Glencairn is a corporation owned by (i) Edwin L. Edwards, Sr. (3%), (ii) Carolyn C. Smith, the mother of the Controlling Stockholders (7%), and (iii) certain trusts established by Carolyn C. Smith for the benefit of her grandchildren (the "Glencairn Trusts") (90%). The 90% equity interest in Glencairn 56 owned by the Glencairn Trusts is held through the ownership of non-voting common stock. The 7% equity interest in Glencairn owned by Carolyn C. Smith is held through the ownership of common stock that is generally non-voting, except with respect to certain specified extraordinary corporate matters as to which this 7% equity interest has the controlling vote. Edwin L. Edwards, Sr. owns a 3% equity interest in Glencairn through ownership of all of the issued and outstanding voting stock of Glencairn and is Chairman of the Board, President and Chief Executive Officer of Glencairn. There have been, and the Company expects that in the future there will be, transactions between the Company and Glencairn. Glencairn is the owner-operator and FCC licensee of WNUV in Baltimore, WVTV in Milwaukee, WRDC in Raleigh/Durham, WABM in Birmingham, KRRT in San Antonio and WFBC in Asheville/Greenville/Spartanburg. The Company has entered into LMAs with Glencairn pursuant to which the Company provides programming to Glencairn for broadcast on WNUV, WVTV, WRDC, WABM, KRRT and WFBC during the hours of 6:00 a.m. to 2:00 a.m. each day and has the right to sell advertising during this period, all in exchange for the payment by the Company to Glencairn of a monthly fee totaling $789,000. In June 1995, the Company acquired options from certain stockholders of Glencairn (the "Glencairn Options") which grant to the Company the right to acquire, subject to applicable FCC rules and regulations, stock comprising up to a 97% equity interest in Glencairn. Of the stock subject to the Glencairn Options, a 90% equity interest is non-voting and the remaining 7% equity interest is non-voting, except with respect to certain extraordinary matters as to which this 7% equity interest has the controlling vote. Each Glencairn Option was purchased by the Company for $1,000 ($5,000 in the aggregate) and is exercisable only upon the Company's payment of an option exercise price generally equal to the optionor's proportionate share of the aggregate acquisition cost of all stations owned by Glencairn on the date of exercise (plus interest at a rate of 10% from the respective acquisition date). The Company estimates that the aggregate option exercise price for the Glencairn Options, if currently exercised, would be approximately $14.8 million. In addition, the Company has agreed to sell to Glencairn for $2,000,000 the License Assets of WTTE in Columbus, Ohio, which the Company currently owns. In addition, the Company has an option to acquire from River City the assets of WSYX, which is in the same market as WTTE. See "Business--Broadcasting Acquisition Strategy." Upon the Company's assignment of the License Assets of WTTE to Glencairn (which the Company does not expect to occur unless the Company acquires WSYX), the Company intends to enter into an LMA with Glencairn relating to WTTE pursuant to which the Company will supply programming to Glencairn, obtain the right to sell advertising during the periods covered by the supplied programming and make payments to Glencairn in amounts to be negotiated. In connection with the Sullivan Acquisition, Glencairn has entered into a plan of merger with Sullivan III which, if completed, would result in Glencairn's ownership of all the issued and outstanding capital stock of Sullivan III. After the merger, the Company intends to enter into an LMA with Glencairn and continue to provide programming services to the five stations the License. Assets of which are acquired by Glencairn in the merger. RIVER CITY TRANSACTIONS Roy F. Coppedge, who will become a director of the Company upon satisfaction of certain conditions, and Barry Baker, who will become a director and executive officer of the Company as soon as permissible under the rules of the FCC and applicable laws, each have a direct or indirect equity interest in River City Partners, L.P. Therefore, Messrs. Coppedge and Baker have an interest in the River City Acquisition, which is described above in "Business--Broadcasting Acquisition Strategy." During 1997, the Company made LMA payments of $896,000 to River City. In September 1996, the Company entered into a five-year agreement with River City pursuant to which River City will provide to the Company certain production services. Pursuant to this agreement, River City will provide certain services to the Company in return for an annual fee of $416,000, subject to certain adjustments on each anniversary date. KEYMARKET OF SOUTH CAROLINA Kerby Confer, who is expected to become an executive officer of the Company as soon as permissible under the rules of the FCC and applicable laws, is the owner of 100% of the common stock of Keymarket of South Carolina, Inc. ("KSC"). The Company has exercised its option to acquire all of the assets of KSC for forgiveness of debt in an aggregate principal amount of approximately $7.4 million, plus payment of approximately $1.0 million, less certain adjustments. The Company also purchased two properties from Mr. Confer for an aggregate purchase price of approximately $1.75 million. 57 BEAVER DAM LIMITED LIABILITY COMPANY In May 1996, the Company, along with the Controlling Stockholders, formed Beaver Dam Limited Liability Company ("BDLLC"), of which the Company owns a 45% interest. BDLLC was formed for the purpose of constructing and owning a building which may be the site for the Company's corporate headquarters. The Company made capital contributions to BDLLC in 1996 of approximately $380,000. During 1997, the Partnership made a liquidating distribution to the Company of approximately $380,000 and the Company no longer owns an interest in BDLP. HERITAGE AUTOMOTIVE GROUP In January 1997, David D. Smith, the Company's President and Chief Executive Officer and one of the Controlling Shareholders, made a substantial investment in, and became a member of the board of directors of, Summa Holdings, Ltd. which, through wholly owned subsidiaries, owns the Heritage Automotive Group ("Heritage") and Allstate Leasing ("Allstate"). Mr. Smith is not an officer, nor does he actively participate in the management, of Summa Holdings, Ltd., Heritage, or Allstate. Heritage owns and operates new and used car dealerships in the Baltimore metropolitan area. Allstate owns and operates an automobile and equipment leasing business with offices in the Baltimore, Richmond, Houston, and Atlanta metropolitan areas. The Company sells Heritage and Allstate advertising time on WBFF and WNUV, the television stations operated by the Company serving the Baltimore DMA. The Company believes that the terms of the transactions between the Company and Heritage and the Company and Allstate are and will be comparable to those prevailing in similar transactions with or involving unaffiliated parties. 58 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) Index to Financial Statements The financial statements required by this item are submitted in a separate section beginning on page F-1 of this report. Index to Financial Statements
PAGE ---------- Index to Financial Statements ................................................ F-1 Report of Independent Public Accountants ..................................... F-2 Consolidated Balance Sheets as of December 31, 1996 and 1997 ................. F-3 Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and 1997 ............................................................... F-4 Consolidated Statements of Stockholders' Equity for the Years Ended Decem- ber 31, 1995, 1996 and 1997 ................................................. F-5, F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997 ............................................................... F-7, F-8 Notes to Consolidated Financial Statements ................................... F-9
(a) (2) Index to Financial Statements Schedules The financial statements schedules required by this item are submitted on pages S-1 through S-3 of this Report. PAGE ----- Index to Schedules .................................................... S-1 Report of Arthur Andersen LLP Independent Public Accountants .......... S-2 Schedule II -- Valuation and Qualifying Accounts ...................... S-3 All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or the notes thereto. (a) (3) Index to Exhibits See Index to Exhibits (b) Reports on Form 8-K There were no reports on Form 8-K filed by the Registrant during the fourth quarter of the fiscal year ended December 31, 1997, except for the Registrant's Current Reports on Form 8-K and 8-K/A filed on October 8, 1997, November 26, 1997, December 5, 1997, December 12, 1997 and December 16, 1997. (c) Exhibits The exhibits required by this Item are listed under Item 14 (a) (3). (d) Financial Statements Schedules The financial statement schedules required by this Item are listed under Item 14 (a) (2). 59 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS
PAGE ---- SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES Report of Independent Public Accountants .............................................. F-2 Consolidated Balance Sheets as of December 31, 1996 and 1997 .......................... F-3 Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and 1997 ................................................................................ F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1996 and 1997 ....................................................................... F-5, F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997 ................................................................................ F-7, F-8 Notes to Consolidated Financial Statements ............................................ F-9
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Sinclair Broadcast Group, Inc.: We have audited the accompanying consolidated balance sheets of Sinclair Broadcast Group, Inc. (a Maryland corporation) and Subsidiaries as of December 31, 1996 and 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 1995, 1996 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sinclair Broadcast Group, Inc. and Subsidiaries as of December 31, 1996 and 1997, and the results of their operations and their cash flows for the years ended December 31, 1995, 1996 and 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Baltimore, Maryland, February 9, 1998, except for Note 24, as to which the date is February 23, 1998 F-2 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
AS OF DECEMBER 31, ------------------------------ 1996 1997 -------------- ------------- ASSETS CURRENT ASSETS: Cash, and cash equivalents .................................................. $ 2,341 $ 139,327 Accounts receivable, net of allowance for doubtful accounts of $2,472 and $2,920, respectively ......................................... 112,313 123,018 Current portion of program contract costs ................................... 44,526 46,876 Prepaid expenses and other current assets ................................... 3,704 4,673 Deferred barter costs ....................................................... 3,641 3,727 Refundable income taxes ..................................................... -- 10,581 Deferred tax assets ......................................................... 1,245 2,550 ---------- ---------- Total current assets ....................................................... 167,770 330,752 PROGRAM CONTRACT COSTS, less current portion ................................. 43,037 40,609 LOANS TO OFFICERS AND AFFILIATES ............................................. 11,426 11,088 PROPERTY AND EQUIPMENT, net .................................................. 154,333 161,714 NON-COMPETE AND CONSULTING AGREEMENTS, net of accumulated amortization of $54,236 and $64,229, respectively ............... 10,193 200 OTHER ASSETS ................................................................. 64,235 167,895 ACQUIRED INTANGIBLE BROADCASTING ASSETS, net of accumulated amortization of $85,155 and $138,061, respectively .............. 1,256,303 1,321,976 ---------- ---------- Total Assets ............................................................... $1,707,297 $2,034,234 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable ............................................................ $ 11,886 $ 5,207 Income taxes payable ........................................................ 730 -- Accrued liabilities ......................................................... 35,074 40,532 Current portion of long-term liabilities- ................................... Notes payable and commercial bank financing ................................ 62,144 35,215 Notes and capital leases payable to affiliates ............................. 1,774 3,073 Program contracts payable .................................................. 58,461 66,404 Deferred barter revenues ................................................... 3,576 4,273 ---------- ---------- Total current liabilities .................................................. 173,645 154,704 LONG-TERM LIABILITIES: Notes payable and commercial bank financing ................................. 1,212,000 1,022,934 Notes and capital leases payable to affiliates .............................. 12,185 19,500 Program contracts payable ................................................... 56,194 62,408 Deferred tax liability ...................................................... 463 24,092 Other long-term liabilities ................................................. 2,739 3,611 ---------- ---------- Total liabilities .......................................................... 1,457,226 1,287,249 ---------- ---------- MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES ............................... 3,880 3,697 ---------- ---------- COMMITMENTS AND CONTINGENCIES EQUITY PUT OPTIONS ........................................................... 8,938 -- ---------- ---------- COMPANY OBLIGATED MANDATORY REDEEMABLE SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY KDSM SENIOR DEBENTURES ...................... -- 200,000 ---------- ---------- STOCKHOLDERS' EQUITY: Series B Preferred stock, $.01 par value, 10,000,000 shares authorized and 1,150,000 and 1,071,381 issued and outstanding ............................. 11 10 Series D Preferred stock, $.01 par value, 3,450,000 shares authorized and -0- and 3,450,000 shares issued and outstanding, respectively .............. -- 35 Class A Common stock, $.01 par value, 100,000,000 shares authorized and 6,911,880 and 13,733,430 shares issued and outstanding, respectively ............................................................... 70 137 Class B Common stock, $.01 par value, 35,000,000 shares authorized and 27,850,581 and 25,436,432 shares issued and outstanding .................... 279 255 Additional paid-in capital .................................................. 256,954 552,949 Additional paid-in capital -- equity put options ............................ -- 23,117 Additional paid-in capital -- deferred compensation ......................... (1,129) (954) Accumulated deficit ......................................................... (18,932) (32,261) ---------- ---------- Total stockholders' equity ................................................. 237,253 543,288 ---------- ---------- Total Liabilities and Stockholders' Equity ................................. $1,707,297 $2,034,234 ========== ==========
The accompanying notes are an integral part of these consolidated statements. F-3 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
1995 1996 1997 ----------- ----------- ------------- REVENUES: Station broadcast revenues, net of agency commissions of $31,797, $56,040 and $74,984, respectively .......................... $ 187,934 $ 346,459 $ 471,228 Revenues realized from station barter arrangements .................... 18,200 32,029 45,207 --------- --------- --------- Total broadcast revenues ............................................ 206,134 378,488 516,435 --------- --------- --------- OPERATING EXPENSES: Program and production ................................................ 28,152 66,652 92,178 Selling, general and administrative ................................... 36,174 75,924 106,084 Expenses realized from station barter arrangements .................... 16,120 25,189 38,114 Amortization of program contract costs and net realizable value adjustments ........................................ 29,021 47,797 66,290 Stock-based compensation .............................................. -- 739 1,636 Depreciation and amortization of property and equipment ............... 5,400 11,711 18,040 Amortization of acquired intangible broadcasting assets, non-compete and consulting agreements and other assets .............. 45,989 58,530 67,840 Amortization of excess syndicated programming ......................... -- 3,043 -- --------- --------- --------- Total operating expenses ............................................ 160,856 289,585 390,182 --------- --------- --------- Broadcast operating income .......................................... 45,278 88,903 126,253 --------- --------- --------- OTHER INCOME (EXPENSE): Interest and amortization of debt discount expense .................... (39,253) (84,314) (98,393) Subsidiary trust minority interest expense.. .......................... -- -- (18,600) Interest income ....................................................... 3,942 3,136 2,174 Other income. ......................................................... 221 342 54 --------- --------- --------- Income before provision for income taxes and extraordinary item ..... 10,188 8,067 11,488 PROVISION FOR INCOME TAXES. ............................................ 5,200 6,936 15,984 --------- --------- --------- Net income (loss) before extraordinary item ........................... 4,988 1,131 (4,496) EXTRAORDINARY ITEM: Loss on early extinguishment of debt, net of related income tax benefit of $3,357 and $4,045, respectively. ..................... (4,912) -- (6,070) --------- --------- --------- NET INCOME (LOSS) ...................................................... $ 76 $ 1,131 $ (10,566) ========= ========= ========= NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS .......................................................... $ 76 $ 1,131 $ (13,329) ========= ========= ========= BASIC EARNINGS PER SHARE: Income (loss) per share before extraordinary item ..................... $ .15 $ .03 $ (.20) ========= ========= ========= Net income (loss) per share ........................................... $ - $ .03 $ (.37) ========= ========= ========= Average shares outstanding ............................................ 32,198 34,748 35,951 ========= ========= ========= DILUTED EARNINGS PER SHARE: Income (loss) per share before extraordinary item ..................... $ .15 $ .03 $ (.20) ========= ========= ========= Net income (loss) per share ........................................... $ - $ .03 $ (.37) ========= ========= ========= Average shares outstanding ............................................ 32,205 37,381 40,078 ========= ========= =========
The accompanying notes are an integral part of these consolidated statements. F-4 PAGE 1 OF 2 ----------- SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (IN THOUSANDS)
SERIES A SERIES B CLASS A CLASS B PREFERRED PREFERRED COMMON COMMON STOCK STOCK STOCK STOCK ----------- ----------- --------- --------- BALANCE, December 31, 1994 ..................... $ -- $-- $-- $ 290 Issuance of common shares, net of related expenses of $9,288 ................... -- -- 58 -- Non-cash distribution prior to KCI merger ..... -- -- -- -- Realization of deferred gain .................. -- -- -- -- Net income .................................... -- -- -- -- ------ --- --- ----- BALANCE, December 31, 1995 ..................... -- -- 58 290 Class B Common Stock converted into Class A Common Stock ......................... -- -- 11 (11) Issuance of Series A Preferred Stock .......... 12 -- -- -- Series A Preferred Stock converted into Series B Preferred Stock ................ (12) 12 -- -- Series B Preferred Stock converted into Class A Common Stock ......................... (1) 1 -- Repurchase of 30,000 shares of Class A Common Stock ......................... -- -- -- -- Stock option grants ........................... -- -- -- -- Income tax provision for deferred compensation ................................. -- -- -- -- Equity put options ............................ -- -- -- -- Amortization of deferred compensation. ................................ -- -- -- -- Net income. ................................... -- -- -- -- ------ ----- --- ----- BALANCE, December 31, 1996 ..................... $ -- $11 $70 $ 279 ====== ===== === ===== ADDITIONAL ADDITIONAL PAID-IN CAPITAL - TOTAL PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS' CAPITAL COMPENSATION DEFICIT EQUITY ------------ ------------------- ------------- -------------- BALANCE, December 31, 1994 ..................... $ 4,774 $ -- $ (18,787) $ (13,723) Issuance of common shares, net of related expenses of $9,288 ................... 111,403 -- -- 111,461 Non-cash distribution prior to KCI merger ..... (109) -- (1,352) (1,461) Realization of deferred gain .................. 21 -- -- 21 Net income .................................... -- -- 76 76 -------- -------- --------- --------- BALANCE, December 31, 1995 ..................... 116,089 -- (20,063) 96,374 Class B Common Stock converted into Class A Common Stock ......................... -- -- -- -- Issuance of Series A Preferred Stock .......... 125,067 -- -- 125,079 Series A Preferred Stock converted into Series B Preferred Stock ................ -- -- -- -- Series B Preferred Stock converted into Class A Common Stock ......................... -- -- -- -- Repurchase of 30,000 shares of Class A Common Stock ......................... (748) -- -- (748) Stock option grants ........................... 25,784 (1,868) -- 23,916 Income tax provision for deferred compensation ................................. (300) -- -- (300) Equity put options ............................ (8,938) -- -- (8,938) Amortization of deferred compensation. ................................ -- 739 -- 739 Net income. ................................... -- -- 1,131 1,131 -------- -------- --------- --------- BALANCE, December 31, 1996 ..................... $256,954 $ (1,129) $ (18,932) $ 237,253 ======== ======== ========= =========
The accompanying notes are an integral part of these consolidated statements. F-5 PAGE 2 OF 2 ----------- SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (IN THOUSANDS)
SERIES B SERIES D CLASS A CLASS B PREFERRED PREFERRED COMMON COMMON STOCK STOCK STOCK STOCK ----------- ----------- --------- --------- BALANCE, December 31, 1996 ......................... $11 $-- $70 $ 279 Repurchase of 186,000 shares of Class A Common Stock ............................. -- -- (2) -- Class B Common Stock converted into Class A Common Stock ............................................ -- -- 24 (24) Series B Preferred Stock converted into Class A Common Stock ........................ (1) -- 2 -- Issuance of Class A Common Stock, net of related issuance costs of $7,572........... -- -- 43 -- Issuance of Series D Preferred Stock, net of related issuance costs of $5,601........... -- 35 -- -- Dividends payable on Series D Preferred Stock .................................. -- -- -- -- Income tax provision for deferred compensation ..................................... -- -- -- -- Equity put options ................................ -- -- -- -- Equity put options premium ........................ -- -- -- -- Stock option grants ............................... -- -- -- -- Stock option grants exercised ..................... -- -- -- -- Amortization of deferred compensation ............. -- -- -- -- Net loss .......................................... -- -- -- -- ----- --- ----- ----- BALANCE, December 31, 1997 ......................... $10 $35 $137 $ 255 ===== === ===== ===== ADDITIONAL ADDITIONAL PAID-IN PAID-IN ADDITIONAL CAPITAL - CAPITAL - TOTAL PAID-IN EQUITY PUT DEFERRED ACCUMULATED STOCKHOLDERS' CAPITAL OPTIONS COMPENSATION DEFICIT EQUITY -------------- ------------ -------------- ------------- -------------- BALANCE, December 31, 1996 ......................... $256,954 $ -- $ (1,129) $ (18,932) $ 237,253 Repurchase of 186,000 shares of Class A Common Stock ............................. (4,597) -- -- -- (4,599) Class B Common Stock converted into Class A Common Stock ............................................ -- -- -- -- -- Series B Preferred Stock converted into Class A Common Stock ........................ (1) -- -- -- -- Issuance of Class A Common Stock, net of related issuance costs of $7,572........... 150,978 -- -- -- 151,021 Issuance of Series D Preferred Stock, net of related issuance costs of $5,601........... 166,864 -- -- -- 166,899 Dividends payable on Series D Preferred Stock .................................. -- -- -- (2,763) (2,763) Income tax provision for deferred compensation ..................................... (240) -- -- -- (240) Equity put options ................................ (14,179) 23,117 -- -- 8,938 Equity put options premium ........................ (3,365) -- -- -- (3,365) Stock option grants ............................... 430 -- (430) -- -- Stock option grants exercised ..................... 105 -- -- -- 105 Amortization of deferred compensation ............. -- -- 605 -- 605 Net loss .......................................... -- -- -- (10,566) (10,566) ---------- ------- -------- --------- --------- BALANCE, December 31, 1997 ......................... $552,949 $23,117 $ (954) $ (32,261) $ 543,288 ========== ======= ======== ========= =========
The accompanying notes are an integral part of these consolidated statements. F-6 PAGE 1 OF 2 ----------- SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (IN THOUSANDS)
1995 1996 1997 ------------ ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ................................................. $ 76 $ 1,131 $ (10,566) Adjustments to reconcile net income (loss) to net cash flows from operating activities-- Extraordinary loss .............................................. 8,269 -- 10,115 Amortization of excess syndicated programming ................... -- 3,043 -- Amortization of debt discount ................................... -- -- 4 (Gain) loss on sales of assets .................................. (221) -- 226 Depreciation and amortization of property and equipment ......... 5,400 11,711 18,040 Amortization of acquired intangible broadcasting assets, non-compete and consulting agreements and other assets ......... 45,989 58,530 67,840 Amortization of program contract costs and net realizable value adjustments .............................................. 29,021 47,797 66,290 Stock-based compensation ........................................ -- 739 1,636 Deferred tax provision (benefit) ................................ (5,089) 2,330 20,582 Realization of deferred gain .................................... (42) -- -- Net effect of change in deferred barter revenues and deferred barter costs ...................................... 230 (908) 591 Decrease in minority interest ................................... (38) (121) (183) Changes in assets and liabilities, net of effects of acquisitions and dispositions ................................... Increase in accounts receivable, net ............................ (12,245) (41,310) (9,468) Increase in prepaid expenses and other current assets ........... (273) (217) (591) Increase in refundable income taxes ............................. -- -- (10,581) Increase (decrease) in accounts payable and accrued liabilities ............................................ 7,274 19,941 (4,360) Decrease in income taxes payable ................................ (2,427) (3,214) (970) Increase (decrease) in other long-term liabilities .............. -- 297 (921) Payments on program contracts payable ............................. (19,938) (30,451) (51,059) --------- --------- --------- Net cash flows from operating activities ....................... $ 55,986 $ 69,298 $ 96,625 ========= ========= =========
The accompanying notes are an integral part of these consolidated statements. F-7 PAGE 2 OF 2 ----------- SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (IN THOUSANDS)
1995 1996 1997 ------------- --------------- ------------ NET CASH FLOWS FROM OPERATING ACTIVITIES ................................. $ 55,986 $ 69,298 $ 96,625 ---------- ------------ ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment ................................... (1,702) (12,609) (19,425) Payments for acquisition of television and radio station assets ......... (101,000) (74,593) (90,598) Payments related to the acquisition of the non-license assets of River City Broadcasting ............................................ -- (818,083) (2,992) Payments for acquisition of certain other non-license assets ............ (14,283) (29,532) -- Payments for the purchase of outstanding stock of Superior Communications, Inc. ......................................... -- (63,504) -- Payments to exercise options to acquire certain FCC licenses ............ -- (6,894) (11,079) Proceeds from assignment of FCC purchase option. ........................ 4,200 -- 2,000 Purchase option extension payments ...................................... -- (6,960) (15,966) Payments for consulting and non-compete agreements ...................... (1,000) (50) -- Payments to acquire and exercise purchase options ....................... (10,000) -- -- Distributions from (investments in) joint ventures ...................... 240 (380) 380 Proceeds from disposal of property and equipment ........................ 3,330 -- 470 Payment for WPTT subordinated convertible debenture ..................... (1,000) -- -- Loans to officers and affiliates ........................................ (205) (854) (1,199) Repayments of loans to officers and affiliates .......................... 2,177 1,562 1,694 Deposits and other costs relating to future acquisitions ................ (77) (328) (82,275) ---------- ------------ ---------- Net cash flows used in investing activities.. ........................ (119,320) (1,012,225) (218,990) ---------- ------------ ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable and commercial bank financing ............... 138,000 982,500 126,500 Repayments of notes payable, commercial bank financing and capital leases .................................................... (362,928) (110,657) (693,519) Repayments of notes and capital leases to affiliates .................... (3,171) (1,867) (2,313) Payments of costs related to financing .................................. (3,200) (20,009) (4,707) Payments for interest rate derivative agreements.. ...................... -- (851) (474) Prepayments of excess syndicated program contract liabilities ........... -- (15,116) (1,373) Repurchases of the Company's Class A Common Stock ....................... -- (748) (4,599) Payments relating to redemption of 1993 Notes ........................... -- -- (98,101) Payment of premium and other costs related to redemption of 1993 Notes .............................................. -- -- (8,407) Payments for costs related to subsequent year securities offering ....... -- (434) -- Dividends paid on Series D Preferred Stock .............................. -- -- (2,357) Proceeds from exercise of stock options ................................. -- -- 105 Payment of equity put option premium .................................... -- -- (507) Net proceeds from issuances of Senior Subordinated Notes. ............... 293,176 -- 438,427 Net proceeds from issuance of Class A Common Stock ...................... 111,461 -- 151,021 Net proceeds from issuance of Series D Preferred Stock .................. -- -- 166,899 Net proceeds from subsidiary trust securities offering .................. -- -- 192,756 ---------- ------------ ---------- Net cash flows from financing activities ............................. 173,338 832,818 259,351 ---------- ------------ ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................................................. 110,004 (110,109) 136,986 CASH AND CASH EQUIVALENTS, beginning of period. .......................... 2,446 112,450 2,341 ---------- ------------ ---------- CASH AND CASH EQUIVALENTS, end of period ................................. $ 112,450 $ 2,341 $ 139,327 ========== ============ ==========
The accompanying notes are an integral part of these consolidated statements. F-8 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation The accompanying consolidated financial statements include the accounts of Sinclair Broadcast Group, Inc., Sinclair Communications, Inc. and all other consolidated subsidiaries, which are collectively referred to hereafter as "the Company, Companies or SBG." The Company owns and operates television and radio stations throughout the United States. Additionally, included in the accompanying consolidated financial statements are the results of operations of certain television stations pursuant to local marketing agreements (LMAs) and radio stations pursuant to joint sales agreements (JSAs). Principles of Consolidation The consolidated financial statements include the accounts of the Company and all its wholly-owned and majority-owned subsidiaries. Minority interest represents a minority owner's proportionate share of the equity in two of the Company's subsidiaries. In addition, the Company uses the equity method of accounting for 20% to 50% ownership investments. All significant intercompany transactions and account balances have been eliminated. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements and in the disclosures of contingent assets and liabilities. While actual results could differ from those estimates, management believes that actual results will not be materially different from amounts provided in the accompanying consolidated financial statements. Cash Equivalents Cash equivalents are stated at cost plus accrued interest, which approximates fair value. Cash equivalents are highly liquid investment grade debt instruments with an original maturity of three months or less and consist of time deposits with a number of consumer banks with high credit ratings. Programming The Companies have agreements with distributors for the rights to television programming over contract periods which generally run from one to seven years. Contract payments are made in installments over terms that are generally shorter than the contract period. Each contract is recorded as an asset and a liability when the license period begins and the program is available for its first showing. The portion of the program contracts payable within one year is reflected as a current liability in the accompanying consolidated balance sheets. The rights to program materials are reflected in the accompanying consolidated balance sheets at the lower of unamortized cost or estimated net realizable value. Estimated net realizable values are based upon management's expectation of future advertising revenues net of sales commissions to be generated by the program material. Amortization of program contract costs is generally computed under either a four year accelerated method or based on usage, whichever yields the greater amortization for each program. Program contract costs, estimated by management to be amortized in the succeeding year, are classified as current assets. Payments of program contract liabilities are typically paid on a scheduled basis and are not affected by adjustments for amortization or estimated net realizable value. F-9 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) Barter Arrangements Certain program contracts provide for the exchange of advertising air time in lieu of cash payments for the rights to such programming. These contracts are recorded as the programs are aired at the estimated fair value of the advertising air time given in exchange for the program rights. Network programming is excluded from these calculations. The Company broadcasts certain customers' advertising in exchange for equipment, merchandise and services. The estimated fair value of the equipment, merchandise or services received is recorded as deferred barter costs and the corresponding obligation to broadcast advertising is recorded as deferred barter revenues. The deferred barter costs are expensed or capitalized as they are used, consumed or received. Deferred barter revenues are recognized as the related advertising is aired. Other Assets Other assets as of December 31, 1996 and 1997 consist of the following (in thousands):
1996 1997 ---------- ---------- Unamortized debt acquisition costs ................................ $26,453 $ 43,011 Investments in limited partnerships ............................... 3,039 2,850 Notes receivable .................................................. 10,773 11,102 Purchase options and related extension fees ....................... 22,902 27,826 Deposits and other costs relating to future acquisitions .......... 328 82,275 Other ............................................................. 740 831 ------- -------- $64,235 $167,895 ======= ========
Non-Compete and Consulting Agreements The Company has entered into non-compete and consulting agreements with various parties. These agreements range from two to three years. Amounts paid under these agreements are amortized over the life of the agreement. Acquired Intangible Broadcasting Assets Acquired intangible broadcasting assets are being amortized over periods of 1 to 40 years. These amounts result from the acquisition of certain television and radio station license and non-license assets (see Note 12). The Company monitors the individual financial performance of each of the stations and continually evaluates the realizability of intangible and tangible assets and the existence of any impairment to its recoverability based on the projected undiscounted cash flows of the respective stations. F-10 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) Intangible assets, at cost, as of December 31, 1996 and 1997, consist of the following (in thousands):
AMORTIZATION PERIOD 1996 1997 --------------- ------------- ------------- Goodwill ............................... 40 years $ 676,219 $ 755,858 Intangibles related to LMAs ............ 15 years 120,787 128,080 Decaying advertiser base ............... 1 -- 15 years 93,896 95,657 FCC licenses ........................... 25 years 370,533 400,073 Network affiliations ................... 1 -- 25 years 55,966 55,966 Other .................................. 1 -- 40 years 24,057 24,403 ---------- ---------- 1,341,458 1,460,037 Less- Accumulated amortization ......... (85,155) (138,061) ---------- ---------- $1,256,303 $1,321,976 ========== ==========
Accrued Liabilities Accrued liabilities consist of the following as of December 31, 1996 and 1997 (dollars in thousands): 1996 1997 ---------- ---------- Compensation .......... $10,850 $10,608 Interest .............. 11,915 18,359 Other ................. 12,309 11,565 ------- ------- $35,074 $40,532 ======= ======= Supplemental Information - Statement of Cash Flows During 1995, 1996 and 1997 the Company incurred the following transactions (in thousands):
1995 1996 1997 --------- ---------- ---------- o Purchase accounting adjustments related to deferred taxes ................................................. $ 3,400 $ 18,051 $ -- ======= ======== ======= o Capital lease obligations incurred .................... $ -- $ -- $10,927 ======= ======== ======= o Issuance of Series A Preferred Stock (see Note 12)..... $ -- $125,079 $ -- ======= ======== ======= o Income taxes paid ..................................... $ 7,941 $ 6,837 $ 6,502 ======= ======== ======= o Subsidiary trust minority interest payments ........... $ -- $ -- $17,631 ======= ======== ======= o Interest paid ......................................... $24,770 $ 82,814 $98,521 ======= ======== =======
Local Marketing Agreements The Company generally enters into LMAs, JSAs and similar arrangements with stations located in markets in which the Company already owns and operates a station, and in connection with acquisitions, pending regulatory approval of transfer of License Assets. Under the terms of these agreements, the Company makes specified periodic payments to the owner-operator in exchange for the grant to the Company of the right to program and sell advertising on a specified portion of the station's inventory of F-11 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) broadcast time. Nevertheless, as the holder of the Federal Communications Commission (FCC) license, the owner-operator retains full control and responsibility for the operation of the station, including control over all programming broadcast on the station. Included in the accompanying consolidated statements of operations for the years ended December 31, 1995, 1996 and 1997, are net revenues of $49.5 million, $153.0 million (including $103.3 million relating to River City), and $135.0 million (including $71.9 million relating to River City) respectively, that relate to LMAs, JSAs and time brokerage agreements ("TBAs"). In connection with the River City Acquisition, the Company entered into an LMA in the form of TBAs with River City and the owner of KRRT with respect to each of the nine television and 21 radio stations with respect to which the Company acquired Non-License Assets. During 1997, the Company exercised its options and now owns the License Assets of (or has entered into an LMA with respect to) all of these stations other than WTTV-TV and WTTK-TV in Indianapolis, Indiana. Reclassifications Certain reclassifications have been made to the prior years' financial statements to conform with the current year presentation. 2. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed under the straight-line method over the following estimated useful lives: Buildings and improvements .................................... 10 -- 35 years Station equipment ............................................. 5 -- 10 years Office furniture and equipment ................................ 5 -- 10 years Leasehold improvements ........................................ 10 -- 31 years Automotive equipment .......................................... 3 -- 5 years Property and equipment and autos under capital leases ......... Shorter of 10 years or the lease term
Property and equipment consisted of the following as of December 31, 1996 and 1997 (in thousands): 1996 1997 ------------ ------------ Land and improvements .......................... $ 9,795 $ 10,225 Buildings and improvements ..................... 39,008 41,436 Station equipment .............................. 112,994 130,586 Office furniture and equipment ................. 10,140 14,037 Leasehold improvements ......................... 3,377 8,457 Automotive equipment ........................... 3,280 4,090 Construction in progress ....................... 6,923 -- --------- --------- 185,517 208,831 Less- Accumulated depreciation and amortization (31,184) (47,117) --------- --------- $ 154,333 $ 161,714 ========= ========= 3. INTEREST RATE DERIVATIVE AGREEMENTS: The Company entered into interest rate derivative rate hedging agreements to reduce the impact of changing interest rates on its floating rate debt, primarily relating to the 1997 Bank Credit Agreement (see Note 4 ). The 1997 Bank Credit Agreement, as amended and restated, requires the Company to F-12 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) enter into Interest Rate Protection Agreements at rates not to exceed 9.5% per annum as to a notional principal amount at least equal to 60% of the Tranche A term loans scheduled to be outstanding from time to time and at rates not to exceed 9.75% per annum as to a notional principal amount of 60% of the aggregate amount of Tranche B scheduled to be outstanding from time to time. As of December 31, 1997, the Company had several interest rate swap agreements relating to the Company's indebtedness which expire from June 10, 1998 to July 15, 2007. The swap agreements set rates in the range of 5.64% to 9.0%. The notional amounts related to these agreements was were $1.0 billion at December 31, 1997, and decrease to $200 million through the expiration dates. The Company has no intentions of terminating these instruments prior to their expiration dates unless it were to prepay a portion of its bank debt. The floating interest rates are based upon the three month London Interbank Offered Rate (LIBOR) rate, and the measurement and settlement is performed quarterly. Settlements of these agreements are recorded as adjustments to interest expense in the relevant periods. Premiums paid under these agreements were approximately $1.1 million in 1994, $851,000 in 1996 and $474,000 in 1997 and are amortized over the life of the agreements as a component of interest expense. The counter parties to these agreements are major national financial institutions. The Company estimates the aggregate cost to retire these instruments at December 31, 1997 to be $726,000. 4. NOTES PAYABLE AND COMMERCIAL BANK FINANCING: FIRST AMENDED AND RESTATED BANK CREDIT AGREEMENT ------------------------------------------------ In connection with the 1994 Acquisitions, the Company amended and restated its Bank Credit Agreement (the "1994 Bank Credit Agreement"). The 1994 Bank Credit Agreement consisted of three classes: Facility A Revolving Credit and Term Loan, Facility B Credit Loan and Facility C Term Loan. In August 1995, the Company utilized the net proceeds from the 1995 Notes discussed below to repay amounts outstanding under the 1994 Bank Credit Agreement. The weighted average interest rates during 1995, while amounts were outstanding and as of August 28, 1995 (when outstanding indebtedness relating to Bank Credit Agreement were repaid) and December 31, 1995 were 8.44% and 7.63%, respectively. Interest expense relating to the Bank Credit Agreement was $15.6 million for the year ended December 31, 1995. Simultaneously with the acquisition of the non-license assets of River City, the 1994 Bank Credit Agreement was amended and restated with new terms as outlined below. SECOND AMENDED AND RESTATED BANK CREDIT AGREEMENT ------------------------------------------------- In order to finance the acquisition of the non-license assets of River City and potential future acquisitions, the Company amended and restated its Bank Credit Agreement on May 31, 1996 (the "1996 Bank Credit Agreement"). The 1996 Bank Credit Agreement consisted of three classes: Tranche A Term Loan, Tranche B Term Loan and a Revolving Credit Commitment. The Tranche A Term Loan was a term loan in a principal amount not to exceed $550 million and was scheduled to be paid in quarterly installments beginning December 31, 1996 through December 31, 2002. The Tranche B Term Loan was a term loan in a principal amount not to exceed $200 million and was scheduled to be paid in quarterly installments beginning December 31, 1996 through November 2003. The Revolving Credit Commitment was a revolving credit facility in a principal amount not to exceed $250 million and was scheduled to have reduced availability quarterly beginning March 31, 1999 through November 30, 2003. The Company incurred amendment acquisition costs of approximately $20 million associated with this indebtedness which are being amortized over the life of the debt. F-13 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) The applicable interest rate for the Tranche A Term Loan and the Revolving Credit Tranche was either LIBOR plus 1.25% to 2.5% or the base rate plus zero to 1.25%. The applicable interest rate for the Tranche A Term Loan and the Revolving Credit Tranche was adjusted based on the ratio of total debt to four quarters trailing earnings before interest, taxes, depreciation and amortization. The applicable interest rate for Tranche B was either LIBOR plus 2.75% or the base rate plus 1.75%. The weighted average interest rates for outstanding indebtedness relating to the 1996 Bank Credit Agreement during 1996 and as of December 31, 1996, were 8.08% and 8.12%, respectively. Interest expense relating to the 1996 Bank Credit Agreement was $40.4 million for the year ended December 31, 1996. The Company amended and restated the 1996 Bank Credit Agreement as discussed below. THIRD AMENDED AND RESTATED BANK CREDIT AGREEMENT ------------------------------------------------ In order to expand its capacity and obtain more favorable terms with its syndicate of banks, the Company amended and restated its Bank Credit Agreement in May 1997 (the "1997 Bank Credit Agreement"). In connection with the amendment and restatement, the Company incurred amendment acquisition costs of approximately $4.7 million, which are being amortized over the life of the debt. Contemporaneously with the Preferred Stock Offering and the Common Stock Offering (see Notes 15 and 16) consummated in September 1997, the Company amended its 1997 Bank Credit Agreement. The 1997 Bank Credit Agreement, as amended, consists of two classes: Tranche A Term Loan Term loan and a Revolving Credit Commitment. The Tranche A Term Loan is a term loan in a principal amount not to exceed $325 million and is scheduled to be paid in quarterly installments through December 31, 2004. The Revolving Credit Commitment is a revolving credit facility in a principal amount not to exceed $675 million and is scheduled to have reduced availability quarterly through December 31, 2004. As of December 31, 1997, outstanding indebtedness under the Tranche A Term Loan and the Revolving Credit Commitment were $307.1 million and $-0- respectively. The applicable interest rate for the Tranche A Term Loan and the Revolving Credit Tranche is either LIBOR plus 0.5% to 1.875% or the base rate plus zero to 0.625%. The applicable interest rate for the Tranche A Term Loan and the Revolving Credit is adjusted based on the ratio of total debt to four quarters' trailing earnings before interest, taxes, depreciation and amortization. The weighted average interest rates for outstanding indebtedness relating to the 1997 Bank Credit Agreement during 1997 and as of December 31, 1997 were 7.43% and 8.5%, respectively. The interest expense relating to the 1997 Bank Credit Agreement was $46.7 million for the year ended December 31, 1997. The Company is required to maintain certain debt covenants in connection with the 1997 Bank Credit Agreement. As of December 31, 1997, the Company is in compliance with all debt covenants. 8 3/4% SENIOR SUBORDINATED NOTES DUE 2007: ------------------------------------------ In December 1997, the Company completed an issuance of $250 million aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2007 (the "8 3/4% Notes") pursuant to the Shelf Registration statement (see Note 14) and generated net proceeds to the Company of $242.8 million. Of the net proceeds from the issuance, $106.2 million was utilized to tender the Company's 1993 Notes with the remainder retained for general corporate purposes which may include payments relating to future acquisitions. Interest on the 8 3/4% Notes is payable semiannually on June 15 and December 15 of each year, commencing June 15, 1998. Interest expense for the year ended December 31, 1997 was $0.9 million. The 8 3/4% Notes are issued under an Indenture among SBG, its subsidiaries (the guarantors) and the trustee. Costs associated with the offering totaled $5.8 million, including an underwriting discount of $5.0 million. These costs were capitalized and are being amortized over the life of the debt. Based upon the quoted market price, the fair value of the 8 3/4% Notes as of December 31, 1997 is $250.6 million. F-14 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) 9% SENIOR SUBORDINATED NOTES DUE 2007: -------------------------------------- In July 1997, the Company completed an issuance of $200 million aggregate principal amount of 9% Senior Subordinated Notes due 2007 (the "9% Notes"). The 9% Notes were sold to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) and a limited number of institutional "accredited investors" and the offering was exempt from registration under the Securities Act, pursuant to Section 4(2) of the Securities Act and Rule 144A thereunder. The Company utilized $162.5 million of the approximately $195.6 million net proceeds of the private issuance to repay outstanding revolving credit indebtedness under the 1997 Bank Credit Agreement and utilized the remainder to pay a portion of the $63 million cash down payment relating to the Heritage Acquisition (see Note 12). Pursuant to a Registration Rights Agreement entered into in connection with the private placement of the 9% Notes, the Company offered to holders of the 9% Notes the right to exchange the 9% Notes with new 9% Notes (the "Notes Exchange Offer") having the same terms as the existing notes, except that the exchange of the new Notes for the existing Notes will be registered under the Securities Act. On October 8, 1997 the Company filed a registration statement on Form S-4 with the Securities and Exchange Commission (the "Commission") for the purpose of registering the new 9% Notes to be offered in exchange for the aforementioned existing 9% Notes. The Company's Notes Exchange Offer became effective on October 10, 1997 and was closed on November 7, 1997, at which time all of the existing 9% Notes were exchanged for new 9% Notes. Interest on the 9% Notes is payable semiannually on January 15 and July 15 of each year, commencing January 15, 1998. Interest expense for the year ended December 31, 1997 was $9.0 million. The 9% Notes are issued under an Indenture among SBG, its subsidiaries (the guarantors) and the trustee. Costs associated with the offering totaled $4.8 million, including an underwriting discount of $4.0 million. These costs were capitalized and are being amortized over the life of the debt. Based upon the quoted market price, the fair value of the 9% Notes as of December 31, 1997 is $206.4 million. 10% SENIOR SUBORDINATED NOTES DUE 2005 -------------------------------------- In August 1995, the Company completed an issuance of $300 million aggregate principal amount of 10% Senior Subordinated Notes (the "1995 Notes"), due 2005, generating net proceeds to the Company of $293.2 million. The net proceeds of this offering were utilized to repay outstanding indebtedness under the then existing Bank Credit Agreement of $201.8 million with the remainder being retained and eventually utilized to make payments related to certain acquisitions consummated during 1996. In conjunction with the repayment of outstanding indebtedness under the Bank Credit Agreement, the Company recorded an extraordinary loss of $4.9 million, net of a tax benefit of $3.4 million. Interest on the Notes is payable semiannually on March 30 and September 30 of each year, commencing March 30, 1996. Interest expense for the years ended December 31, 1996 and 1997, was $30.0 million and $30.0 million, respectively. The notes are issued under an indenture among SBG, its subsidiaries (the guarantors) and the trustee. Costs associated with the offering totaled $6.8 million, including an underwriting discount of $6.0 million and are being amortized over the life of the debt. Based upon the quoted market price, the fair value of the Notes as of December 31, 1997 is $322.2 million. 10% SENIOR SUBORDINATED NOTES DUE 2003 AND 1997 TENDER OFFER ------------------------------------------------------------ In December 1993, the Company completed an issuance of $200 million aggregate principal amount of 10% Senior Subordinated Notes (the "1993 Notes"), due 2003 (the Notes). Subsequently, the Company determined that a redemption of $100.0 million was required. This redemption and a refund of $1.0 million of fees from the underwriters took place in the first quarter of 1994. F-15 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) In December 1997, the Company completed a tender offer of $98.1 million aggregate principal amount of the 1993 Notes (the "Tender Offer"). Total consideration per $1,000 principal amount note tendered was $1,082.08 resulting in total consideration paid to consummate the Tender Offer of $106.2 million. In conjunction with the Tender Offer, the Company recorded an extraordinary loss of $6.1 million, net of a tax benefit of $4.0 million. Interest on the Notes not tendered is payable semiannually on June 15 and December 15 of each year. Interest expense for the years ended December 31, 1995, 1996 and 1997, was $10.0 million, $10.0 million and $9.6 million, respectively. The Notes are issued under an Indenture among SBG, its subsidiaries (the guarantors) and the trustee. SUMMARY - ------- Notes payable and commercial bank financing consisted of the following as of December 31, 1996 and 1997 (in thousands):
1996 1997 ------------- ------------- Bank Credit Agreement, Tranche A Term Loan .......................... $ 520,000 $ 307,125 Bank Credit Agreement, Tranche B Term Loan .......................... 198,500 -- Bank Credit Agreement, Revolving Credit Commitment .................. 155,000 -- 8 3/4% Senior Subordinated Notes, due 2007 ......................... -- 250,000 9% Senior Subordinated Notes, due 2007 .............................. -- 200,000 10% Senior Subordinated Notes, due 2003 ............................. 100,000 1,899 10% Senior Subordinated Notes, due 2005 ............................. 300,000 300,000 Installment note for certain real estate interest at 8.0% ........... -- 101 Unsecured installment notes to former minority stockholders of CRI and WBFF, interest at 18% ...................................... 644 -- ---------- ---------- 1,274,144 1,059,125 Less: Discount on 8 3/4% Senior Subordinated Notes, due 2007 ........ -- (976) Less: Current portion ............................................... (62,144) (35,215) ---------- ---------- $1,212,000 $1,022,934 ========== ==========
F-16 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) The Revolving Credit Commitment is a revolving credit facility in a principal amount not to exceed $675 million and is scheduled to have reduced availability quarterly beginning March 31, 1999 through December 31, 2004. Indebtedness under Tranche A of the 1997 Bank Credit Agreement and notes payable as of December 31, 1997, mature as follows (in thousands): 1998 ................................................................ $ 35,215 1999 ................................................................ 37,924 2000 ................................................................ 48,758 2001 ................................................................ 48,759 2002 ................................................................ 48,759 2003 and thereafter ................................................. 839,710 ---------- 1,059,125 Less: Discount on 8 3/4% Senior Subordinated Notes, due 2007 ........ (976) ---------- $1,058,149 ==========
Substantially all of the Company's assets have been pledged as security for notes payable and commercial bank financing. See Note 23 for Guarantor and Non-Guarantor Subsidiaries under the Company's Indentures. 5. NOTES AND CAPITAL LEASES PAYABLE TO AFFILIATES: Notes and capital leases payable to affiliates consisted of the following as of December 31, 1996 and 1997 (in thousands):
1996 1997 ---------- ----------- Subordinated installment notes payable to former majority own- ers, interest at 8.75%, principal payments in varying amounts due annually beginning October 1991, with a balloon payment due at maturity in May 2005 ........................................... $ 10,448 $ 9,574 Capital lease for building, interest at 17.5% .......................... 1,372 1,198 Capital leases for broadcasting tower facilities, interest rates aver- aging 10% ............................................................. 249 3,720 Capitalization of time brokerage agreements, interest at 6.73% ......... -- 6,611 Capital leases for building and tower, interest at 8.25% ............... 1,890 1,470 -------- -------- 13,959 22,573 Less: Current portion .................................................. (1,774) (3,073) -------- -------- $ 12,185 $ 19,500 ======== ========
F-17 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) Notes and capital leases payable to affiliates, as of December 31, 1997, mature as follows (in thousands): 1998 ....................................................... $ 4,694 1999 ....................................................... 4,696 2000 ....................................................... 4,615 2001 ....................................................... 4,044 2002 ....................................................... 2,854 2003 and thereafter ........................................ 7,503 -------- Total minimum payments due ................................. 28,406 Less: Amount representing interest ......................... (5,833) -------- Present value of future notes and capital lease payments ... $ 22,573 ======== 6. PROGRAM CONTRACTS PAYABLE: Future payments required under program contracts payable as of December 31, 1997, are as follows (in thousands): 1998 ................................................... $ 66,404 1999 ................................................... 40,026 2000 ................................................... 20,375 2001 ................................................... 1,770 2002 ................................................... 208 2003 and thereafter .................................... 29 --------- 128,812 Less: Current portion .................................. (66,404) --------- Long-term portion of program contracts payable ......... $ 62,408 ========= Included in the current portion amounts are payments due in arrears of $14.3 million. In addition, the Companies have entered into noncancelable commitments for future program rights aggregating $56.9 million as of December 31, 1997. The Company has estimated the fair value of its program contract payables and noncancelable commitments at approximately $102.7 million and $43.1 million, respectively, as of December 31, 1996, and $118.9 million and $46.7 million, respectively, at December 31, 1997, based on future cash flows discounted at the Company's current borrowing rate. 7. PREPAYMENT OF SYNDICATED PROGRAM CONTRACT LIABILITIES: In connection with the 1996 acquisitions (see Note 12), the Company assumed certain syndicated program contracts payable for which the underlying value of the associated syndicated program assets was determined, by management, to be of little or no value. The Company negotiated the prepayment of syndicated program contracts payable for certain of the 1996 acquisitions, as well as certain other of the Company's subsidiaries. During the years ended December 31, 1996 and 1997, the Company made cash payments totaling $15.1 million and $1.4 million, respectively, relating to these negotiations. For subsidiaries owned prior to 1996, the Company recognized related amortization of excess syndicated programming of $3.0 million for the year ended December 31, 1996. F-18 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) 8. RELATED PARTY TRANSACTIONS: In connection with the start-up of an affiliate in 1990, certain SBG Class B Stockholders issued a note allowing them to borrow up to $3.0 million from the Company. This note was amended and restated June 1, 1994, to a term loan bearing interest of 6.88% with quarterly principal payments beginning March 31, 1996 through December 31, 1999. As of December 31, 1996 and 1997, the balance outstanding was approximately $1.8 and $1.3 million, respectively. During the year ended December 31, 1993, the Company loaned Gerstell Development Limited Partnership (a partnership owned by Class B Stockholders) $2.1 million. The note bears interest at 6.18%, with principal payments beginning on November 1, 1994, and a final maturity date of October 1, 2013. As of December 31, 1996 and 1997, the balance outstanding was approximately $1.9 million. Concurrently with the initial public offering (see Note 13), the Company acquired options from certain stockholders of Glencairn that will grant the Company the right to acquire, subject to applicable FCC rules and regulations, up to 97% of the capital stock of Glencairn. The Glencairn options were purchased by the Company for nominal consideration and will be exercisable only upon payment of an aggregate price equal to Glencairn's cost for the underlying stations, plus a 10% annual return. Glencairn is the owner-operator and FCC licensee of WNUV in Baltimore, WVTV in Milwaukee, WRDC in Raleigh/Durham, WABM in Birmingham, KRRT in Kerrville and WFBC in Asheville/Greenville/Spartanburg. The Company has entered into five-year LMA agreements (with five-year renewal options) with Glencairn pursuant to which the Company provides programming to Glencairn for airing on WNUV, WVTV, WRDC, WABM, KRRT and WFBC during the hours of 6:00 a.m. to 2:00 a.m. each day and has the right to sell advertising during this period. During the years ended December 31, 1995, 1996 and 1997, the Company made payments of $5.6 million, $7.3 million and $8.4 million respectively, to Glencairn under these LMA agreements. During the years ended December 31, 1995, 1996 and 1997, the Company from time to time entered into charter arrangements to lease airplanes owned by certain Class B Stockholders. During the years ended December 31, 1995, 1996 and 1997, the Company incurred expenses of approximately $489,000, $336,000 and $736,000 related to these arrangements, respectively. In May 1996, the Company acquired certain assets from River City, obtained options to acquire other assets from River City and entered into an LMA to provide programming services to certain television and radio stations, of which River City is the owner of the License Assets. Certain individuals who have direct or indirect beneficial owners of equity interests in River City are affiliates of the Company. During the years ended December 31, 1996 and 1997, the Company incurred LMA expenses relating to River City of $1.4 million and $896,000, respectively. In September 1996, the Company entered into a five-year agreement with River City pursuant to which River City will provide to the Company certain production services. Pursuant to this agreement, River City will provide certain services to the Company in return for an annual fee of $416,000, subject to certain adjustments on each anniversary date. During the years ended December 31, 1996 and 1997, the Company incurred expenses relating to this agreement of $166,000 and $397,000, respectively. An individual who is an affiliate of the Company is the owner of 100% of the common stock of Keymarket of South Carolina, Inc. ("KSC"). The Company has exercised its option to acquire all of the assets of KSC for consideration of forgiveness of KSC debt in an aggregate principal amount of approximately $7.4 million, plus a payment of approximately $1.0 million, less certain adjustments. The Company will close this transaction upon FCC approval which is anticipated to occur during 1998. The Company also purchased two properties from this affiliate for an aggregate purchase price of approximately $1.75 million as required by certain leases assigned to the Company in connection with the River City acquisition. During May 1996, the Company, along with the Class B Stockholders, formed Beaver Dam Limited Partnership (BDLP), of which the Company owned a 45% interest. BDLP was formed for the purpose of construct- F-19 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) ing and owning a building which may be the site for the Company's corporate headquarters. The Company made capital contributions of approximately $380,000. During 1997, the Partnership made a liquidating distribution to the Company of approximately $380,000 and the Company no longer owns an interest in BDLP. Certain assets used by the Company's operating subsidiaries are leased from Cunningham, KIG and Gerstell (entities owned by the Class B Stockholders). Lease payments made to these entities were $1.3 million, $1.3 million, and $1.4 million for the years ended December 31, 1995, 1996 and 1997, respectively. 9. INCOME TAXES: The Company files a consolidated federal income tax return and separate company state tax returns. The provision (benefit) for income taxes consists of the following as of December 31, 1995, 1996 and 1997 (in thousands):
1995 1996 1997 ----------- --------- ------------- Provision for income taxes before extraordinary item .......... $ 5,200 $6,936 $ 15,984 Income tax effect of extraordinary item ....................... (3,357) -- (4,045) -------- ------ --------- $ 1,843 $6,936 $ 11,939 ======== ====== ========= Current: Federal ...................................................... $ 5,374 $ 127 $ (10,581) State ........................................................ 1,558 4,479 1,938 -------- ------ --------- 6,932 4,606 (8,643) -------- ------ --------- Deferred: Federal ...................................................... (4,119) 2,065 18,177 State ........................................................ (970) 265 2,405 -------- ------ --------- (5,089) 2,330 20,582 -------- ------ --------- $ 1,843 $6,936 $ 11,939 ======== ====== =========
The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision (benefit):
1995 1996 1997 ---------- ---------- ---------- Statutory federal income taxes ............................................ 34.0% 34.0% 34.0% Adjustments- State income and franchise taxes, net of federal effect .................. 2.8 16.7 6.3 Goodwill amortization .................................................... 16.4 24.3 17.0 Non-deductible expense items.. ........................................... 3.7 6.1 8.5 Tax liability related to dividends on Parent Preferred Stock (a) ......... -- -- 70.3 Other .................................................................... (5.9) 4.9 3.0 ---- ---- ----- Provision for income taxes ................................................ 51.0% 86.0% 139.1% ==== ==== =====
- ---------- (a) In March 1997, the Company issued the HYTOPS securities (see Note 17). In connection with this transaction, Sinclair Broadcast Group, Inc. (the "Parent") issued $206.2 million of Series C Preferred Stock (the "Parent Preferred Stock") to KDSM, Inc., a wholly owned subsidiary. Parent Preferred Stock dividends paid to KDSM, Inc. are considered taxable income for Federal tax purposes and not considered income for book purposes. Also for Federal tax purposes, KDSM, Inc. is allowed a tax deduction for dividends received on the Parent Preferred Stock in an amount equal to Parent Preferred Stock dividends received in each taxable year limited to the extent that the Parent's consolidated group has "earnings and profits". To the extent that dividends received by KDSM, Inc. are in excess of the Parent's consolidated group earnings and profits, the Parent will reduce its tax basis in the Parent Preferred Stock which gives rise to a deferred tax liability (to be recognized upon redemption) and KDSM, Inc.'s dividend income is treated as a permanent difference between taxable income and book income. During the year ended December 31, 1997, the Parent did not generate earnings and profits which resulted in a reduction in basis of the Parent's Series C Preferred Stock of $20.8 million which generated a related deferred tax liability of $8.4 million. F-20 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) Temporary differences between the financial reporting carrying amounts and the tax basis of assets and liabilities give rise to deferred taxes. The Company had a net deferred tax asset and deferred tax liability of $782,000 and $21.5 million as of December 31, 1996 and 1997, respectively. The realization of deferred tax assets is contingent upon the Company's ability to generate sufficient future taxable income to realize the future tax benefits associated with the net deferred tax asset. Management believes that deferred assets will be realized through future operating results. The Company has total available Federal NOL's of approximately $57.3 million as of December 31, 1997, which expire during various years from 2004 to 2012. These NOL's are recorded within refundable income taxes and deferred taxes in the accompanying Consolidated Balance Sheet as of December 31, 1997. Certain of these NOL's are limited to use within a specific entity, and certain NOL's are subject to annual limitations under Internal Revenue Code Section 382 and similar state provisions. Total deferred tax assets and deferred tax liabilities as of December 31, 1996 and 1997, including the effects of businesses acquired, and the sources of the difference between financial accounting and tax bases of the Company's assets and liabilities which give rise to the deferred tax assets and deferred tax liabilities and the tax effects of each are as follows (in thousands):
1996 1997 ---------- --------- Deferred Tax Assets: Accruals and reserves ................................................. $ 2,195 $ 3,015 Loss on disposal of fixed assets ...................................... -- 148 Net operating losses .................................................. 4,829 10,435 Program contracts ..................................................... 2,734 3,410 Other ................................................................. 713 903 ------- ------- $10,471 $17,911 ======= ======= Deferred Tax Liabilities: FCC license ........................................................... $ 2,613 $ 5,346 Parent Preferred Stock deferred tax liability [see (a) above] ......... -- 8,388 Hedging instruments. .................................................. 188 15 Fixed assets and intangibles .......................................... 4,430 23,572 Capital lease accounting .............................................. 1,304 1,647 Affiliation agreement.. ............................................... 691 -- Investment in partnerships. ........................................... 209 420 Other ................................................................. 254 65 ------- ------- $ 9,689 $39,453 ======= =======
During 1996, the Company made a $1.1 million deferred tax adjustment to decrease its deferred tax asset and increase goodwill under the purchase accounting guidelines of APB 16 and in accordance with SFAS 109 related to the opening deferred tax asset balances of certain 1995 acquisitions. 10. EMPLOYEE BENEFIT PLAN: The Sinclair Broadcast Group, Inc. 401(k) Profit Sharing Plan and trust (the "SBG Plan") covers eligible employees of the Company. Contributions made to the SBG Plan include an employee elected salary reduction amount, company matching contributions and a discretionary amount determined each year by the Board of Directors. The Company's 401(k) expense for the years ended December 31, 1995, 1996 and 1997, was $271,000, $657,000 and $1.0 million, respectively. There were no discretionary contributions during these periods. During December 1997, the Company registered 400,000 shares of its Class "A" Common Stock with the Securities and Exchange Commission (the "Commission") to be issued as a matching contribution for the 1997 plan year and subsequent plan years. F-21 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) 11. CONTINGENCIES AND OTHER COMMITMENTS: LITIGATION ---------- Lawsuits and claims are filed against the Company from time to time in the ordinary course of business. These actions are in various preliminary stages, and no judgments or decisions have been rendered by hearing boards or courts. Management, after reviewing developments to date with legal counsel, is of the opinion that the outcome of such matters will not have a material adverse effect on the Company's financial position or results of operations. OPERATING LEASES ---------------- The Company has entered into operating leases for certain property and equipment under terms ranging from three to ten years. The rent expense under these leases, as well as certain leases under month-to-month arrangements, for the years ended December 31, 1995, 1996 and 1997, aggregated approximately $1.1 million, $3.1 million and $3.9 million, respectively. Future minimum payments under the leases are as follows (in thousands): 1998 ........................ $ 3,427 1999 ........................ 2,226 2000 ........................ 1,583 2001 ........................ 1,382 2002 ........................ 1,172 2003 and thereafter ......... 4,988 ------- $14,778 ======= 12. ACQUISITIONS: 1995 ACQUISITIONS AND DISPOSITIONS ---------------------------------- In January and May 1995, the Company acquired the non-license and license assets, respectively, of WTVZ in Norfolk, Virginia for a purchase price of $49.0 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $1.4 million, $12.6 million and $35.0 million, respectively, based upon an independent appraisal. Intangible assets are being amortized over 1 to 40 years. In January 1995, the Company acquired the license and non-license assets of the Paramount Station Group of Raleigh/Durham, Inc. which owned and operated WLFL in Raleigh/Durham, North Carolina for $55.5 million, plus the assumption of $3.7 million in liabilities. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $8.6 million, $15.9 million and $34.7 million, respectively, based upon an independent appraisal. Intangible assets are being amortized over periods of 1 to 40 years. On March 31, 1995, the Company exercised its option to acquire 100% of the voting stock of FSFA for the exercise price of $100. FSFA was merged into WLFL, Inc. and became a wholly-owned subsidiary of the Company. Simultaneously, the Company sold the license assets of FSFA to Glencairn for $2.0 million, and entered into a five-year LMA (with a five-year renewal option) with Glencairn (see Note 8). F-22 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) On May 5, 1995, Keyser Communications, Inc. (KCI), an affiliated entity wholly-owned by the stockholders of the Company, was merged into the Company for common stock. Certain assets and liabilities of KCI (other than programming items, an LMA agreement and consulting agreements), were distributed to the KCI shareholders immediately prior to the merger. The merger of KCI is being treated as a reorganization and has been accounted for as a pooling of interests transaction. Accordingly, the consolidated financial statements for all periods presented have been restated to include the accounts of KCI. In July 1995, the Company acquired the non-license assets of WABM in Birmingham, Alabama for a purchase price of $2.5 million. The acquisition was accounted for under the purchase method of accounting whereby $1.1 million of the purchase price was allocated to property and program assets, based upon an independent appraisal. The excess of the purchase price over the acquired assets of approximately $1.4 million was allocated to other intangible assets and is being amortized over 15 years. Simultaneously with the purchase, the Company entered into a five-year LMA agreement (with a five-year renewal option) with Glencairn. In November 1995, the Company acquired the non-license assets of WDBB in Tuscaloosa, Alabama for a purchase price of $400,000. In addition, the Company made "Option Grant Payments" of $11.3 million to certain parties for options to purchase the issued and outstanding stock of WDBB, Inc., which holds the license assets of WDBB. The option agreement further provides for the payment of option grant installments of $2.6 million over five years and a final option exercise price of $100,000. The acquisition was accounted for under the purchase method of accounting whereby $11.1 million was allocated to the property and program assets based upon an independent appraisal. The total of Option Grant Payments paid and grant installments accrued of $14.0 million was allocated to other intangible assets and is being amortized over 15 years. 1996 ACQUISITIONS - ----------------- RIVER CITY ACQUISITION In April 1996, the Company entered into an agreement to purchase certain non-license assets of River City. In May 1996, the Company closed the transaction for a purchase price of $967.1 million, providing as consideration 1,150,000 shares of Series A Convertible Preferred Stock with a fair market value of $125.1 million, 1,382,435 stock options with a fair market value of $23.9 million and cash payments totaling $818.1 million. The Company utilized indebtedness under its Bank Credit Agreement to finance the transaction. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $82.8 million, $375.6 million and $508.7 million, respectively, based upon an independent appraisal. Intangible assets are being amortized over 1 to 40 years. Simultaneously, the Company entered into option agreements to purchase certain license assets for an aggregate option exercise price of $20 million. In September 1996, after receiving FCC approval for license transfer, the Company made a cash payment of $6.9 million to acquire certain radio station FCC licenses. During 1997, the Company exercised its options to acquire certain other FCC licenses and now owns all of the License Assets (or has entered into an LMA with respect to) all of the television and radio stations with respect to which it acquired non-license assets from River City, other than WTTV-TV and WTTK-TV in Indianapolis, Indiana. Also, simultaneously with the acquisition, the Company entered into an option agreement to purchase the license and non-license assets of WSYX-TV in Columbus, Ohio. The option purchase price for this television station is $100 million plus the amount of River City indebtedness secured by the WSYX assets on the exercise date (not to exceed the amount at the date of closing of $135 million). Pursuant to F-23 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) the WSYX option agreement, the Company is required to make certain "Option Extension Fees", as defined. These fees are required to begin quarterly beginning with December 31, 1996, through the earlier of the "Option Grant Date" or the expiration date of June 30, 1999. The Option Extension Fees are calculated as 8% per annum of the option purchase price through the first anniversary of the Option Grant Date, 15% per annum of the option purchase price through the second anniversary of the Option Grant Date and 25% per annum of the option purchase price through the expiration of the WSYX option agreement. As of December 31, 1997, the Company incurred Option Extension Fees and other costs relating to WSYX-TV totaling $22.9 million. In conjunction with the River City acquisition, the Company entered into an agreement to purchase the non-license assets of KRRT, Inc., a television station in San Antonio, Texas, for a purchase price of $29.5 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $3.8 million, $0.4 million and $25.3 million, respectively, based upon an independent appraisal. Intangible assets are being amortized over 1 to 15 years. In connection with the River City acquisition, the Company consummated the following transactions concurrent with or subsequent to the closing: 1. In June 1996, the Board of Directors of the Company adopted, upon approval of the stockholders by proxy, an amendment to the Company's amended and restated charter. This amendment increased the number of Class A Common Stock shares authorized to be issued by the Company from 35,000,000 shares to 100,000,000 shares. The amendment also increased the number of shares of Preferred Stock authorized from 5,000,000 shares to 10,000,000 shares. 2. Series A Preferred Stock -- As partial consideration for the acquisition of the non-license assets of River City, the Company issued 1,150,000 shares of Series A Preferred Stock. In June 1996, the Board of Directors of the Company adopted, upon approval of the stockholders by proxy, an amendment to the Company's amended and restated charter at which time Series A Preferred Stock was exchanged for and converted into Series B Preferred Stock. The Company recorded the issuance of Series A Preferred Stock based on the fair market value at the date the River City acquisition was announced at the exchange rate of 3.64 shares of Class A Common Stock for each share of Series A Preferred Stock. 3. Series B Preferred Stock -- Shares of Series B Preferred Stock are convertible at any time into shares of Class A Common Stock, with each share of Series B Preferred Stock convertible into approximately 3.64 shares of Series A Common Stock. The Company may redeem shares of Series B Preferred Stock only after the occurrence of certain events. If the Company seeks to redeem shares of Series B Preferred Stock and the stockholder elects to retain the shares, the shares will automatically be converted into common stock on the proposed redemption date. All shares of Series B Preferred Stock remaining outstanding as of May 31, 2001, will automatically convert into Class A Common Stock. Series B Preferred Stock is entitled to 3.64 votes on all matters with respect to which Class A Common Stock has a vote. F-24 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) 4. Stock Options and Awards: Long-Term Incentive Plan- In June 1996, the Board of Directors adopted, upon approval of the stockholders by proxy, the 1996 Long-Term Incentive Plan of the Company (the "LTIP"). The purpose of the LTIP is to reward key individuals for making major contributions to the success of the Company and its subsidiaries and to attract and retain the services of qualified and capable employees. A total of 2,073,673 shares of Class A Common Stock is reserved and available for awards under the plan. In connection with the River City acquisition, 244,500 options were granted to certain employees and 1,382,454 were granted to Barry Baker (see Executive Employment Agreement below) under this plan with an exercise price of $30.11 per share. The Company recorded deferred compensation of $1.9 million as additional paid-in capital at the stock option grant date. During the years ended December 31, 1996 and 1997, compensation expense of $739,000 and $605,000 was recorded relating to the options issued under the LTIP, respectively. The remaining deferred compensation of approximately $954,000 will be recognized as expense on a straight-line basis over the vesting period. Incentive Stock Option Plan- In June 1996, the Board of Directors adopted, upon approval of the stockholders by proxy, certain amendment to the Company's Incentive Stock Option Plan. The purpose of the amendments was (i) to increase the number of shares of Class A Common Stock approved for issuance under the plan from 400,000 to 500,000, (ii) to delegate to Barry Baker the authority to grant certain options, (iii) to lengthen the period after the date of grant before options become exercisable, from two years to three (iv) and to provide immediate termination and three-year ratable vesting of options in certain circumstances. In connection with the River City acquisition, the Company granted 287,000 options to key management employees at an exercise price of $37.75, the fair market value at the date of grant. 5. Executive Employment Agreement In connection with the acquisition of River City, the Company entered into a five-year employment agreement (the "Baker Employment Agreement") with Barry Baker, pursuant to which Mr. Baker will become President and Chief Executive Officer of SCI and Executive Vice President of the Company, at such time as Mr. Baker is able to hold those positions consistent with applicable FCC regulations. Until such time as Mr. Baker is able to become an officer of the Company, he serves as a consultant to the Company pursuant to a consulting agreement and received compensation that he would be entitled to as an officer under the Baker Employment Agreement. If the Baker Employment Agreement is terminated by the Company other than for cause (as defined) or by Mr. Baker for good cause (constituting certain occurrences specified in the agreement), Mr. Baker shall be entitled to certain termination payments entitling him to his salary and bonuses which would have been paid under the agreement; to purchase certain television or radio assets acquired by the Company from River City at fair market value, and all stock options held by Mr. Baker shall vest immediately. OTHER 1996 ACQUISITIONS In May 1995, the Company entered into option agreements to acquire all of the license and non-license assets of WSMH-TV in Flint, Michigan (WSMH). In July 1995, the Company paid the $1.0 million option exercise price to exercise its option and in February 1996, the Company consummated the acquisition for a purchase price of $35.4 million. The acquisition was accounted for under the purchase F-25 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $1.9 million, $6.0 million and $27.5 million, respectively, based upon an independent appraisal. In March 1996, the Company entered into an agreement to acquire the outstanding stock of Superior Communications, Inc. (Superior) which owns the license and non-license assets of the television stations KOCB in Oklahoma City, Oklahoma and WDKY in Lexington, Kentucky. In May 1996, the Company consummated the acquisition for a purchase price of $63.5 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $7.3 million, $20.4 million, respectively, based upon an independent appraisal. In January 1996, the Company entered into an agreement to acquire license and non-license assets of the television station WYZZ in Peoria, Illinois. In July 1996, the Company consummated the acquisition for a purchase price of $21.1 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $2.2 million, $4.3 million and $14.6 million, respectively, based upon an independent appraisal. In July 1996, the Company entered into an agreement to acquire license and non-license assets of the television station KSMO in Kansas City, Missouri through the exercise of its options described in Note 13 for a total purchase price of $10.0 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets and acquired intangible broadcasting assets for $4.6 million and $5.4 million, respectively, based upon an independent appraisal. In August 1996, the Company acquired the license and non-license assets of the television station WSTR in Cincinnati, Ohio for a total purchase price of $8.7 million. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets and acquired intangible broadcasting assets for $6.2 million and $2.5 million, respectively, based upon an independent appraisal. 1997 ACQUISITIONS AND AGREEMENTS TO ACQUIRE CERTAIN ASSETS: - ----------------------------------------------------------- 1997 ACQUISITIONS In January 1997, the Company entered into a purchase agreement to acquire the license and non-license assets of KUPN-TV, the UPN affiliate in Las Vegas, Nevada, for a purchase price of $87.5 million. Under the terms of this agreement, the Company made cash deposit payments of $9.0 million and in May 1997, the Company closed on the acquisition making cash payments of $78.5 million for the remaining balance of the purchase price and other related closing costs. The acquisition was accounted for under the purchase method of accounting whereby the purchase price was allocated to property and programming assets, acquired intangible broadcasting assets and other intangible assets for $1.6 million, $17.9 million and $68.0 million, respectively, based upon an independent appraisal. The Company financed the transaction by utilizing proceeds from the HYTOPS offering (see Note 17) combined with indebtedness under the 1997 Bank Credit Agreement. In 1997, the Company exercised options to acquire the license and non-license assets of the following radio stations: WGR-AM and WWWS-AM (Buffalo, New York) and WWFH-FM, WILP-AM, WWSH-FM and WKRF-FM (Wilkes-Barre/Scranton, Pennsylvania). During the year ended December 31, 1997, the Company made payments totaling approximately $3.1 million to acquire the license and non-license assets of these radio stations. F-26 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) EXERCISE OF OPTIONS TO ACQUIRE RIVER CITY LICENSE ASSETS Since March 31, 1997, the FCC has granted approval for transfer of FCC licenses with respect to the following television stations: KDNL-TV (St. Louis, Missouri), KOVR-TV (Sacramento, California), WLOS-TV (Asheville, North Carolina), KABB-TV (San Antonio, Texas) and KDSM-TV (Des Moines, Iowa). The Company exercised options to acquire the License Assets (the television and radio assets essential for broadcasting a television or radio signal in compliance with regulatory guidelines) of each of these stations from River City Broadcasting, L.P. ("River City") for aggregate option exercise payments of $9.3 million. In July 1997, the Company made an option exercise payment of $.5 million to River City related to the license assets of WFBC-TV (Greenville, South Carolina) and simultaneously assigned its option to acquire the License Assets of WFBC-TV to Glencairn, Ltd. ("Glencairn") for an option assignment fee of $2.0 million. The Company entered into a local marketing agreement ("LMA") with Glencairn whereby the Company, in exchange for an hourly fee, obtained the right to program and sell advertising on substantially all of the station's inventory of broadcast time. The Company also received FCC approval for the transfer of the FCC licenses of KPNT-FM and WVRV-FM in St. Louis, Missouri, and exercised its option to acquire the License Assets of these radio stations for an option exercise price of $1.2 million. As a result of these license approvals and option exercises, the Company now owns the License Assets of (or has entered into an LMA with Glencairn with respect to) all of the television and radio stations with respect to which it acquired Non-License Assets (assets involved in the operation of radio and television stations other than License Assets) from River City, other than WTTV-TV and WTTK-TV in Indianapolis, Indiana. AGREEMENT TO ACQUIRE HERITAGE On July 16, 1997, the Company entered into agreements (the "Heritage Acquisition Agreements") with The News Corporation Limited, Heritage Media Group, Inc. and certain subsidiaries of Heritage Media Corporation (collectively, "Heritage"), pursuant to which the Company agreed to acquire certain television and radio station assets. Under the Heritage Acquisition Agreements, the Company will acquire the assets of, or the right to program pursuant to LMAs, six television stations in three markets and the assets of 24 radio stations in seven markets (the "Heritage Acquisition"). The aggregate purchase price for the assets is $630 million payable in cash at closing, less deposits paid of $65.5 million and amounts paid in January 1998 relating to the closing of certain television assets of $215 million (see Note 24). In January and February 1998, the Company completed the acquisition of the Heritage radio and television stations except for the television stations in the Burlington, Vermont-Plattsburgh, New York market and the radio stations in the New Orleans, Louisiana market. Because of FCC ownership limitations, the Company will be required to agree to divest one or more of the radio stations it owns or proposes to acquire in the New Orleans market before closing the Heritage Acquisition with respect to that market. Closing of the New Orleans radio stations is conditioned on, among other things, FCC approval. AGREEMENT TO ACQUIRE LAKELAND GROUP In November 1997, the Company entered into an agreement to acquire 100% of the stock of Lakeland Group Television Inc. for a purchase price of $50 million (the "Lakeland Acquisition") and made a cash deposit of $1.5 million. Upon the closing of the Lakeland Acquisition, the Company will acquire television station KLGT in Minneapolis, Minnesota. The Lakeland Acquisition is expected to close in the second quarter of 1998. AGREEMENT TO ACQUIRE MAX MEDIA On December 2, 1997, the Company entered into agreements to acquire, directly or indirectly, all of the equity interests of Max Media Properties, L.L.C. ("Max Media"). As a result of this transaction, the Company will acquire, or acquire the right to program pursuant to LMAs, nine television stations and F-27 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) eight radio stations in eight markets (the "Max Media Acquisition"). The aggregate purchase price is $255 million payable in cash at closing (less a deposit of $12.8 million paid at the time of signing the acquisition agreement), a portion of which will be used to retire existing debt of Max Media at closing. Max Media's television station WKEF-TV in Dayton, Ohio has an overlapping service area with the Company's television stations WTTE-TV in Columbus, Ohio, WSTR-TV in Cincinnati, Ohio, and with Company LMA station WTTV-TV in Indianapolis, Indiana. In addition, Max Media's television station WEMT-TV in Tri-Cities, Tennessee/Virginia has an overlapping service area with the Company's television station WLOS-TV in Asheville, North Carolina and Max Media's television station KBSI-TV in Paducah, Kentucky/Cape Girardeau, Missouri has an overlapping service area with the Company's television station KDNL-TV in St. Louis, Missouri. Furthermore, the Company owns a television station (and proposes to acquire radio stations from Heritage) in the Norfolk-Virginia Beach-Newport News, Virginia market, where four of Max Media's radio stations are located. Consequently, the Company has requested waivers from the FCC to allow the Company to complete the Max Media Acquisition. There can be no assurance that such waivers will be granted. As a result of the Max Media Acquisition and the Heritage Acquisition, the Company intends to dispose of two of the FM radio stations in the Norfolk-Virginia Beach-Newport News, Virginia radio market that it has agreed to acquire from Heritage and Max Media in order to be in compliance with the FCC regulations that limit the number of radio stations that can be owned in a market. The Max Media Acquisition is subject to FCC and Department of Justice (DOJ) approval and certain other conditions, and is anticipated to be completed in the second quarter of 1998. The transaction is expected to be financed through borrowings under the Company's Bank Credit Agreement. 13. INITIAL PUBLIC OFFERING: In June 1995, the Company consummated an initial public offering of 5,750,000 shares of Class A Common Stock at an initial public offering price of $21.00 per share realizing net proceeds of approximately $111.5 million. The net proceeds to the Company from this offering were used to reduce long-term indebtedness. The Company consummated the following transactions concurrent with or prior to the offering: 1. The Company purchased the options to acquire the partnership interests and liabilities of KSMO in Kansas City, Missouri and WSTR in Cincinnati, Ohio ("Option Stations") from the stockholders for an aggregate purchase price was $9.0 million. The stockholders also assigned to the Company their rights and obligations under an option agreement among the stockholders and a commercial bank which held secured debt of KSMO and WSTR. 2. The stockholders assigned the subordinated convertible debenture relating to the sale of WPTT to the Company in exchange for $1.0 million, a portion of which was used to retire the outstanding balance of a note due from the controlling stockholders. 3. The Company acquired options from certain stockholders of Glencairn that will grant the Company the right to acquire, subject to applicable FCC rules and regulations, up to 97% of the capital stock of Glencairn. 4. The Board of Directors of the Company adopted Amended and Restated Articles of Incorporation to authorize up to 35,000,000 shares of Class A Common Stock, par value $.01 per share, 35,000,000 shares of Class B Common Stock, par value $.01 per share and 5,000,000 shares of Preferred Stock, par value $.01 per share; completed a reclassification and conversion of its outstanding common stock into shares of Class B Common Stock; and effected an approximately 49.1 for 1 stock split of the Company's common stock (resulting in 29,000,000 shares of Class B Common Stock outstanding). The reclassification, conversion and stock split have been retroactively reflected in the accom- F-28 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) panying consolidated balance sheets and statements of stockholders' equity. In June 1996, the Company amended its charter, increasing the number of shares of Class A Common Stock authorized to be issued from 35,000,000 to 100,000,000 (see Note 12). 5. The Board of Directors of the Company adopted an Incentive Stock Option Plan for Designated Participants (the Designated Participants Stock Option Plan) pursuant to which options for shares of Class A Common Stock will be granted to certain designated employees of the Company upon adoption. 6. On March 27, 1995, the Board of Directors of the Company adopted an Incentive Stock Option Plan (the Stock Option Plan) pursuant to which options for shares of Class A Common Stock may be granted to certain designated classes of employees of the Company. The Stock Option Plan provides that the maximum number of shares of Class A Common Stock reserved for issuance under the Stock Option Plan is 500,000, as amended, and that options to purchase Class A Common Stock may be granted under the plan until the tenth anniversary of its adoption. 14. SHELF REGISTRATION STATEMENTS: In September 1996, the Company filed and in November 1996 obtained effectiveness of a registration statement on Form S-3 with the Commission with respect to the sale by certain selling stockholders of 5,564,253 shares of Class A Common Stock. These shares represent 4,181,818 shares of Class A Common Stock issuable upon conversion of Series B Preferred Stock and 1,382,435 shares of Class A Common Stock issuable upon exercise of options held by Barry Baker. In October 1996, the Company filed a registration statement on Form S-3 with the Commission for the purpose of offering additional shares of its Class A Common Stock to the public. In August 1997, the Company amended this registration statement to reflect the registration of $1 billion of securities to be offered to the public, covering Class A Common Stock, Preferred Stock and debt securities (the "Shelf Registration"). In September 1997, the Company completed offerings of its Class A Common Stock and Series D Preferred Stock pursuant to the Shelf Registration. In December 1997, the Company issued the 8 3/4% Notes pursuant to the Shelf Registration. 15. SECONDARY PUBLIC OFFERING OF CLASS A COMMON STOCK: In September 1997, the Company and certain stockholders of the Company completed a public offering of 4,345,000 and 1,750,000 shares, respectively of Class A Common Stock (the "Common Stock Offering"). The shares were sold pursuant to the Shelf Registration for an offering price of $36.50 per share and generated proceeds to the Company of $151.0 million, net of underwriters' discount and other offering costs of $7.6 million. The Company utilized a significant portion of the Common Stock Offering proceeds to repay indebtedness under the 1997 Bank Credit Agreement (see Note 4). 16. PUBLIC OFFERING OF SERIES D PREFERRED STOCK: Concurrent with the Common Stock Offering, the Company completed a public offering of 3,450,000 shares of Series D Convertible Exchangeable Preferred Stock (the "Preferred Stock Offering"). The shares were sold pursuant to the Shelf Registration at an offering price of $50 per share and generated proceeds to the Company of $167.5 million, net of underwriters' discount and other offering costs of $5.0 million. The Convertible Exchangeable Preferred Stock has a liquidation preference of $50 per share and a stated annual dividend of $3.00 per share payable quarterly out of legally available funds and are convertible into shares of Class A Common Stock at the option of the holders thereof at a conversion price of $45.625 per share, subject to adjustment. The shares of Convertible Exchangeable Preferred Stock are F-29 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) exchangeable at the option of the Company, for 6% Convertible Subordinated Debentures of the Company, due 2012, and are redeemable at the option of the Company on or after September 20, 2000 at specified prices plus accrued dividends. The Company received total net proceeds of $319.1 million from the Preferred Stock Offering and the Common Stock Offering. The Company utilized $285.7 million of the net proceeds from the Common Stock Offering and the Preferred Stock Offering to repay outstanding borrowings under the revolving credit facility, $8.9 million to repay outstanding amounts under the Tranche A term loan of the 1997 Bank Credit Agreement and retained the remaining net proceeds of approximately $24.5 million for general corporate purposes. 17. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUST: In March 1997, the Company completed a private placement of $200 million aggregate liquidation value of 11 5/8% High Yield Trust Offered Preferred Securities (the "HYTOPS") of Sinclair Capital, a subsidiary trust of the Company. The HYTOPS were issued March 12, 1997, mature March 15, 2009, and provide for quarterly distributions to be paid in arrears beginning June 15, 1997. The HYTOPS were sold to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act of 1933, as amended) and a limited number of institutional "accredited investors" and the offering was exempt from registration under the Securities Act of 1933, as amended ("the Securities Act"), pursuant to Section 4(2) of the Securities Act and Rule 144A thereunder. The Company utilized $135 million of the approximately $192.8 million net proceeds of the private placement to repay outstanding debt and retained the remainder for general corporate purposes, which included the acquisition of KUPN-TV in Las Vegas, Nevada. Pursuant to a Registration Rights Agreement entered into in connection with the private placement of the HYTOPS, the Company offered holders of the HYTOPS the right to exchange the HYTOPS for new HYTOPS having the same terms as the existing securities, except that the exchange of the new HYTOPS for the existing HYTOPS has been registered under the Securities Act. On May 2, 1997, the Company filed a registration statement on Form S-4 with the Commission for the purpose of registering the new HYTOPS to be offered in exchange for the aforementioned existing HYTOPS issued by the Company in March 1997 (the "Exchange Offer"). The Company's Exchange Offer was closed and became effective August 11, 1997, at which time all of the existing HYTOPS were exchanged for new HYTOPS. Amounts payable to the holders of HYTOPS are recorded as "Subsidiary trust minority interest expense" in the accompanying financial statements and were $18.6 million for the year ended December 31, 1997. 18. STOCK-BASED COMPENSATION PLANS: As permitted under SFAS 123, "Accounting for Stock-Based Compensation," the Company measures compensation expense for its stock-based employee compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and provides pro forma disclosures of net income and earnings per share as if the fair value-based method prescribed by SFAS 123 had been applied in measuring compensation expense. F-30 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) A summary of changes in outstanding stock options follows:
WEIGHTED- WEIGHTED- AVERAGE AVERAGE EXERCISE EXERCISE OPTIONS PRICE EXERCISABLE PRICE ------------ ----------- ------------- ---------- Outstanding at end of 1994 ......... -- $ -- -- $ -- 1995 Activity: Granted ........................... 68,000 21.00 -- -- ------ ------ -- ------ Outstanding at end of 1995 ......... 68,000 21.00 -- -- 1996 Activity: Granted ........................... 1,904,785 31.50 -- -- Exercised ......................... -- -- -- -- Forfeited ......................... 3,750 21.00 -- -- --------- ------ -- ------ Outstanding at end of 1996 ......... 1,969,035 31.16 736,218 30.11 --------- ------ ------- ------ 1997 Activity: Granted ........................... 274,450 33.74 -- -- Exercised ......................... 5,000 21.00 -- -- Forfeited ......................... 126,200 35.69 -- -- --------- ------ ------- ------ Outstanding at end of 1997 ......... 2,112,285 $ 34.19 1,214,076 $ 29.82 ========= ======= ========= =======
Additional information regarding stock options outstanding at December 31, 1997, follows:
WEIGHTED- WEIGHTED- AVERAGE AVERAGE REMAINING REMAINING WEIGHTED- VESTING CONTRACTUAL AVERAGE EXERCISE PERIOD LIFE EXERCISE OUTSTANDING PRICE (IN YEARS) (IN YEARS) EXERCISABLE PRICE - ------------- ---------- ------------ ------------- ------------- ---------- 54,250 $ 21.00 0.13 7.44 38,250 $ 21.00 1,708,935 30.11 0.67 8.49 1,175,826 30.11 326,100 37.75 1.76 8.76 -- -- 23,000 41.875 2.97 9.97 -- -- ---------- --------- ---- ---- --------- -------- 2,112,285 $ 34.19 0.85 8.52 1,214,076 $ 29.82 ========== ========= ==== ==== ========= ========
F-31 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) Had compensation cost for the Company's 1995, 1996, and 1997 grants for stock-based compensation plans been determined consistent with SFAS 123, the Company's net income, net income applicable to common share before extraordinary items, and net income per common share for these years would approximate the pro forma amounts below (in thousands except per share data):
1995 1996 1997 ------------------------- ------------------------- -------------------------- AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA ------------- ----------- ------------- ----------- ------------- ------------ Net income (loss) before extraor- dinary item ........................ $ 4,988 $4,799 $ 1,131 $ (1,639) $ (4,496) $ (5,871) ------- ------ ------- -------- --------- --------- Net income (loss) ................... $ 76 $ (113) $ 1,131 $ (1,639) $ (10,566) $ (11,941) ------- ------ ------- -------- --------- --------- Net income (loss) available to common shareholders ................ $ 76 $ (113) $ 1,131 $ (1,639) $ (13,329) $ (14,704) ------- ------ ------- -------- --------- --------- Basic net income per share before extraordinary items ................ $ .15 $ .15 $ .03 $ (.05) $ (.20) $ (.24) ------- ------ ------- -------- --------- --------- Basic net income per share after extraordinary items ................ $ -- $ -- $ .03 $ (.05) $ (.37) $ (.41) ------- ------ ------- -------- --------- --------- Diluted net income per share be- fore extraordinary items ........... $ .15 $ .15 $ .03 $ (.05) $ (.20) $ (.24) ------- ------ ------- -------- --------- --------- Diluted net income per share af- ter extraordinary items ............ $ -- $ -- $ .03 $ (.05) $ (.37) $ (.41) ------- ------ ------- -------- --------- ---------
The Company has computed for pro forma disclosure purposes the value of all options granted during 1995, 1996, and 1997 using the Black-Scholes option pricing model as prescribed by SFAS No. 123 and the following weighted average assumptions: YEARS ENDED DECEMBER 31, --------------------------------------- 1995 1996 1997 ---------- ---------- ------------- Risk-free interest rate 5.78% 6.66% 5.66 - 6.35% Expected lives 5 years 5 years 5 years Expected volatility 35% 35% 35% Adjustments are made for options forfeited prior to vesting. 19. EQUITY PUT AND CALL OPTIONS: During December 1996, the Company entered into physically settled in cash put and call option contracts related to the Company's common stock. These option contracts were entered into for the purpose of hedging the dilution of the Company's common stock upon the exercise of stock options granted. The Company entered into 250,000 call options for common stock and 320,600 put options for common stock, with a strike price of $37.75 and $27.88 per common share, respectively. To the extent that the Company entered into put option contracts, the additional paid-in capital amounts were adjusted accordingly and reflected as Equity Put Options in the accompanying balance sheet as of December 31, 1996. In March 1997, the Company amended its put option contracts from physically settled in cash to physically or net physically settled in shares, at the election of the Company, and reclassified amounts reflected as Equity Put Options to "Additional paid-in capital -- equity put options" as reflected in the accompanying balance sheet as of December 31, 1997. In April 1997, the Company entered into put and call option contracts related to its common stock for the purpose of hedging the dilution of the common stock upon the exercise of stock options granted. The Company entered into 550,000 European style (that is, exercisable on the expiration date only) put F-32 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) options for common stock with a strike price of $25.78 per share which provide for settlement in cash or in shares, at the election of the Company. The Company entered into 550,000 American style (that is, exercisable any time on or before the expiration date) call options for common stock with a strike price of $25.78 per share which provide for settlement in cash or in shares, at the election of the Company. The option premium amount of $3.4 million for these contracts, which was recorded as a reduction of additional paid in capital, is payable in quarterly installments at 8.1% interest per annum through the maturity date, July 13, 2000. 20. EARNINGS PER SHARE: The Company adopted SFAS 128 "Earnings per Share" which requires the restatement of prior periods and disclosure of basic and diluted earnings per share and related computations.
THE YEARS ENDED ---------------------------------------- 1995 1996 1997 ----------- ----------- ------------ Weighted-average number of common shares ............................... 32,198 34,748 35,951 Dilutive effect of outstanding stock options ........................... 7 170 119 Dilutive effect of conversion of preferred shares ...................... -- 2,463 4,008 ------ ------ ------ Weighted-average number of common equivalent shares outstanding .......................................... 32,205 37,381 40,078 ====== ====== ====== Net income (loss) before extraordinary item ............................ $ 4,988 $ 1,131 $ (4,496) ======== ======== ========= Net income (loss) ...................................................... $ 76 $ 1,131 $ (10,566) Preferred stock dividends payable ...................................... -- -- (2,763) -------- -------- --------- Net income (loss) available to common shareholders ..................... $ 76 $ 1,131 $ (13,329) ======== ======== ========= Basic net income (loss) per share before extraordinary items ........... $ .15 $ .03 $ (.20) ======== ======== ========= Basic net income (loss) per share after extraordinary items ............ $ -- $ .03 $ (.37) ======== ======== ========= Diluted net income (loss) per share before extraordinary items ......... $ .15 $ .03 $ (.20) ======== ======== ========= Diluted net income (loss) per share after extraordinary items .......... $ -- $ .03 $ (.37) ======== ======== =========
21. FINANCIAL INFORMATION BY SEGMENT: In June 1997, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards (SFAS) 131 "Disclosures about Segments of an Enterprise and Related Information." SFAS 131 establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial statements. SFAS 131 supercedes SFAS 14, "Financial Reporting for Segments of a Business Enterprise" and is effective for financial statements for periods beginning after December 15, 1997. As of December 31, 1997, the Company consisted of two principal business segments - television broadcasting and radio broadcasting. Prior to the acquisition of River City Broadcasting, L.P. in May 1996, the Company did not own, operate or program radio stations. As of December 31, 1997 the Company owns or provides programming services pursuant to LMAs to 29 television stations located in 21 geographically diverse markets in the continental United States. The Company owns 30 radio stations in seven geographically diverse markets. Substantially all revenues represent income from unaffiliated companies. F-33 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED)
TELEVISION YEARS ENDED DECEMBER 31, ----------------------------- 1996 1997 ------------- ------------- Total revenues .................................................. $ 338,467 $ 449,878 Station operating expenses. ..................................... 142,231 192,049 Depreciation, program amortization and stock-based compensation.. 56,420 80,799 Amortization of intangibles and other assets. ................... 55,063 57,897 Amortization of excess syndicated programming.. ................. 3,043 -- ---------- ---------- Station broadcast operating income .............................. $ 81,710 $ 119,133 ========== ========== Total assets. ................................................... $1,400,521 $1,736,149 ========== ========== Capital expenditures. ........................................... $ 12,335 $ 16,613 ========== ==========
RADIO YEARS ENDED DECEMBER 31, ------------------------ 1996 1997 ---------- ---------- Total revenues .................................................. $ 40,021 $ 66,557 Station operating expenses. ..................................... 25,534 44,327 Depreciation, program amortization and stock-based compensation.. 3,827 5,167 Amortization of intangibles and other assets. ................... 3,467 9,943 Amortization of excess syndicated programming.. ................. -- -- -------- -------- Station broadcast operating income.. ............................ $ 7,193 $ 7,120 ======== ======== Total assets. ................................................... $306,776 $298,085 ======== ======== Capital expenditures. ........................................... $ 274 $ 2,812 ======== ========
F-34 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) 22. UNAUDITED PRO FORMA SUMMARY RESULTS OF OPERATIONS: The unaudited pro forma summary consolidated results of operations for the years ended December 31, 1996 and 1997, assuming the 1996 and 1997 acquisitions had been consummated on January 1, 1996, are as follows (in thousands, except per share data):
(UNAUDITED) (UNAUDITED) 1996 1997 ------------- ------------ Revenues, net .......................................................... $ 489,270 $ 520,359 ========== ========= Net loss before extraordinary item ..................................... $ (12,750) $ (3,643) ========== ========= Net Loss ............................................................... $ (12,750) $ (9,713) ========== ========= Net loss available to common shareholders .............................. $ (12,750) $ (12,476) ========== ========= Basic and diluted earnings per share before extraordinary item ......... $ (0.37) $ (0.18) ========== ========= Basic and diluted earnings per share ................................... $ (0.37) $ (0.35) ========== =========
23. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES: Prior to the HYTOPS issuance in March 1997, the 1993 Notes and the 10% Notes were guaranteed by all of the Company's subsidiaries other than Cresap Enterprises, Inc. (the Company believes that Cresap Enterprises, Inc. is inconsequential to its operations). In conjunction with the HYTOPS issuance, KDSM, Inc., KDSM Licensee, Inc. and Sinclair Capital (the "Non-Guarantor Subsidiaries") are no longer guarantors of indebtedness under the 1993 Notes or the 10% Notes. Furthermore, the Non-Guarantor Subsidiaries are not guarantors under the Company's 1997 Bank Credit Agreement or the indentures relating to the 9% Notes or the 8 3/4% Notes issued in July 1997 and December 1997, respectively. The following supplemental financial information sets forth on a condensed basis the balance sheet and statement of operations as of and for the year ended December 31, 1997 for Sinclair Broadcast Group, Inc. (without its subsidiaries, the "Parent"), the Non-Guarantor Subsidiaries, and the subsidiaries (the "Guarantor Subsidiaries") that continue to guarantee indebtedness under the 1997 Bank Credit Agreement, the 1993 Notes, the 10% Notes, the 9% Notes and the 8 3/4% Notes. Certain reclassifications have been made to provide for uniform disclosure of all periods presented. The Company believes that these reclassifications are not material. F-35 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) Balance Sheet information as of December 31, 1997:
GUARANTOR NON-GUARANTOR ELIMINATION PARENT SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL ------------- -------------- --------------- --------------- ------------- Cash and cash equivalents ..................... $ 137,683 $ 1,633 $ 11 $ -- $ 139,327 Accounts receivable, net ...................... 6,127 125,322 2,150 133,599 Other current assets .......................... 1,826 53,794 2,206 57,826 ---------- ---------- -------- ---------- Total current assets .......................... 145,636 180,749 4,367 -- 330,752 Other long-term assets and acquired in- tangible broadcasting assets, net ............ 1,390,698 1,259,250 254,173 (1,200,639) 1,703,482 ---------- ---------- -------- ------------ ---------- Total assets .................................. $1,536,334 $1,439,999 $258,540 $ (1,200,639) $2,034,234 ========== ========== ======== ============ ========== Accounts payable and accrued expenses.......... $ 27,507 $ 17,806 $ 426 $ -- $ 45,739 Notes payable and commercial bank fi- nancing ...................................... 35,207 8 -- 35,215 Other current liabilities ..................... 1,595 1,021,272 2,790 (951,907) 73,750 ---------- ---------- -------- ------------ ---------- Total current liabilities ..................... 64,309 1,039,086 3,216 (951,907) 154,704 Notes payable and commercial bank fi- nancing ...................................... 1,022,841 93 -- 1,022,934 Other long-term liabilities ................... 9,916 98,120 1,575 109,611 ---------- ---------- -------- ---------- Total liabilities ............................. 1,097,066 1,137,299 4,791 (951,907) 1,287,249 Minority interest in consolidated subsid- iaries ....................................... -- 3,697 -- 3,697 Company Obligated Mandatorily Re- deemable Security of Subsidiary Trust Holding Solely KDSM Senior Deben- tures ........................................ -- -- 200,000 200,000 Stockholder's equity .......................... 439,268 299,003 53,749 (248,732) 543,288 ---------- ---------- -------- ------------ ---------- Total liabilities and stockholders' equity . $1,536,334 $1,439,999 $258,540 $ (1,200,639) $2,034,234 ========== ========== ======== ============ ==========
F-36 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) Statement of operations information for the year ended December 31, 1997:
GUARANTOR NON-GUARANTOR ELIMINATION PARENT SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL ------------ -------------- --------------- ------------ ------------- Total revenues ................................ $ -- $ 507,897 $ 8,538 $ -- $ 516,435 --------- --------- --------- --------- ---------- Program and production including barter expenses ..................................... -- 128,810 1,482 130,292 Selling, general and administrative ........... 7,501 96,124 2,459 106,084 Amortization of program contract costs and net realizable value adjustments ......... -- 64,711 1,579 66,290 Amortization of acquired intangible broadcasting assets, non-compete and consulting agreements and other assets 4,916 61,336 1,588 67,840 Other depreciation and amortization ........... 713 18,586 377 19,676 --------- --------- --------- ---------- Broadcast operating income .................... (13,130) 138,330 1,053 -- 126,253 Interest and amortization of debt dis- count expense ................................ (97,625) (98,392) (18,600) 97,624 (116,993) Interest and other income (expense) ........... 96,297 (17,271) 20,826 (97,624) 2,228 --------- --------- --------- --------- ---------- Income (loss) before provision (benefit) for income taxes and extraordinary item ......................................... (14,458) 22,667 3,279 -- 11,488 Provision (benefit) for income taxes .......... 14,740 (140) 1,384 15,984 --------- --------- --------- ---------- Net income before extraordinary item .......... (29,198) 22,807 1,895 -- (4,496) Extraordinary item net of income tax benefit ...................................... (5,239) (831) -- (6,070) --------- --------- --------- ---------- Net income (loss) ............................. $ (34,437) $ 21,976 $ 1,895 $ -- $ (10,566) ========= ========= ========= ========= ==========
24. SUBSEQUENT EVENTS: Heritage Acquisition. As of the date hereof and pursuant to the Heritage Acquisition, (dispositions described below) the Company has acquired or is providing programming services to three television stations in two separate markets and 13 radio stations in four separate markets. The Company has made cash payments totaling $544 million in connection with the closing of these stations during the first quarter of 1998. The Company also has the right to acquire three radio stations in the New Orleans, Louisiana market. Acquisition of the Heritage radio stations in the New Orleans market is subject to approval by the FCC and termination of the applicable waiting period under the HSR Act. The Company has reached an agreement to divest certain radio stations it owns or has the right to acquire in the New Orleans market and expects to receive FCC approval and clearance under the HSR Act in connection with such disposition. The Company has entered into agreements to sell to STC Broadcasting of Vermont, Inc. ("STC") two television stations and the Non-License Assets and rights to program a third television station, all of which were acquired in the Heritage Acquisition. The three television stations are in the Burlington, Vermont and Plattsburgh, New York market and will be sold for aggregate consideration of approximately $72 million. The Company expects to close the sale to STC during the second quarter of 1998 subject to, among other conditions, approval by the FCC and termination of the applicable waiting period under the HSR Act. F-37 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1996 AND 1997 - (CONTINUED) The Company has also agreed to sell to Entertainment Communications, Inc. ("Entercom") seven radio stations it acquired in the Heritage Acquisition. The seven stations are located in the Portland, Oregon and Rochester, New York markets and will be sold for aggregate consideration of approximately $126.5 million. Subject to approval by the FCC and termination of the applicable waiting period under the HSR Act, the Company anticipates it will close on the sale of the Portland and Rochester radio stations to Entercom during the second quarter of 1998. Entercom is operating these stations pursuant to an LMA pending closing of the sale. Montecito Acquisition. In February 1998, the Company entered into an agreement to acquire all of the capital stock of Montecito Broadcasting Corporation ("Montecito") for approximately $33 million (the "Montecito Acquisition"). Montecito owns all of the issued and outstanding stock of Channel 33, Inc. which owns and operates KFBT-TV in Las Vegas, Nevada. Currently, the Company is a Guarantor of Montecito Indebtedness of approximately $33 million. The Company cannot acquire Montecito unless and until FCC rules permit Sinclair to own the broadcast license for more than one station in the Las Vegas market, or unless Sinclair no longer owns the broadcast license for KUPN-TV in Las Vegas. The Company will operate KFBT-TV through an LMA upon expiration of the applicable HSR Act waiting period. The Company expects to be able to enter into the LMA in the second quarter of 1998. Sullivan Acquisition. In February 1998, the Company entered into an agreement to acquire all of the capital stock of Sullivan Broadcast Holdings, Inc. ("Sullivan Holdings") and Sullivan Broadcasting Company II, Inc. ("Sullivan II" and, together with Sullivan Holdings, "Sullivan") for a purchase price expected to be approximately $950 million to $1 billion, less the amount of certain outstanding indebtedness of Sullivan Holdings assumed by the Company (the "Sullivan Acquisition"). Upon the closing of all aspects of the Sullivan Acquisition, the Company will own or provide programming services to 13 additional television stations in 11 separate markets. The final purchase price will be based on a multiple of Sullivan's projected 1998 cash flow calculated at the initial closing of the Sullivan Acquisition. As part of the total consideration, the Company, at its option, may issue to the sellers up to $100 million of Class A Common Stock based on an average closing price of the Class A Common Stock. Among other conditions, the Sullivan Acquisition is subject to approval by the Federal Communications Commission ("FCC") and termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). An initial closing, at which the Company will acquire control of operating assets (excluding the License Assets) of, and acquire the right to program, the 13 television stations, is expected to occur in the second quarter of 1998. A second closing, at which the Company will acquire control of the License Assets of six of the stations, is expected to occur in the third quarter of 1998. F-38 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES INDEX TO SCHEDULES Schedule II -- Valuation and Qualifying Accounts ......... S - 3 All schedules except those listed above are omitted as not applicable or not required or the required information is included in the consolidated financial statements or in the notes thereto. S-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Sinclair Broadcast Group, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated balance sheets, statements of operations, changes in stockholders' equity and cash flows balance sheets, statements of operations, changes in stockholders' equity and cash flows of Sinclair Broadcast Group, Inc. and Subsidiaries included in this Form 10-K registration statement and have issued our report thereon dated February 9, 1998. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the accompanying index is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Baltimore, Maryland, February 9, 1998 S-2 SCHEDULE II SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 (IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED BALANCE BEGINNING COSTS AND TO OTHER AT ENDED DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIODS - ------------------------------------- ------------ ------------ ---------- ------------ ----------- 1995 Allowance for doubtful accounts ..... $ 855 $ 978 $-- $ 767 $1,066 1996 Allowance for doubtful accounts ..... 1,066 1,563 575 (1) 732 2,472 1997 Allowance for doubtful accounts ..... 2,472 2,655 -- 2,207 2,920
- ---------- (1) Amount represents allowance for doubtful account balances purchased in connection with the acquisition of certain television stations during 1996. S-3 SIGNATURES Pursuant to the requirements of the Section 14 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereto duly authorized on March 17, 1998. SINCLAIR BROADCAST GROUP, INC. By: /s/ David B. Amy ------------------------------------ David B. Amy Chief Financial Officer Principal Accounting Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below under the heading "Signature" constitutes and appoints David D. Smith and David B. Amy as his or her true and lawful attorneys-in-fact each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities to sign any or all amendments to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, or their substitutes, each acting alone, may lawfully do or cause to be done by virtue hereof.
SIGNATURE TITLE DATE - --------------------------- --------------------------------------- -------------- /s/ David D. Smith - ------------------------- Chairman of the Board, March 17, 1998 David D. Smith Chief Executive Officer (Principal executive officer) /s/ David B. Amy - ------------------------- Chief Financial Officer and March 17, 1998 David B. Amy (Principal Financial and Accounting Officer /s/ Frederick G. Smith - ------------------------- Director March 17, 1998 Frederick G. Smith /s/ J. Duncan Smith - ------------------------- Director March 17, 1998 J. Duncan Smith
II-1
SIGNATURE TITLE DATE - --------------------------- --------------------------------------- -------------- /s/ Robert E. Smith - ------------------------- Director March 17, 1998 Robert E. Smith ------------------------- Director March , 1998 Basil A. Thomas - ------------------------- Director March , 1998 Lawrence E. McCanna
II-2 EXHIBIT NUMBER DESCRIPTION - ---------- --------------------------------------------------------------------- 3.1 Amended and Restated Certificate of Incorporation (1) 3.2 By-laws (2) 4.1 Indenture, dated as of December 9, 1993, among Sinclair Broadcast Group, Inc., its wholly-owned subsidiaries and First Union National Banks of North Carolina, as trustee. (2) 4.2 Indenture, dated as of August 28, 1995, among Sinclair Broadcast Group, Inc., its wholly-owned subsidiaries and the United States Trust Company of New York as trustee. (2) 4.3 Form of Senior Subordinated Indenture among Sinclair Broadcast Group, Inc. and First Union National Bank, as trustee. (9) 4.4 Form of First Supplemental Indenture among Sinclair Broadcast Group, Inc., the Guarantors named therein and First Union National Bank, as trustee, including Form of Note. (9) 10.1 Asset Purchase Agreement, dated as of April 10, 1996, by and between River City Broad- casting, L.P. as seller and Sinclair Broadcast Group, Inc. as buyer. (3) 10.2 Option Agreement, dated as of April 10, 1996, by and among River City Broadcasting, L.P., as sellers and Sinclair Broadcast Group, Inc. (3) 10.3 Modification Agreement, dated as of April 10, 1996, by and between River City Broadcast Group, L.P. as seller, and Sinclair Broadcast Group, Inc. as buyer, with reference to Asset Purchase Agreement. (3) 10.4 Stock Option Agreement dated April 10, 1996 by and between Sinclair Broadcast Group, Inc. and Barry Baker. (10) 10.5 Employment Agreement, dated as of April 10, 1996, with Barry Baker. (1) 10.6 Indemnification Agreement, dated as of April 10, 1996, with Barry Baker. (1) 10.7 Time Brokerage Agreement, dated as of May 31, 1996, by and among Sinclair Communica- tions, Inc., River City Broadcasting, L.P. and River City License Partnership and Sinclair Broadcast Group, Inc. (1) 10.8 Registration Rights Agreement, dated as of May 31, 1996, by and between Sinclair Broadcast Group, Inc. and River City Broadcasting, L.P. (1) 10.9 Time Brokerage Agreement, dated as of August 3, 1995, by and between River City Broad- casting, L.P. and KRRT, Inc. and Assignment and Assumption Agreement dated as of May 31, 1996 by and among KRRT, Inc., River City Broadcasting, L.P. and KABB, Inc. (as Assignee of Sinclair Broadcast Group, Inc.). (1) 10.10 Loan Agreement, dated as of July 7, 1995, by and between Keymarket of South Carolina, Inc. and River City Broadcasting, L.P. and First Amendment to Loan Agreement dated as of May 24, 1996. (1) 10.11 Option Agreement, dated as of July 7, 1995, by and among Keymarket of South Carolina, Kerby E. Confer and River City Broadcasting, L.P. (1) 10.12 Letter Agreement, dated August 20, 1996, between Sinclair Broadcast Group, Inc., River City Broadcasting, L.P. and Fox Broadcasting Company. (4) 10.13 Asset Purchase Agreement, dated January 31, 1997, by and between Channel 21, L.P. and KUPN, Inc. (10) 10.14 Promissory Note, dated as of May 17, 1990, in the principal amount of $3,000,000 among David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith (as makers) and Sinclair Broadcast Group, Inc., Channel 63, Inc., Commercial Radio Institute, Inc., WTTE, Channel 28, Inc. and Chesapeake Television, Inc. (as holders). (5) 10.15 Term Note, dated as of September 30, 1990, in the principal amount of $7,515,000 between Sinclair Broadcast Group, Inc. (as borrower) and Julian S. Smith (as lender). (6) EXHIBIT NUMBER DESCRIPTION - ------------ ------------------------------------------------------------------ 10.16 Replacement Term Note dated as of September 30, 1990 in the principal amount of $6,700,000 between Sinclair Broadcast Group, Inc. (as borrower) and Carolyn C. Smith (as lender) (2) 10.17 Note dated as of September 30, 1990 in the principal amount of $1,500,000 between Frederick G. Smith, David D. Smith, J. Duncan Smith and Robert E. Smith (as borrowers and Sinclair Broadcast Group, Inc. (as lender) (5) 10.18 Amended and Restated Note dated as of June 30, 1992 in the principal amount of $1,458,489 between Frederick G. Smith, David D. Smith, J. Duncan Smith and Robert E. Smith (as borrowers) and Sinclair Broadcast Group, Inc. (as lender) (5) 10.19 Term Note dated August 1, 1992 in the principal amount of $900,000 between Frederick G. Smith, David D. Smith, J. Duncan Smith and Robert E. Smith (as borrowers) and Commer- cial Radio Institute, Inc. (as lender) (5) 10.20 Management Agreement dated as of January 6, 1992 between Keyser Communications, Inc. and WPGH, Inc. (5) 10.21 Promissory Note dated as of December 28, 1986 in the principal amount of $6,421,483.53 between Sinclair Broadcast Group, Inc. (as maker) and Frederick H. Himes, B. Stanley Resnick and Edward A. Johnston (as representatives for the holders) (5) 10.22 Term Note dated as of March 1, 1993 in the principal amount of $6,559,000 between Julian S. Smith and Carolyn C. Smith (as makers-borrowers) and Commercial Radio Institute, Inc. (as holder-lender) (5) 10.23 Restatement of Stock Redemption Agreement by and among Sinclair Broadcast Group, Inc. and Chesapeake Television, Inc., et al. dated June 19, 1990 (5) 10.24 Corporate Guaranty Agreement dated as of September 30, 1990 by Chesapeake Television, Inc., Commercial Radio, Inc., Channel 63, Inc. and WTTE, Channel 28, Inc. (as guarantors) to Julian S. Smith and Carolyn C. Smith (as lenders) (5) 10.25 Security Agreement dated as of September 30, 1990 among Sinclair Broadcast Group, Inc., Chesapeake Television, Inc., Commercial Radio Institute, Inc., WTTE, Channel 28, Inc. and Channel 63, Inc. (as borrowers and subsidiaries of the borrower) and Julian S. Smith and Carolyn C. Smith (as lenders) (5) 10.26 Term Note dated as of September 22, 1993, in the principal amount of $1,900,000 between Gerstell Development Limited Partnership (as maker-borrower) and Sinclair Broadcast Group, Inc. (as holder-lender) (5) 10.27 Third Amended and Restated Credit Agreement, dated as of May 20, 1997, by and among Sinclair Broadcast Group, Inc., Certain Subsidiary Guarantors, Certain Lenders and the Chase Manhattan Bank as Agent. (11) 10.28 Incentive Stock Option Plan for Designated Participants. (2) 10.29 Incentive Stock Option Plan of Sinclair Broadcast Group, Inc. (2) 10.30 First Amendment to Incentive Stock Option Plan of Sinclair Broadcast Group, Inc., adopted April 10, 1996. (10) 10.31 Second Amendment to Incentive Stock Option Plan of Sinclair Broadcast Group, Inc., adopted May 31, 1996. (10) 10.32 1996 Long Term Incentive Plan of Sinclair Broadcast Group, Inc. (10) 10.33 Employment Agreement by and between Sinclair Broadcast Group, Inc. and Robert E. Smith, dated as of June 12, 1995. (10) 10.34 Employment Agreement by and between Sinclair Broadcast Group, Inc. and J. Duncan Smith, dated as of June 12, 1995*. (10) EXHIBIT NUMBER DESCRIPTION - ------------ ------------------------------------------------------------------- 10.35 Employment Agreement by and between Sinclair Broadcast Group, Inc. and Frederick G. Smith, dated as of June 12, 1995. (10) 10.36 Employment Agreement by and between Sinclair Broadcast Group, Inc. and David D. Smith, dated as of June 12, 1995. (10) 10.37 Common Stock Option dated as of August 26, 1994 by and between Communications Corporation of America (as optionee) and Sinclair Broadcast Group, Inc. (as optionor) (2) 10.38 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by and between Sinclair Broadcast Group, Inc. and William Richard Schmidt, as trustee (2) 10.39 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by and between Sinclair Broadcast Group, Inc. and C. Victoria Woodward, as trustee (2) 10.40 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by and between Sinclair Broadcast Group, Inc. and Dyson Ehrhardt, as trustee (2) 10.41 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by and between Sinclair Broadcast Group, Inc. and Mark Knobloch, as trustee (2) 10.42 Agreement and Plan of Merger of Keyser Communications, Inc. into Sinclair Broadcast Group, Inc. dated May 4, 1995 and Articles of Merger dated May 4, 1995 (2) 10.43 Amended and Restated Asset Purchase Agreement by and between River City Broadcasting, L.P. and Sinclair Broadcast Group, Inc. dated as of April 10, 1996 and amended and restated as of May 31, 1996 (7) 10.44 Group I Option Agreement by and among River City Broadcasting, L.P. and Sinclair Broad- cast Group, Inc. dated as of May 31, 1996 (7) 10.45 Columbus Option Agreement by and among River City Broadcasting, L.P. and River City License Partnership and Sinclair Broadcast Group, Inc. dated as of May 31, 1996 (7) 10.46 Option Agreement dated as of May 24, 1994 between Kansas City TV 62 Limited Partnership and the Individuals Named Herein, on Behalf of an Entity To Be Formed (1) 10.47 Option Agreement dated as of May 24, 1994 between Cincinnati 64 Limited Partnership and the Individuals Named Herein, on Behalf of an Entity To Be Formed (1) 10.48 Stock Purchase Agreement dated as of March 1, 1996 by and between Sinclair Broadcast Group, Inc. and The Stockholders of Superior Communications Group, Inc. (1) 10.49 Asset Purchase Agreement dated as of January 16, 1996 by and between Bloomington Comco, Inc. And WYZZ, Inc. (1) 10.50 Asset Purchase Agreement dated as of June 10, 1996 by and between WTTE, Channel 28, Inc. and WTTE, Channel 28 Licensee, Inc. and Glencairn, Ltd. (1) 10.51 Asset Purchase Agreement dated April 10, 1996 by and between KRRT, Inc. and SBGI, Inc. (8) 10.52 Agreement for the purchase of assets dated as of January 16, 1996 and escrow agreement dated as of January 16, 1996 between Bloomington Comco, Inc. and Sinclair Broadcast Group (6) 10.53 Stock Purchase Agreement dated as of March 1, 1996 by and among Sinclair Broadcast Group, Inc. and PNC Capital Corp., Primus Capital Fund II, Ltd., Albert M. Holtz, Perry A. Sook, Richard J. Roberts, George F. Boggs, Albert M. Holtz, as Trustee for the Irrevocable Deed of Trust for Tara Ellen Holtz, dated December 6, 1994, and Albert M. Holtz as trustee for the Irrevocable Deed of Trust for Meghan Ellen Holtz, dated December 6, 1994 (6) EXHIBIT NUMBER DESCRIPTION - ------------ ------------------------------------------------------------------ 10.54 Primary Television Affiliation Agreement dated as of March 24, 1997 by and between Amer- ican Broadcasting Companies, Inc., River City Broadcasting, L.P. and Chesapeake Television, Inc. (Confidential treatment has been requested. The copy filed omits the information subject to a confidentiality request.) 10.55 Primary Television Affiliation Agreement dated as of March 24, 1997 by and between Amer- ican Broadcasting Companies, Inc., River City Broadcasting, L.P. and WPGH, Inc. (Confidential treatment has been requested. The copy filed omits the information subject to a confidentiality request.) 10.56 Assets Purchase Agreement by and among Entertainment Communications, Inc., Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio of Rochester Licensee, Inc., dated as of January 26, 1998. 10.57 Time Brokerage Agreement by and among Entertainment Communications, Inc., Tuscaloosa Broadcasting, Inc., Sinclair Radio of Portland Licensee, Inc. and Sinclair Radio or Rochester Licensee, Inc., dated as of January 26, 1998. 10.58 Stock Purchase Agreement by and among the sole stockholders of Montecito Broadcasting Corporation, Montecito Broadcasting Corporation and Sinclair Communications, Inc., dated as of February 3, 1998. 10.59 Stock Purchase Agreement by and among Sinclair Communications, Inc., the stockholders of Max Investors, Inc., Max Investors, Inc. and Max Media Properties LLC., dated as of December 2, 1997 10.60 Asset Purchase Agreement by and among Sinclair Communications, Inc., Max Management LLC and Max Media Properties LLC., dated as of December 2, 1997. 10.61 Asset Purchase Agreement by and among Sinclair Communications, Inc., Max Television Company, Max Media Properties LLC and Max Media Properties II LLC., dated as of December 2, 1997. 10.62 Asset Purchase Agreement by and among Sinclair Communications, Inc., Max Television Company, Max Media Properties LLC and Max Media Properties II LLC., dated as of January , 1998. 10.63 Asset Purchase Agreement by and among Tuscoloosa Broadcasting, Inc., WPTZ Licensee, Inc., WNNE Licensee, Inc., and STC Broadcasting of Vermont, Inc., dated as of February 3, 1998. 10.64 Stock Purchase Agreement by and among Sinclair Communications, Inc. and the stockholders of Lakeland Group Television, Inc., dated as of November 14, 1997. 10.65 Stock Purchase Agreement by and among Sinclair Communications, Inc., the stockholders of Max Radio, Inc., Max Radio Inc. and Max Media Properties LLC, dated as of December 2, 1997. 10.66 Agreement and Plan of Merger among Sullivan Broadcasting Company II, Inc., Sinclair Broadcast Group, Inc., and ABRY Partners, Inc. Effective as of February 23, 1998. 10.67 Agreement and Plan of Merger among Sullivan Broadcast Holdings, Inc., Sinclair Broadcast Group, Inc., and ABRY Partners, Inc. Effective as of February 23, 1998. 10.68 Amendment No. 1 dated as of September 2, 1997 to the Third Amended and Restated Credit Agreement dated as of May 20, 1997 by and among Sinclair Broadcast Group, Inc., certain Subsidiary Guarantors, certain Lenders and The Chase Manhattan Bank as Agent. (12) EXHIBIT NUMBER DESCRIPTION - -------- --------------------------------------------------- 12 Computation of Ratio of Earnings to Fixed Charges 23 Consent of Independent Public Accountants 27 Financial Data Schedule - ---------------- (1) Incorporated by reference from the Company's Report on Form 10-Q for the quarterly period ended June 30, 1996 (2) Incorporated by reference from the Company's Registration Statement on Form S-1, No. 33-90682 (3) Incorporated by reference from the Company's Report on Form 10-Q for the quarterly period ended March 31, 1996 (4) Incorporated by reference from the Company's Report on Form 10-Q for the quarterly period ended September 30, 1996. (5) Incorporated by reference from the Company's Registration Statement on Form S-1, No. 33-69482 (6) Incorporated by reference from the Company's Report on Form 10-K for the annual period ended December 31, 1995. (7) Incorporated by reference from the Company's Amended Current Report on Form 8-K/A, filed May 9, 1996. (8) Incorporated by reference from the Company's Current Report on Form 8-K, filed May 17, 1996. (9) Incorporated by reference from the Company's Current Report on Form 8-K, dated as of December 16, 1997. (10) Incorporated by reference from the Company's Report on Form 10-K for the annual period ended December 31, 1996. (11) Incorporated by reference from the Company's Report on Form 10-Q for the quarterly period ended June 30, 1997. (12) Incorporated by reference from the Company's Report on Form 10-Q for the quarterly period ended September 30, 1997. EX-10.56 2 EXHIBIT 10.56 ASSET PURCHASE AGREEMENT AMONG ENTERTAINMENT COMMUNICATIONS, INC., TUSCALOOSA BROADCASTING, INC., SINCLAIR RADIO OF PORTLAND LICENSEE, INC. AND SINCLAIR RADIO OF ROCHESTER LICENSEE, INC. DATED AS OF JANUARY 26, 1998 TABLE OF CONTENTS ----------------- PAGE ARTICLE I. DEFINITIONS.................................................. 2 ARTICLE II. SALE AND PURCHASE............................................ 7 2.1. TRANSFER OF ASSETS........................................... 7 2.2. EXCLUDED ASSETS.............................................. 9 2.3. PURCHASE PRICE............................................... 11 2.4. ESCROW....................................................... 11 2.5. PAYMENT...................................................... 11 2.6. ALLOCATION OF PURCHASE PRICE................................. 11 ARTICLE III. LIABILITIES.................................................. 12 3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM........................ 12 3.2. OTHER LIABILITIES............................................ 12 3.3. NON-ASSIGNABLE STATION CONTRACTS............................. 12 ARTICLE IV. REPRESENTATIONS AND WARRANTIES............................... 13 4.1. SELLERS' REPRESENTATIONS..................................... 13 4.2. ENTERCOM'S REPRESENTATIONS................................... 22 ARTICLE V. CONDITIONS................................................... 24 5.1. MUTUAL CONDITIONS............................................ 24 5.2. ENTERCOM'S CONDITIONS........................................ 25 5.3. SELLERS' CONDITIONS.......................................... 25 ARTICLE VI. COVENANTS AND AGREEMENTS..................................... 26 6.1. AFFIRMATIVE COVENANTS OF SELLERS............................. 26 6.2. NEGATIVE COVENANTS OF SELLERS................................ 28 6.3. AFFIRMATIVE COVENANTS OF ENTERCOM............................ 28 6.4. MUTUAL COVENANTS OF SELLERS AND ENTERCOM..................... 29 6.5. NO CONTROL BY ENTERCOM....................................... 30 ARTICLE VII. PREPARATION FOR CLOSING...................................... 30 7.1. APPLICATION TO COMMISSION.................................... 30 7.2. INSPECTION BY ENTERCOM....................................... 30 7.3. HART-SCOTT-RODINO NOTIFICATION............................... 31 ARTICLE VIII. CLOSING...................................................... 31 8.1. CLOSING...................................................... 31 8.2. ADJUSTMENTS.................................................. 31 8.3. CLOSING DELIVERIES TO ENTERCOM............................... 33 8.4. CLOSING DELIVERIES TO SELLERS................................ 34 8.5. COVENANTS OF FURTHER ASSURANCE............................... 35 8.6. DAMAGE TO PROPERTY........................................... 35 8.7. TAXES ON TRANSACTION......................................... 35 i ARTICLE IX. TERMINATION, DEFAULT AND INDEMNIFICATION..................... 36 9.1. TERMINATION BY REASON OTHER THAN DEFAULT..................... 36 9.2. EFFECT OF TERMINATION BY REASON OTHER THAN DEFAULT................................................. 36 9.3. DEFAULT...................................................... 36 9.4. REMEDIES OF SELLERS.......................................... 37 9.5. ENTERCOM'S REMEDIES.......................................... 37 9.6. LIQUIDATED DAMAGES NOT A PENALTY............................. 37 9.7. INDEMNIFICATION.............................................. 38 ARTICLE X. GENERAL PROVISIONS........................................... 40 10.1. EXPENSES OF THE PARTIES...................................... 40 10.2. BROKERS...................................................... 40 10.3. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES................................................... 40 10.4. AMENDMENT AND WAIVER......................................... 41 10.5. ASSIGNMENT................................................... 41 10.6. EFFECT OF THIS AGREEMENT..................................... 41 10.7. HEADINGS..................................................... 41 10.8. COUNTERPARTS................................................. 41 10.9. GOVERNING LAW................................................ 41 10.10. NOTICES...................................................... 41 10.11. STATION EMPLOYEES............................................ 43 10.12. SECTION 1031 ASSET EXCHANGE.................................. 43 ii EXHIBITS A Form of Time Brokerage Agreement B Form of Sinclair Communications, Inc. Guarantee C Form of Escrow Agreement D Form of Indemnification Escrow Agreement E Forms of Bill of Sale and Assignment of Assets, Assignments of FCC Licenses, Assignment of Contracts and Leases, and Assumption Agreement F Form of Sellers' Corporate Legal Opinion G Form of Sellers' FCC Legal Opinion H Form of Entercom's Legal Opinion SCHEDULES 2.1.1 FCC Licenses 2.1.2 Real and Leased Property 2.1.3 Tangible Personal Property 2.1.5 Program Contracts 2.1.6 Trade-out Agreements 2.1.8 Operating Contracts 2.1.9 Vehicles 2.2.11 Miscellaneous Excluded Assets 4.1.6 Changes or Events 4.1.7 Litigation 4.1.8 Permitted Encumbrances 4.1.9 FCC Matters 4.1.14 Employee Benefit Plans 4.1.15 Labor Relations 4.1.16 Environmental Matters 4.1.17 Insurance 4.1.19 Matters Regarding the Heritage Agreement 4.2.3 Entercom's Qualifications as Assignee iii ASSET PURCHASE AGREEMENT ------------------------ THIS ASSET PURCHASE AGREEMENT made and entered into this 26th day of January, 1998 by and among, TUSCALOOSA BROADCASTING, INC., a Maryland corporation (hereinafter "Tuscaloosa"), SINCLAIR RADIO OF PORTLAND LICENSEE, INC., a Maryland corporation ("SRPLI"), SINCLAIR RADIO OF ROCHESTER LICENSEE, INC., a Maryland corporation ("SRRLI"), (Tuscaloosa, SRPLI and SRRLI are sometimes collectively referred to herein as "Sellers"), and ENTERTAINMENT COMMUNICATIONS, INC., a Pennsylvania corporation (hereinafter "Entercom"). W I T N E S S E T H: -------------------- WHEREAS, pursuant to authorizations duly granted and issued by the Federal Communications Commission (the "Commission"), certain subsidiaries (the "Operating Subsidiaries") of HMC Acquisition Corp., a Delaware corporation ("HMC" and collectively with the Operating Subsidiaries, "Heritage") presently own and operate radio stations KKSN(AM), Vancouver, Washington, KKSN-FM, Portland, Oregon, KKRH(FM), Salem, Oregon, WKLX(FM), WBEE(FM) and WBBF(AM), Rochester, New York, and WQRV(FM), Avon, New York (each, a "Station" and collectively, the "Stations"); and WHEREAS, on August 20, 1997, Heritage Media Corporation, formerly the parent of the Operating Subsidiaries, merged with and into HMC, a wholly-owned subsidiary of The News Corporation, Limited ("News Corp."); and WHEREAS, Sinclair Broadcast Group, Inc. ("Sinclair") has agreed, pursuant to an Asset Purchase Agreement, among Sinclair and certain subsidiaries of Heritage, dated as July 16, 1997 (as such agreement may be amended from time to time, the "Heritage Agreement"), to acquire the assets owned, leased or used by Heritage or such subsidiaries in connection with the business and operations of the Stations and other radio and television stations; and WHEREAS, Tuscaloosa, SRPLI and SRRLI are wholly-owned subsidiaries of Sinclair and will acquire the Stations pursuant to one or more assignments of Sinclair's rights and obligations under the Heritage Agreement from Sinclair to Tuscaloosa, SRPLI and SRRLI; and WHEREAS, Entercom and Sellers have agreed, subject to the prior acquisition of the Stations by Sellers, prior approval by the Commission and certain other conditions, to transfer and assign the assets, properties, rights, privileges, licenses and all other authorizations used in connection with or relating to the Stations from Sellers to Entercom as hereinafter set forth; and WHEREAS, Entercom may elect to accomplish such transfer in whole or part as the acquisition of replacement property in a deferred like-kind exchange under Section 1031 of the Code; and WHEREAS, concurrently with the execution of this Agreement, (i) Entercom and Sellers are entering into a Time Brokerage Agreement substantially in the form of Exhibit A hereto (the "TBA") providing for the programming and sale by Entercom, upon the acquisition by Sellers of the Station, of substantially all of the broadcast time available on the Stations and (ii) Sinclair Communications, Inc., a Maryland corporation and wholly-owned subsidiary of Sinclair ("SCI"), is delivering a guarantee substantially in the form of Exhibit B hereto (the "Sinclair Guarantee") of certain of Sellers' obligations under this Agreement. NOW, THEREFORE, in consideration of the mutual promises herein contained and of the representations and warranties hereinafter set forth and for other good and valuable consideration, the parties, intending to be legally bound hereby, agree as follows: ARTICLE I. ---------- DEFINITIONS ----------- As used herein, the following terms shall have the following respective meanings: "ADJUSTMENT TIME" shall mean 12:00:01 a.m. eastern standard time on the Closing Date. "AGREEMENT" shall mean this Asset Purchase Agreement. "APPLICATIONS" shall have the meaning set forth in Section 7.1 hereof. "BENEFIT ARRANGEMENT" means any benefit arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Plan, including, without limitation, employment agreements, executive compensation arrangements, incentive programs or arrangements, sick leave, vacation pay, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock option or purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, perquisite, company cars, any plans subject to Code Section 125 and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. "CLOSING" shall mean the event of consummation of the transactions contemplated by this Agreement as more fully described in Article VIII of this Agreement. "CLOSING DATE" shall mean the date specified for Closing in Section 8.1 hereof. "CODE" shall mean the Internal Revenue Code of 1986, as amended. 2 "COMMISSION" shall mean the Federal Communications Commission. "DOJ" shall mean the Antitrust Division of the United States Department of Justice. "ENCUMBRANCES" shall mean any mortgages, pledges, liens, security interests, defects in title, easements, rights-of-way, encumbrances, restrictions and any other matter affecting title. "ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. ss. 9601 et seq.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss. 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 9601 et seq.; the Clean Water Act ("CWA"), 33 U.S.C. ss. 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss. 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. ss. 7401 et seq.; the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. ss. 651 et seq.; or any other applicable federal, state, or local laws relating to Hazardous Materials generation, production, use, storage, treatment, transportation or disposal, or the protection of the environment from Hazardous Materials. "ENTERCOM" shall mean the corporation identified as such in the Preamble to this Agreement and any Qualified Intermediary to which Entercom may elect to assign all or part of its rights hereunder pursuant to Section 10.12 hereof. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and all laws promulgated pursuant thereto or in connection therewith. "ERISA AFFILIATE" shall mean any person that, together with any other person, would be or was prior to March 17, 1997 treated as a single employer under Section 414 of the Code or Section 4001 of ERISA. "FINAL ORDER" shall mean an action by the Commission upon any application including, without limitation, the Applications, for its consent, approval or authorization, which action has not been reversed, stayed, enjoined, set aside, annulled or suspended, and with respect to which action, no protest, petition to deny, petition for rehearing or reconsideration, appeal or request for stay is pending, and as to which action the time for filing of any such protest, petition, appeal or request and any period during which the Commission may reconsider or review such action on its own authority has expired. "FTC" shall mean the United States Federal Trade Commission. "HAZARDOUS MATERIALS" shall mean any wastes, substances, or materials (whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants, or contaminants, including without limitation, substances defined as "hazardous waste," "hazardous substances," "toxic 3 substances," "radioactive materials," or other similar designations in, or otherwise subject to regulation under, any Environmental Laws. "HERITAGE" shall mean HMC and the Operating Subsidiaries. "HERITAGE AGREEMENT CLOSING DATE" shall mean the latest date on which all of the Stations are acquired by Sinclair under the Heritage Agreement, whether or not all stations subject to the Heritage Agreement are acquired on such date. "HERITAGE AGREEMENT DATE" shall mean July 16, 1997. "HMC" shall mean the corporation identified as such in the Preamble to this Agreement. "KNOWLEDGE" shall mean the actual knowledge of the party to whom such knowledge is imputed or the knowledge that the party should have upon reasonable investigation in light of the facts and circumstances available to such party. "LIABILITIES" shall mean, as to any Person, all debts, adverse claims, liabilities and obligations, direct, indirect, absolute or contingent of such Person, whether accrued, vested or otherwise, whether in contract, tort, strict liability or otherwise and whether or not actually reflected, or required by generally accepted accounting principles to be reflected, in such Person's balance sheets or other books and records. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the business, assets or financial condition of the Stations taken as a whole, except for any such material adverse effect resulting from (a) general economic conditions applicable to the radio broadcast industry, (b) general conditions in the markets in which the Stations operate or (c) circumstances that are not likely to recur and either have been substantially remedied or can be substantially remedied without substantial cost or delay. "MULTIEMPLOYER PLAN" shall mean any Plan described in Section 3(37) of ERISA. "NEWS CORP." shall mean The News Corporation Limited, a South Australian corporation. "ORDINARY COURSE OF BUSINESS" shall mean, with respect to any person, the ordinary course of business consistent with past practices of such person both with respect to type and amount; any actions taken pursuant to the requirements of law or contracts existing on the date hereof shall be deemed to be action in the Ordinary Course of Business. "PERMITTED ENCUMBRANCES" shall mean (a) Encumbrances of a landlord or other statutory lien not yet due and payable, or a landlord's lien arising in the Ordinary Course of Business, (b) Encumbrances arising in connection with equipment or maintenance financing or leasing under the terms of the Station Contracts set forth on the Schedules which have been made 4 available to Entercom, (c) Encumbrances arising pursuant to the terms of leases on Real Property or Leased Property as set forth on Schedule 2.1.1 and Schedule 2.1.8 which are subject to any lease or sublease to a third party, (d) Encumbrances for taxes not yet due and payable or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained in accordance with generally accepted accounting principles, (e) Encumbrances that do not materially detract from the value of any of the Assets or materially interfere with the use thereof as currently used, or (f) those Encumbrances on Schedule 4.1.8. "PLAN" means any plan, program or arrangement, whether or not written, that is or was an "employee benefit plan" as such term is defined in Section 3(3) of ERISA and (a) which was or is established or maintained by Heritage, Sellers or any ERISA Affiliate of such parties; (b) to which Heritage, Sellers contributed or was obligated to contribute or to fund or provide benefits or had any liability (whether actual or contingent) with respect to any of its assets or otherwise; or (c) which provides or promises benefits to any person who performs or who has performed services for Heritage, Sellers and because of those services is or has been (i) as participant therein or (ii) entitled to benefits thereunder. "PORTLAND STATIONS" shall mean KKSN(AM), KKSN-FM and KKRH(FM). "PRORATION ITEMS" shall mean any power and utility charges, business and license fees (including retroactive adjustments thereof), sales and service charges, commissions, special assessments, and rental payments and personal and real estate taxes and assessments with respect to the Real Property, taxes (except for taxes arising from the transfer of the Assets hereunder), deposits, Trade-out Agreements, accrued vacation, unused sick leave and other similar prepaid and deferred items and any other operating expenses incurred in the Ordinary Course of Business. The parties acknowledge and agree that there shall be excluded from Proration Items the following: (a) except as otherwise provided in the TBA, severance pay relating to any employee of the Stations who shall have been terminated prior to the Closing Date, and (b) any Liabilities not being assumed by Entercom in accordance with Section 3.1. "QUALIFIED INTERMEDIARY" shall mean a party described in U.S. Treasury Regulations Section 1.1031(k)-1(g)(4). "QUALIFIED PLAN" shall mean a Plan that satisfies, or is intended to satisfy, the requirements for tax qualification described in Section 401 of the Code including, without limitation, any Plan that was terminated on or after July 1, 1989, as to which a person may have any actual or contingent liability. "ROCHESTER STATIONS" shall mean WKLX(FM), WBEE(FM), WBBF(AM) and WQRV(FM). "SCI" shall mean the corporation identified as such in the Preamble to this Agreement. "SELLERS" shall mean Tuscaloosa, SRPLI and SRRLI. 5 "SELLERS' KNOWLEDGE" shall mean, except as otherwise expressly provided in Section 4.1.16.1 of this Agreement, the knowledge of the Sellers, Sinclair, SCI or any of their respective affiliates, officers, directors, partners, agents, representatives or consultants. "SINCLAIR" shall mean the corporation identified as such in the Preamble to this Agreement. "SINCLAIR GUARANTEE" shall mean the guarantee, substantially in the form of Exhibit B hereto, dated of even date herewith, providing for the guarantee by SCI of Sellers' obligations under this Agreement. "STATIONS" shall mean (i) the frequency modulation (FM) radio broadcast station licensed by the Commission to Portland, Oregon broadcasting on 97.1 MHz and currently assigned the call letters KKSN-FM, (ii) the amplitude modulation (AM) radio broadcast station licensed by the Commission to Vancouver, Washington broadcasting on 910 kHz and currently assigned the call letters KKSN(AM), (iii) the frequency modulation (FM) radio broadcast station licensed by the Commission to Salem, Oregon broadcasting on 105.1 MHz and currently assigned the call letters KKRH(FM), (iv) the frequency modulation (FM) radio broadcast station licensed by the Commission to Rochester, New York broadcasting on 98.9 MHz and currently assigned the call letters WKLX(FM), (v) the frequency modulation (FM) radio broadcast station licensed by the Commission to Rochester, New York broadcasting on 92.5 MHz and currently assigned the call letters WBEE(FM), (vi) the frequency modulation (FM) radio broadcast station licensed by the Commission to Avon, New York broadcasting on 93.3 MHz and currently assigned the call letters WQRV(FM) and (vii) the amplitude modulation (AM) radio broadcast station licensed by the Commission to Rochester, New York broadcasting on 950 kHz and currently assigned the call letters WBBF(AM). "SRPLI" shall mean the corporation identified as such in the Preamble to this Agreement. "SRRLI" shall mean the corporation identified as such in the Preamble to this Agreement. "TBA" shall mean the Time Brokerage Agreement, substantially in the form of Exhibit A hereto, dated of even date herewith, providing for the programming by and sale to Entercom of substantially all of the broadcast time available on the Stations upon acquisition thereof by Sellers. "TUSCALOOSA" shall mean the corporation identified as such in the Preamble to this Agreement. "WELFARE PLAN" shall mean an "employee welfare benefit plan" as such term is defined in Section 3(1) of ERISA. 6 ARTICLE II. ----------- SALE AND PURCHASE ----------------- 2.1. TRANSFER OF ASSETS. Subject to the terms and conditions set forth in this Agreement, at the Closing Sellers shall transfer, convey, grant, assign and deliver to Entercom, free and clear of all Encumbrances (other than Permitted Encumbrances) and Entercom shall buy, accept and receive from Sellers, all right, title and interest in, to and under all real, personal and mixed assets, rights, benefits and privileges, both tangible and intangible, owned, leased, used or useful in connection with the business and operations of the Stations (collectively, the "Assets"), but excluding the Excluded Assets described in Section 2.2. The Assets shall include, without limitation, all right, title and interest in, to and under the following: 2.1.1. FCC LICENSES. All licenses, permits and other authorizations issued by the Commission to Heritage, prior to the Heritage Agreement Closing Date, or issued to Sellers or Sinclair after such date, for the operation of the Stations (the "FCC Licenses"), including without limitation those listed in Schedule 2.1.1. and all applications therefor, together with any renewals, extensions or modifications thereof and additions thereto. 2.1.2. REAL AND LEASED PROPERTY INTERESTS. (a) All the real property owned by Heritage, prior to the Heritage Agreement Closing Date, or owned by Sellers or Sinclair, after such date, and related to the business and operations of the Stations including, without limitation, all land, fee interests, easements and other interests of every kind and description in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon owned by Heritage, prior to the Heritage Agreement Closing Date, or owned by Sellers or Sinclair, after such date, and used or useful in connection with the business and operations of the Stations ("Real Property"), including, without limitation, all of those items listed in Schedule 2.1.2. (b) All the real property leasehold interests of Heritage, prior to the Heritage Agreement Closing Date, or the real property leasehold interests of Sellers or Sinclair, after such date, related to the business and operations of the Stations, including, without limitation, leases and subleases of any land, easements and other real property leasehold interests of every kind and description in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon leased by Heritage, prior to the Heritage Agreement Closing Date, or leased by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations ("Leased Property"), including, without limitation, all of those items listed in Schedule 2.1.2. 2.1.3. TANGIBLE PERSONAL PROPERTY. All of the furniture, fixtures, furnishings, machinery, computers, equipment, inventory, spare parts, supplies, office materials and other tangible property of every kind and description owned, leased or used by 7 Heritage, prior to the Heritage Agreement Closing Date, or owned, leased or used by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations, together with any replacements thereof and additions thereto made before the Closing, and less any retirements or dispositions thereof made before the Closing in the Ordinary Course of Business, including, without limitation, those items which have a book value in excess of Five Thousand Dollars ($5,000), all of which as of the Heritage Agreement Date are set forth and identified in Schedule 2.1.3. 2.1.4. INTELLECTUAL PROPERTY. All of the service marks, copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes and other similar intangible assets maintained, owned, leased or used by Heritage, prior to the Heritage Agreement Closing Date, or maintained, owned, leased or used by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations (including any and all applications, registrations extensions and renewals relating thereto) (the "Intellectual Property"), and all of the rights, benefits and privileges associated therewith including, without limitation, the right to use the call letters for the Stations. 2.1.5. PROGRAM CONTRACTS. The program licenses and contracts under which Heritage, prior to the Heritage Agreement Closing Date, or under which Sellers or Sinclair, after such date, are authorized to broadcast programs on the Stations (collectively the "Program Contracts") including, without limitation, (a) all program (cash and non-cash) licenses and contracts listed on Schedule 2.1.5, and (b) any other such program contracts that have been or will be entered into between the date of the Heritage Agreement and the Closing Date in accordance with the terms of the Heritage Agreement and this Agreement. 2.1.6. TRADE-OUT AGREEMENTS. All contracts and agreements (excluding Program Contracts) pursuant to which commercial air time on the Stations has been sold, traded or bartered in consideration for any property or services in lieu of or in addition to cash (collectively, the "Trade-out Agreements"), including, without limitation, those set forth and identified in Schedule 2.1.6. 2.1.7. BROADCAST TIME SALES AGREEMENT. All contracts and agreements pursuant to which commercial air time has been sold on the Stations for cash (collectively the "Time Sales Agreements"). 2.1.8. OPERATING CONTRACTS. All other operating contracts and agreements relating to the business or operations of the Stations, all material such contracts as of the Heritage Agreement Date being listed on Schedule 2.1.8. (including, without limitation, all employment agreements and talent contracts, all leases and subleases relating to the Leased Property, all agreements relating to any motor vehicles, all network affiliation agreements and all national and local advertising representation agreements for the Stations), together with all contracts and agreements that have been or will be entered into between the Heritage Agreement Date and the Closing Date in accordance with the terms of the Heritage Agreement and this Agreement (collectively, the "Operating Contracts" and together with the Program Contracts, Trade-out Agreements and the Time Sales Agreements, the "Station Contracts"). 8 2.1.9. VEHICLES. All automotive equipment and motor vehicles maintained, owned, leased or otherwise used by Heritage, prior to the Heritage Agreement Closing Date, or maintained, owned, leased or otherwise used by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations, including, without limitation, those set forth and described in Schedule 2.1.9. 2.1.10. FILES AND RECORDS. All engineering, business and other books, papers, logs, files and records pertaining to the business and operations of the Stations, but not the organizational documents and records described in Section 2.2.7. 2.1.11. AUXILIARY FACILITIES. All translators, earth stations, and other auxiliary facilities, and all applications therefor owned, leased or otherwise used or useful by Heritage, prior to the Heritage Agreement Closing Date, or used or useful by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations. 2.1.12. PERMITS AND LICENSES. All permits, approvals, orders, authorizations, consents, licenses, certificates, franchises, exemptions of, or filings or registrations with, any court or governmental authority (other than the Commission) in any jurisdiction, which have been issued or granted to or are owned or used or useful by Heritage, prior to the Heritage Agreement Closing Date, or which have been issued or granted to or are owned or used or useful by Sellers or Sinclair, after such date, in connection with the business and operations of the Stations, and all pending applications therefor. 2.1.13. GOODWILL. The business of the Stations as a "going concern," customer relationships and goodwill, if any. 2.2. EXCLUDED ASSETS. Notwithstanding anything to the contrary in this Agreement, there shall be excluded from the Assets and retained by Sellers, to the extent in existence as of the Closing Date for a particular Station, the following assets (collectively, the "Excluded Assets"). 2.2.1. CASH. All cash, cash equivalents or deposits held by Sellers, all interest payable in connection with any such cash, cash equivalents or deposits or short term investments, bank balances and rights in and to bank accounts, marketable and other securities of Sellers. 2.2.2. ACCOUNTS RECEIVABLE. Except as otherwise provided in the TBA, all Accounts Receivable arising out of the business and operations of the Stations by Sellers prior to the Adjustment Time. 2.2.3. PERSONAL PROPERTY DISPOSED OF. All tangible personal property disposed of or consumed in the Ordinary Course of Business by Heritage or by Sellers as permitted by the Heritage Agreement or this Agreement. 9 2.2.4. INSURANCE. All contracts of insurance and all insurance plans and the assets thereof. 2.2.5. EMPLOYEE PLANS AND ASSETS. All Plans, Benefit Arrangements (except for any Station Contracts, Proration Items or other matters which are specifically assumed by Entercom pursuant to the terms hereof), Qualified Plans and Welfare Plans and the assets hereof. 2.2.6. RIGHT TO TAX REFUNDS. Any and all claims of Sellers with respect to any tax refunds. 2.2.7. CERTAIN BOOKS AND RECORDS. All of (a) the Stations' originals of account books of original entry, (b) duplicated copies of any books, records, accounts, checks, payment records, tax records (including payroll, unemployment, real estate and other tax records) and other similar books, records and information relating to the operation of the business of the Stations prior to the Closing, and (c) all records and documents relating to any Excluded Assets maintained by or in the possession of Sellers; provided, in each case, that (i) prior to the Heritage Agreement Closing Date, to the extent permitted under the Heritage Agreement and (ii) at and after the Heritage Agreement Closing Date, without such limitation, Entercom shall be permitted full access to all such books and records and to make copies thereof upon reasonable request. 2.2.8. THIRD-PARTY CLAIMS. All rights and claims of Sellers, whether mature, contingent or otherwise, against third parties relating to the Assets or the Stations, whether in tort, contract, or otherwise. 2.2.9. DEPOSIT AND PREPAID EXPENSES. All deposits and prepaid expenses related to Sellers' ownership or operation of the Stations, provided, however, any deposit and prepaid expenses shall be included in the Assets conveyed pursuant hereto to the extent that Sellers receive a credit therefor in the calculation of the Proration Amount pursuant to Section 8.2. 2.2.10. NAMES. Any and all rights to use the names "Heritage Broadcasting," "Heritage Media," "Tuscaloosa," "Tuscaloosa Broadcasting," "Sinclair," or "Sinclair Communications" and any logo or variation thereof and the goodwill associated therewith. 2.2.11. MISCELLANEOUS EXCLUDED ASSETS. The assets listed and identified on Schedule 2.2.11. 2.3. PURCHASE PRICE. The Purchase Price for the Assets is the sum of ONE HUNDRED TWENTY SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($126,500,000). 10 2.4. ESCROW. For and in partial consideration of the execution and delivery of this Agreement, simultaneously with the execution and delivery of this Agreement, Entercom is depositing in escrow with an escrow agent (the "Escrow Agent") an irrevocable standby letter of credit (in form satisfactory to Sellers and for the benefit of Sellers ) in the amount of NINE MILLION FOUR HUNDRED EIGHTY SEVEN THOUSAND FIVE HUNDRED DOLLARS ($9,487,500) (the "Letter of Credit"), to secure Entercom's obligations described herein, in accordance with the terms and conditions of an escrow agreement substantially in the form attached as Exhibit C hereto (the "Escrow Agreement"). The Escrow Agent shall be a bank or financial institution with a combined capital and surplus of at least $100,000,000.00. 2.5. PAYMENT. The Purchase Price to be paid by Entercom shall be payable in cash delivered at the Closing by wire transfer of immediately available federal funds to the account of Sellers at such financial institution as Sellers shall specify in writing. 2.6. ALLOCATION OF PURCHASE PRICE. Entercom and Sellers agree that the aggregate fair market value of the Assets (the "Aggregate Fair Market Value") will be appraised by the appraisal firm of BIA Consulting, Inc. ("BIA") (the "Appraisal"). All costs and expenses of BIA in preparing the Appraisal shall be borne one-half by Entercom and one-half by Sellers. The parties acknowledge that a draft Appraisal has been prepared by BIA prior to the date of this Agreement, and that Sellers and Entercom will cooperate to finalize such Appraisal. Entercom shall prepare IRS Form 8594 reflecting the Aggregate Fair Market Value as found by BIA and such other information as required by the form, and shall forward it within 30 days after Closing to Sellers for their approval, which approval shall not be withheld unreasonably. Entercom and Sellers shall each file with their respective federal income tax return for the tax year in which the Closing occurs, IRS Form 8594 containing the information agreed upon by the parties pursuant to the this Section 2.6. Entercom agrees to report the purchase of the Assets and each of Sellers agrees to report the sale of such assets for income tax purposes in a manner consistent with the information agreed upon by the parties pursuant to this Section 2.6 and contained in its IRS Form 8594. In the event either or both of the parties elects to treat all or a portion of the Assets transferred as part of a deferred like-kind exchange under Section 1031 of the Code, each party shall, in completing any IRS Forms 8824 that the party might be required to file with the IRS, reflect the values for the Assets as determined pursuant to this Section 2.6. The parties expressly agree that Seventy Six Million Dollars ($76,000,000) of the Purchase Price shall be allocated to the Portland Stations, and Fifty Million Five Hundred Thousand Dollars ($50,500,000) of the Purchase Price shall be allocated to the Rochester Stations. Notwithstanding any other provision of this Agreement, the provisions of this Section 2.6 shall survive the Closing without limitation. ARTICLE III. ------------ LIABILITIES ----------- 3.1. ASSUMPTION OF LIABILITIES BY ENTERCOM. From and after the Closing Date, Entercom shall assume, pay, perform, and discharge the following Liabilities (collectively, the "Assumed Liabilities") of Sellers: 11 3.1.1. The Liabilities arising out of events occurring on or after the Closing Date related to the businesses or operations of the Stations or Entercom's ownership of the Assets; 3.1.2. All Liabilities arising out of events occurring on or after the Closing Date with respect to the FCC Licenses; 3.1.3. All Liabilities arising on or after the Closing Date under the Station Contracts (including, without limitation, Trade-out Agreements) pursuant to their terms (except for Liabilities for any breaches thereunder by Sellers or Heritage occurring prior to the Closing Date); and 3.1.4. All those Liabilities for which, and only to the extent, that Entercom receives the benefit of a Proration Item in accordance with Section 8.2 hereof. 3.2. OTHER LIABILITIES. Except for the Assumed Liabilities or as otherwise expressly provided in the TBA, Entercom does not and shall not assume any other Liabilities of any kind or description. 3.3. NON-ASSIGNABLE STATION CONTRACTS. 3.3.1. Sellers shall, beginning immediately upon execution of this Agreement, take all reasonable action required to obtain all consents, approvals and agreements of any third parties necessary to authorize, approve or permit the consummation of the transactions contemplated by this Agreement, including, without limitation, any consent of the parties to the Station Contracts designated as necessary in Schedule 2.1.8 in order to consummate the transactions contemplated hereby (collectively, the "Restricted Contracts"). Notwithstanding anything to the contrary set forth in this Agreement or otherwise, to the extent that the consent or approval of any third party is required under any Restricted Contract, Sellers shall only be required to use reasonable efforts (not involving the payment by Sellers of any money to any party to any such Restricted Contract, except to the extent required by Section 3.3.2) to obtain such consents and approvals, and in the event that Sellers fail to obtain any such consent or approval, Entercom shall have no right to terminate this Agreement. 3.3.2. Notwithstanding anything to the contrary in Section 3.3.1, Sellers shall retain, until such time as any required consents shall have been obtained by Sellers, all rights to and obligations under any Station Contract which requires the consent of any other party thereto for assignment to Entercom if such consent has not been obtained on the Closing Date (the "Deferred Contract"). Until the assignment of the Deferred Contract, (i) Sellers shall continue to use all commercially reasonable efforts and Entercom shall cooperate with Sellers to obtain the consent and/or to remove any other impediments to such assignment, and (ii) Sellers and Entercom agree to cooperate in any lawful arrangement to provide (to the extent permitted without breach of the Deferred Contract) that Entercom shall receive the benefits of such interest after the Closing Date to the same extent as if it were Sellers; provided, however, (y) if Entercom shall fail to receive such benefits after the Closing Date for any leased property that is a main 12 transmitter tower site or a studio site for any Station (the "Designated Properties"), Sellers agree to make such payments as are necessary for Entercom to receive such benefits and/or necessary to receive such consents for assignment as long as the aggregate amount of all such payments does not exceed Seventy Five Thousand Dollars ($75,000) for all such Designated Properties under this Agreement and (z) Entercom shall, at its sole discretion, not be obligated to perform the obligations under any Deferred Contract if it is not also receiving all of the benefits thereunder. If, subsequent to the Closing, Sellers shall obtain any consent required to assign any Deferred Contract, the Deferred Contract for which consent to assign has been obtained shall at that time be deemed to be conveyed, granted, bargained, sold, transferred, setover, assigned, released, delivered and confirmed to Entercom, without need of further action by Sellers or of future documentation. ARTICLE IV. ----------- REPRESENTATIONS AND WARRANTIES ------------------------------ 4.1. SELLERS' REPRESENTATIONS. Sellers hereby represent and warrant to Entercom that: 4.1.1. CORPORATE STANDING. Tuscaloosa, SRPLI and SRRLI are corporations, duly organized, validly existing and in good standing under the laws of the states of their respective organizations, and are duly qualified to do business and are in good standing in any jurisdiction where it owns or operates a radio station and in each other jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified could not, individually or in the aggregate, have a material adverse effect. 4.1.2. AUTHORIZATION OF AGREEMENT; NO BREACH. Tuscaloosa, SRPLI and SRRLI have the corporate power and authority to execute, deliver and perform this Agreement and such other agreements as are necessary to consummate the transactions contemplated hereby. Subject to the receipt of the consents and approvals required elsewhere herein, this Agreement constitutes the valid and binding obligation of each of Tuscaloosa, SRPLI and SRRLI, enforceable against each in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming the said consents and approvals are obtained, neither such execution, delivery and performance nor compliance by each Seller with the terms and provisions hereof will conflict with or result in a breach of any of the terms, conditions or provisions of the organizational documents of such entities or any judgment, order, injunction, decree, regulation or ruling of any court or any other governmental authority to which each is subject or any material agreement or contract to which each is a party or to which each is subject, or constitute a material default thereunder. 4.1.3. QUALIFICATIONS AS ASSIGNOR. Sellers know of no facts which, under the Communications Act of 1934, as amended, or the existing rules and regulations of the Commission, would disqualify Heritage or Sellers as an assignor of the FCC Licenses to be assigned by each under the Heritage Agreement or hereunder, as applicable. 13 4.1.4. ABSENCE OF CONFLICTING ORDERS. Neither Seller is subject to any judgment, award, order, writ, injunction, arbitration decision or decree which prohibits or prevents the performance of this Agreement or the consummation of any transaction contemplated under this Agreement, and there is no litigation, administrative action, arbitration, proceeding or investigation pending, or to Sellers' Knowledge, threatened, against any Seller or affecting any Seller in any federal, state or local court or before any administrative agency or arbitrator that would adversely affect Sellers' ability to perform their obligations under this Agreement or would hinder the consummation of the transactions contemplated hereunder. 4.1.5. FINANCIAL STATEMENTS: UNDISCLOSED LIABILITIES. 4.1.5.1. Sellers have provided to Entercom an unaudited balance sheet of the Stations as of November 30, 1997 (the "Balance Sheet") and an unaudited statement of income and operating cash flows for the ten month period ending November 30, 1997, in each case, provided to Sellers by Heritage. To Sellers' Knowledge, the financial statements referred to in this Section 4.1.5.1 (a) present fairly in all material respects the financial condition of its Stations as of the date and the results of operations and operating cash flows for the period indicated and (b) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except that the financial statements referred to in this Section 4.1.5.1 do not contain all footnotes and cash flow information from investing and financing activities required under generally accepted accounting principles and are subject to customary year-end adjustments). 4.1.5.2. To Sellers' Knowledge, there exist no Liabilities of the Stations relating to, or arising out of, the business or operations of such Stations, contingent or absolute, matured or unmatured, known or unknown, except (a) as reflected on the Balance Sheet and (b) for Liabilities that (i) were incurred after November 30, 1997 (the "Current Balance Sheet Date") in the Ordinary Course of Business, or (ii) were not required to be reflected on the Balance Sheet in accordance with generally accepted accounting principles applied on a consistent basis. 4.1.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth and described in Schedule 4.1.6, (i) to Sellers' Knowledge, after the Current Balance Sheet Date through the date hereof there has been no, (ii) to Sellers' Knowledge, from the date hereof through the Heritage Agreement there will be no, and (iii) except as may be caused by Entercom pursuant to the TBA, after the Heritage Agreement Closing Date there will be no, Material Adverse Effect. Since the Current Balance Sheet Date, the business of the Stations has been conducted in the Ordinary Course of Business. After the Heritage Agreement Closing Date, Sellers will not have, and to Sellers' Knowledge, Heritage has not (a) incurred any extraordinary loss of, or injury to, any of its Assets as the result of any fire, explosion, flood, windstorm, earthquake, labor trouble, riot, accident, act of God or public enemy or armed forces, or other casualty; (b) incurred, or become subject to, any Liability, except current Liabilities incurred in the Ordinary Course of Business; (c) discharged or satisfied any Encumbrance or paid any 14 Liability other than current Liabilities shown in the Balance Sheet, current Liabilities incurred since the Current Balance Sheet Date in the Ordinary Course of Business and Liabilities (including, without limitation, partial and complete prepayments) arising under any credit or loan agreement between such parties and their lenders; (d) mortgaged, pledged or subjected to any Encumbrance any of the Assets (except for Permitted Encumbrances); (e) made any material change in any method of accounting or accounting practice; (f) sold, leased, assigned or otherwise transferred any of the material Assets other than obsolete Assets which have been replaced by suitable replacements; (g) made any material increase in compensation or benefits payable to any employee other than in the Ordinary Course of Business; or (h) made any agreement to do any of the foregoing. 4.1.7. ABSENCE OF LITIGATION. Except as set forth on Schedule 4.1.7, as of the date hereof, there is no material or, to Sellers' Knowledge, immaterial, action, suit, investigation, claim, arbitration, litigation or similar proceeding, nor any order, decree or judgment pending or, to Sellers' Knowledge, threatened, against Sinclair, Sellers, the Assets or the Stations before any governmental authority. 4.1.8. ASSETS. Except for the Excluded Assets, the Assets include all of the assets or property used or useful in the businesses of the Stations as presently operated. Except for leased or licensed Assets, at and after the Heritage Agreement Closing Date, Sellers or one of them will be the owners of, and will have good title to, the Assets free and clear of any Encumbrances, except for Permitted Encumbrances (including, without limitation, those items set forth on Schedule 4.1.8). At the Closing, Entercom shall acquire good title to, and all right, title and interest in and to the Assets, free and clear of all Encumbrances, except for the Permitted Encumbrances. 4.1.9. FCC MATTERS. At and after the Heritage Agreement Closing Date, Sellers or one of them will hold the FCC Licenses listed as held on Schedule 2.1.1. Such FCC Licenses constitute all of the licenses, permits and authorizations from the Commission which have been issued to Heritage that are required for the business and operations of the Stations. Except as set forth on Schedule 4.1.9, such FCC Licenses are valid and in full force and effect through the dates set forth on Schedule 2.1.1, unimpaired by any condition, other than as set forth in the FCC Licenses. Except as set forth on Schedule 4.1.9, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses and, except for actions or proceedings affecting radio broadcast stations or the radio industry generally, no application, complaint, action or proceeding is pending or, to Sellers' Knowledge, threatened, that may result in (a) the revocation, modification, non-renewal or suspension of any of such FCC Licenses, or (b) the issuance of a cease-and-desist order. To Sellers' Knowledge, except as set forth in Schedule 4.1.9, no facts, conditions or events exist relating to Heritage, Sellers, or the Stations that would reasonably be expected to cause the Commission to revoke any FCC License or not to grant any pending applications for renewal of the FCC Licenses or to deny the assignment of the FCC Licenses to Entercom as provided for in this Agreement. 15 4.1.10. REAL PROPERTY. 4.1.10.1. At and after the Heritage Agreement Closing Date, Sellers or one of them will have good and marketable fee simple title to all fee estates included in the Real Property and good title to all other owned Real Property, in each case free and clear of all Encumbrances, except for Permitted Encumbrances. 4.1.10.2. At and after the Heritage Agreement Closing Date, Sellers or one of them will have a valid leasehold interest in all Leased Property listed as leased in Schedule 2.1.2. Schedule 2.1.2 lists all leases and subleases pursuant to which any of the Leased Property is leased. At and after the Heritage Agreement Closing Date, Sellers or one of them will be the owner and holder of all the Leased Property purported to be granted by such leases and subleases. At and after the Heritage Agreement Closing Date, each such lease and sublease will be valid as to Sellers or one of them and, to Sellers' Knowledge, will constitute a legal and binding obligation of, and will be legally enforceable against, each party thereto and grants the leasehold interest it purports to grant, including any rights to nondisturbance and peaceful and quiet enjoyment that may be contained therein. At and after the Heritage Agreement Closing Date, Sellers or one of them will be, and to Sellers' Knowledge, all other parties will be, in compliance in all material respects with the provisions of such leases and subleases. 4.1.10.3. The Real Property and the Leased Property listed in Schedule 2.1.2 constitute all of the real property owned, leased or used in the business and operations of the Stations which is material to the business and operations of the Stations. 4.1.10.4. To Sellers' Knowledge, no portion of the Real Property or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or threatened. To Sellers' Knowledge and to the extent that such documents are in Sellers' possession, Sellers have delivered to Entercom true, correct and complete copies of the following documents with respect to the Real Property and Leased Property: (i) deeds, by which a fee interest in any of the Real Property and Leased Property has been received; (ii) leases, by which any of the Real Property is leased; (iii) title insurance policies or commitments; (iv) surveys; and (v) inspection reports or other instruments or reports, including, without limitation, any phase I or phase II environmental reports or other similar environmental reports, surveys or assessments (including any and all amendments and other modifications of such instruments). 4.1.11. INTELLECTUAL PROPERTY. At and after the Heritage Agreement Closing Date, Sellers or one of them will possess adequate rights, licenses and authority to use all Intellectual Property necessary to conduct the business of the Stations as presently conducted. At and after the Heritage Agreement Closing Date, Sellers or one of them will have good title to all Intellectual Property that each owns, free and clear of any Encumbrances, except for Permitted Encumbrances. At and after the Heritage Agreement Closing Date, no Seller will be obligated to pay any royalty or other fees to anyone with respect to the Intellectual Property. No Seller has, and to Sellers' Knowledge, Heritage has not, received 16 any written notice to the effect that any service rendered or to be rendered by Heritage or any of Sellers relating to the business of the Stations may infringe, or that such parties are otherwise infringing, on any Intellectual Property right or other legally protectable right of another. No director, officer or employee of Heritage or Sellers has any interest in any Intellectual Property. 4.1.12. STATION CONTRACTS. Complete and correct copies of the Station Contracts set forth in Schedules 2.1.5, 2.1.6 and 2.1.8 (which schedules are true and correct in all material respects) have been made available to Entercom and (a) at and after the Heritage Agreement Closing Date, each such material Station Contract and, to Sellers' Knowledge, each such immaterial Station Contract, will be in full force and effect and will constitute a legal, valid and binding obligation of the parties thereto; (b) at and after the Heritage Agreement Closing Date, each Seller which has become subject to a Station Contract will not be in breach or default in any material respect of the terms thereto; (c) at and after the Heritage Agreement Closing Date, none of the material rights under any such Station Contract of each Seller which has become subject thereto will be subject to termination, nor will a default occur, as a result of the consummation of the transactions contemplated hereby, except to the extent that failure to obtain the prior consent to assignment thereof of any party thereto shall or could be interpreted to constitute a termination or modification of or a default under any such Station Contract; and (d) to Sellers' Knowledge, no other party to any such Station Contract is in breach or default in any material respect of the terms thereunder. 4.1.13. TAXES. Each Seller has (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will have prior to the Closing Date) duly filed all material tax returns required to be filed on or before the Closing Date with respect to all material taxes applicable to the ownership or operation of the Stations by Sellers. In the case of any tax returns which receive an extension for their date of filing, such tax returns will be considered due on, and not considered required to be filed before, the extended due date. To Sellers' Knowledge, all tax returns are (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will be) true and complete in all material respects. Sellers: (a) have paid all taxes due to any governmental authority as indicated on the tax returns applicable to the ownership or operation of the Stations by Sellers; or (b) have established (or, in the case of amounts becoming due after the date hereof but prior to the Closing Date will have established) adequate reserves (in conformity with generally accepted accounting principles consistently applied) for the payment of taxes applicable to the ownership or operation of the Stations by Sellers. 4.1.14. EMPLOYEE BENEFIT PLANS. 4.1.14.1. Schedule 4.1.14 lists all Plans and Benefit Arrangements (exclusive of severance arrangements and retention agreements) maintained or contributed to for the benefit of the employees of the Stations (collectively, the "Benefit Plans"). Each Benefit Plan maintained or contributed to by Sellers, and, to Sellers' Knowledge, each Benefit Plan maintained or contributed to by Heritage, has been maintained in material compliance with its terms and with ERISA, the Code and other applicable laws. 17 4.1.14.2. Schedule 4.1.14 sets forth a list of all Qualified Plans maintained or contributed to by Sellers, and to Sellers' Knowledge, all Qualified Plans maintained or contributed to by Heritage, in each case, for the benefit of the employees of the Stations. All such Qualified Plans and any related trust agreements or annuity agreements (or any other funding document) have been maintained in material compliance with ERISA and the Code (including, without limitation, the requirements for tax qualification described in Section 401 thereof), other than any Multiemployer Plan. To Sellers' Knowledge, any trusts established under such Plans are exempt from federal income taxes under Section 501(a) of the Code. 4.1.14.3. Schedule 4.1.14 sets forth a list of all funded Welfare Plans maintained or contributed to by Sellers, and to Sellers' Knowledge, all funded Welfare Plans maintained or contributed to by Heritage, in each case, that provide benefits to current or former employees of the Stations or their beneficiaries. To Sellers' Knowledge, the funding under each Welfare Plan does not exceed and has not exceeded the limitations under Sections 419A(b) and 419A(c) of the Code. At and after the Heritage Agreement Closing Date, Sellers will not be, and to Sellers' Knowledge, Heritage is not, subject to taxation on the income of any Welfare Plan's welfare benefit fund (as such term is defined in Section 419(e) of the Code) under Section 419A(g) of the Code, which Welfare Plan has been maintained or contributed to by any such party. 4.1.14.4. Sellers have no, and to Sellers' Knowledge, Heritage has no, post-retirement medical life insurance or other benefits promised, provided or otherwise due now or in the future to current, former or retired employees of the Stations. 4.1.14.5. Except as set forth in Schedule 4.1.14, at and after the Heritage Agreement Closing Date, Sellers will have, and to Sellers' Knowledge, Heritage has (a) filed or caused to be filed all returns and reports on the Plans that each such party is required to file and (b) paid or made adequate provision for all fees, interest, penalties, assessments or deficiencies that have become due pursuant to those returns or reports or pursuant to any assessment or adjustment that has been made relating to those returns or reports. All other fees, interest, penalties and assessments that are payable by or for Heritage and Sellers have been or will be timely reported, fully paid and discharged. There will be no unpaid fees, penalties, interest or assessments due from Sellers, and to Sellers' Knowledge, there are no unpaid fees, penalties, interest or assessments due from Heritage or from any other person, in each case, that are or could become an Encumbrance on any of its Assets or could otherwise adversely affect the businesses or operations of the Stations or the Assets. At and after the Heritage Agreement Closing Date, Sellers or one of them will have, and to Sellers' Knowledge, Heritage has, collected or withheld all amounts that are required to be collected or withheld by each such party to discharge its obligations, and all of those amounts have been paid to the appropriate governmental authority or set aside in appropriate accounts for future payment when due. Sellers have furnished to Entercom true and complete copies of all documents setting forth the terms and funding of each Plan. 4.1.14.6. Except as set forth in Schedule 4.1.14, at and after the Heritage Agreement Closing Date, none of Sellers or any ERISA Affiliate of such parties will 18 have, and none of Heritage or any ERISA Affiliate of Heritage has ever, sponsored or maintained, had any obligation to sponsor or maintain, or had any liability (whether actual or contingent, with respect to any of its assets or otherwise) with respect to any Plan subject to Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan). At and after the Heritage Agreement Closing Date, none of Sellers or any ERISA Affiliate of such parties will have, and none of Heritage or any ERISA Affiliate of Heritage (since January 1, 1989) has, terminated or withdrawn from or sought a funding waiver with respect to any plan subject to Title IV of ERISA, and no facts exist that could reasonably be expected to cause such actions in the future; no accumulated funding deficiency (as defined in Code Section 412), whether or not waived, exists with respect to any such plan; no reportable event (as defined in ERISA Section 4043) has occurred with respect to any such plan (other than events for which reporting is waived); all costs of any such plans have been provided for on the basis of consistent methods in accordance with sound actuarial assumptions and practices, and the assets of each such plan, as of its last valuation date, exceeded its "Benefits Liabilities" (as defined in ERISA Section 4001(a)(16)); and, since the last valuation date for each such plan, no such plan has been amended or changed to increase the amounts of benefits thereunder and, to Sellers' Knowledge, there has been no event that would reduce the excess of assets over benefit liabilities; and except as set forth in Schedule 4.1.14, at and after the Heritage Agreement Closing Date, none of Sellers or any ERISA Affiliate of such parties will have, and none of Heritage or any ERISA Affiliate of Heritage has ever, made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any Multiemployer Plan. 4.1.14.7. No claims or lawsuits are pending or, to Sellers' Knowledge, threatened, by, against, or relating to any Benefit Plan. To Sellers' Knowledge, the Benefit Plans are not presently under audit or examination (nor has notice been received of a potential audit or examination) by the Internal Revenue Service, the Department of Labor, or any other governmental agency or entity and no matters are pending with respect to any Qualified Plan under the Internal Revenue Service's Voluntary Compliance Resolution program, its Closing Agreement Program, or other similar programs. 4.1.14.8. To Sellers' Knowledge, with respect to each Plan, there has occurred no non-exempt "prohibited transaction" (within the meaning of Section 4975 of the Code) or transaction prohibited by Section 406 of ERISA or breach of any fiduciary duty described in Section 404 of ERISA that would, if successful, result in any liability for Sellers. Sellers will take no action that would result in such a liability between the date hereof and the Closing Date. 4.1.14.9. At and after the Heritage Agreement Closing Date, Sellers will have no liability, and to Sellers' Knowledge, Heritage has no liability (whether actual, contingent, with respect to any of the Assets or otherwise) with respect to any employee benefit plan that is not a Benefit Plan (exclusive of severance arrangements and retention agreements) or with respect to any employee benefit plan sponsored or maintained (or which has been or should have been sponsored or maintained) by any ERISA Affiliate of such parties. 19 4.1.14.10. At and after the Heritage Agreement Closing Date, all group health plans of Sellers and their ERISA Affiliates will have been, and all group health plans of Heritage and its ERISA Affiliates have been, operated in material compliance with the requirements of Sections 4980B (and its predecessor) and 5000 of the Code, and Sellers have provided or will have provided before the Closing Date, to individuals entitled thereto, all required notices and coverage pursuant to Section 4980B with respect to any "qualifying event" (as defined therein) occurring before or on the Closing Date. 4.1.15. LABOR RELATIONS. Sellers have made available to Entercom a true and complete list of all employees engaged in the business or operations of the Stations as of the date set forth on the list, together with such employee's position, salary and date of hire. Schedule 4.1.15 lists all written employment contracts of Heritage and Sellers related to employees of the Stations and all written agreements, plans, arrangements, commitments and understandings pursuant to which Heritage has, or at and after the Heritage Agreement Closing Date, pursuant to which Sellers will have, severance obligations related to employees at the Stations. Except as set forth on Schedule 4.1.15, no labor union or other collective bargaining unit represents or, to Sellers' Knowledge, claims to represent, any of the employees of the Station. Except as set forth in Schedule 4.1.15, there are no strikes, work stoppages, grievance proceedings, union organization efforts, or other controversies pending between Heritage or Sellers, and any union or collective bargaining unit representing (or, to Sellers' Knowledge, claiming to represent) the employees at the Stations. At and after the Heritage Agreement Closing Date, Sellers will be, and Heritage is, in compliance with all laws relating to the employment or the workplace, including, without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, immigration and the withholding of income taxes, unemployment compensation, worker's compensation, employee privacy and right to know and social security contributions, except for any noncompliance which would not have a Material Adverse Effect. Except as set forth herein, there are no collective bargaining agreements relating to the Stations or the business and operations thereof. 4.1.16. ENVIRONMENTAL MATTERS. 4.1.16.1. Except as set forth in Schedule 4.1.16, to Sellers' Knowledge (which knowledge is based on the items set forth on Schedule 4.1.16), Heritage is, and at and after the Heritage Agreement Closing Date, Sellers will be, in material compliance with, and the Real Property and all improvements thereon are in material compliance with, all Environmental Laws. 4.1.16.2. Except as set forth in Schedule 4.1.16, there are no pending or, to Sellers' Knowledge, threatened, actions, suits, claims, or other legal proceedings based on (and none of Sellers have received any written notice of any complaint, order, directive, citation, notice of responsibility, notice of potential responsibility, or information request from any governmental authority arising out of or attributable to): (a) the current or past presence at any part of the Real Property of Hazardous Materials; (b) the current or past release or threatened 20 release into the environment from the Real Property (including, without limitation, into any storm drain, sewer, septic system or publicly owned treatment works) of any Hazardous Materials; (c) the off-site disposal of Hazardous Materials originating on or from the Real Property or the businesses or Assets of the Stations; (d) any facility operations or procedures of the Stations since Heritage's ownership thereof which do not conform to requirements of the Environmental Laws; or (e) any violation of Environmental Laws at any part of the Real Property arising from activities of the Stations since Heritage's ownership thereof involving Hazardous Materials. At and after the Heritage Agreement Closing Date, Sellers will have been, and to Sellers' Knowledge, Heritage has been, duly issued all material permits, licenses, certificates and approvals required under any Environmental Law. 4.1.17. INSURANCE. Schedule 4.1.17 contains a true and complete list and brief summary of all policies of title, property, fire, casualty, liability, life, workmen's compensation, libel and slander, and other forms of insurance of any kind relating to the Assets or the business and operations of the Stations. To Sellers' Knowledge, all such policies: (a) are in full force and effect; (b) are sufficient for compliance in all material respects by Heritage with all requirements of law and of all material agreements to which Heritage is a party; and (c) are valid, outstanding, and enforceable policies and Heritage is not in default in any material respect thereunder. Between the Heritage Agreement Closing Date and the Closing Date of this Agreement, Sellers will carry insurance relating to the Assets or the business and operations of the Stations such that this Section 4.1.17 would be true after substituting "Sellers" for "Heritage" in each instance. All such insurance of Sellers shall provide for full replacement cost coverage of any tangible property that is lost or damaged due to an insured event or cause. 4.1.18. REPORTS. All material returns, reports and statements that the Station will be required to file with the Commission or any governmental agency after the date of this Agreement, and to Sellers' Knowledge, all material returns, reports and statements that the Stations have been required to file with the Commission or any governmental agency through the date of this Agreement, have been or will be timely filed, and all reporting requirements of the Commission and other governmental authorities having jurisdiction thereof have been or will be complied with by Sellers and, to Sellers' Knowledge, by Heritage, in each case, in all material respects. All such reports, returns and statements to be filed after the date hereof will be complete and correct in all material respects as filed and, to Sellers' Knowledge, all such reports, returns and statements that have been filed through the date of this Agreement, are complete and correct in all material reports as filed. At and after the Heritage Agreement Closing Date all documents required by the Commission to be deposited by Sellers. and, to Sellers' Knowledge, all documents required by the Commission to be deposited by Heritage since the period of operation of the Stations by Heritage, in each case, in the public file of the Stations (as defined in the rules and regulations of the Commission) have been or will be deposited therein. 4.1.19. HERITAGE AGREEMENT. Except as set forth on Schedule 4.1.19, Sinclair and its affiliates have not waived any of their rights under the Heritage Agreement related to the Stations. Sinclair is unaware of any material breach or misrepresentation by Heritage or News Corp. under the Heritage Agreement. Sinclair is not in material breach of, and has not defaulted under, any of the terms of the Heritage Agreement 21 (unless waived or consented to in writing by Heritage and described on Schedule 4.1.19). The Heritage Agreement constitutes the valid and binding obligation of Sinclair, enforceable against Sinclair and, by assignments, against Sellers, in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' rights generally or equitable principles. Sinclair is not, and, to Seller's Knowledge, Heritage and News Corp. are not, subject to any judgment, award, order, writ, injunction, arbitration decision or decree which prohibits the performance of the Heritage Agreement or the consummation of any transaction contemplated under the Heritage Agreement, and, except as disclosed on Schedule 4.1.19, there is no litigation, administrative action, arbitration, proceeding or investigation pending or, to Sellers' Knowledge, threatened, against Heritage, News Corp., Sinclair or Sellers or affecting such parties in any federal, state or local court, or before any administrative agency or arbitrator that would adversely affect the ability of Sinclair, Sellers, Heritage or News Corp. to consummate, or that would prohibit, the transactions contemplated under the Heritage Agreement related to the Stations. 4.1.20. INTERPRETATION OF CERTAIN PROVISIONS. Sellers have not relied and are not relying on the specification of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agree not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. 4.2. ENTERCOM'S REPRESENTATIONS. Entercom represents and warrants to Sellers that: 4.2.1. CORPORATE STANDING. Entercom is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, and at the Closing Date will have the corporate power and authority to conduct its business as proposed to be conducted and upon the acquisition of the Assets will be duly qualified to do business in any jurisdiction where it owns and operates a radio station and in each other jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified could not, individually or in the aggregate, have a material adverse effect. 4.2.2. AUTHORIZATION OF AGREEMENT: NO BREACH. Entercom has the corporate power and authority to execute, deliver and perform this Agreement and such other agreements as are necessary to consummate the transactions contemplated hereby. Subject to the receipt of the consents and approvals required elsewhere herein, this Agreement constitutes the valid and binding obligation of Entercom, enforceable against Entercom in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming the said consents and approvals are obtained, neither such execution, delivery and performance nor compliance by Entercom with the terms and provisions hereof will conflict with or result in a breach of any of the terms, conditions or provisions of the organizational documents of Entercom 22 or any judgment, order, injunction, decree, regulation or ruling of any court or any other governmental authority to which Entercom is subject or any material agreement or contract to which Entercom is a party or to which it is subject, or constitute a material default thereunder. 4.2.3. QUALIFICATION AS ASSIGNEE. Except as disclosed in Schedule 4.2.3, Entercom is, and pending Closing will remain, legally, financially and otherwise qualified under the Communications Act of 1934, as amended (the "Communications Act") and all rules, regulations and policies of the Commission to acquire and operate the Stations. Except as disclosed in Schedule 4.2.3, there are no facts or proceedings which would reasonably be expected to disqualify Entercom under the Communications Act or otherwise from acquiring or operating any of the Stations or would cause the Commission not to approve the assignment of the FCC Licenses to Entercom. Except as disclosed in Schedule 4.2.3, Entercom has no knowledge of any fact or circumstance relating to Entercom or any of Entercom's Affiliates that would reasonably be expected to (a) cause the filing of any objection to the assignment of the FCC Licenses to Entercom, (b) lead to a delay in the processing by the Commission of the applications for such assignment or (c) lead to a material delay in the processing by the Commission of the renewals of the FCC Licenses for the Portland Stations or the Rochester Stations. Except as disclosed in Schedule 4.2.3, no waiver of any Commission rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Entercom, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. 4.2.4. ABSENCE OF CONFLICTING ORDERS. Entercom is not subject to any judgment, award, order, writ, injunction, arbitration decision or decree which prohibits the performance of this Agreement or the consummation of any transaction contemplated under this Agreement, and there is no litigation, administrative action, arbitration, proceeding or investigating pending, or to the knowledge of Entercom, threatened, against Entercom or affecting Entercom in any federal, state or local court, or before any administrative agency or arbitrator that would adversely affect Entercom's ability to perform its obligations under this Agreement or would hinder the consummation of the transactions contemplated hereunder. 4.2.5. AVAILABILITY OF FUNDS. Entercom will have available on the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby. 4.2.6. WARN ACT. Entercom is not planning or contemplating, and has not made or taken, any decisions or actions concerning the employees of the Stations after the Closing Date that would require the service of notice under the Worker Adjustment and Retraining Act of 1988, as amended. 4.2.7. NO OUTSIDE RELIANCE. Entercom has not relied and is not relying on any statement, representation or warranty not made in this Agreement, any Schedule hereto or any certificate to be delivered to Entercom at the Closing pursuant to this Agreement. Entercom is not relying on any projections or other predictions contained or referred to in 23 materials (other than the Schedules) that have been or may hereafter be provided to Entercom or any of its Affiliates, agents or representatives, and Sellers make no representations or warranties with respect to any such projections or other predictions. 4.2.8. INTERPRETATION OF CONCERN PROVISIONS. Entercom has not relied and is not relying on the specifications of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agrees not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. ARTICLE V. ---------- CONDITIONS ---------- 5.1. MUTUAL CONDITIONS. Performance of the obligations of the parties under this Agreement and the Closing of the transaction provided for herein are and shall be subject to the occurrence and concurrence of the express conditions precedent that: 5.1.1. The Stations shall have been acquired by Sellers from Heritage pursuant to the Heritage Agreement; and 5.1.2. The Commission has granted its consent and approval in writing to the assignment to Entercom of the FCC Licenses as contemplated hereby, such consent to be free of any material adverse condition, and the Commission's consent shall have become a Final Order, provided, that if no objection or petition to deny has been filed against the Applications and if Entercom's lenders consent to Closing upon FCC consent prior to such consent becoming a Final Order, then the condition set forth in this Section 5.1.2 will be deemed to be satisfied upon the consent and approval of the Commission; and 5.1.3. The waiting period (as it may be extended) applicable to the transfer of the Assets under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have expired or been earlier terminated. 5.1.4. No statute, rule or regulation, or order of any court or administrative agency, shall be in effect which restrains or prohibits Entercom or Sellers, or any one of them, from consummating the transactions contemplated hereby. 5.2. ENTERCOM'S CONDITIONS. Performance of the obligations of Entercom under this Agreement and the Closing of the transactions provided for herein also are and shall be subject to the occurrence of each of the following express conditions precedent, each of which may be waived by Entercom, that: 24 5.2.1. The applications for the renewal of the FCC Licenses of each of the Portland Stations and the Rochester Stations shall have been granted without any material adverse condition, and such grants shall have become Final Orders; and 5.2.2. The representations and warranties contained in Section 4.1 hereof shall be true and correct at and as of the Closing Date as if made on and as of such date except to the extent that they speak as of a particular date or time other then the Closing Date (in which case such representations and warranties shall be true and correct as of such date or time); provided, that the failure of such representations and warranties to be true and correct at and as of the Closing Date shall only be a condition to Entercom's obligations hereunder if such failures involve costs, damages and/or expenditures in excess of $1,265,000 (as determined by a qualified independent third party), provided, further, that if such amount is less than $1,265,000 but more than $150,000, such amount shall be placed in escrow on the Closing Date pursuant to an indemnification escrow agreement, the form of which is attached hereto as Exhibit D hereto, to secure Sellers' indemnification obligations under Section 9.7.1 hereunder; and 5.2.3. All of the terms, covenants and conditions to be complied with and performed by each Seller on or prior to the Closing Date shall have been complied with or performed in all material respects; and 5.2.4. There shall have been no material adverse change relating to the material FCC Licenses of any of the Stations (other than WBBF(AM)). 5.3. SELLERS' CONDITIONS. Performance of the obligations of Sellers under this Agreement and the Closing of the transactions provided for herein also are and shall be subject to the occurrence of each of the following express conditions precedent, each of which may be waived by any Seller, that: 5.3.1. The representations and warranties contained in Section 4.2 hereof shall be true and correct at and as of the Closing Date in all material respects as if made on and as of such date except to the extent they speak as of a particular date or time other than the Closing Date (in which case such representations and warranties shall be true and correct in all material respects as of such date or time); and 5.3.2. All of the terms, covenants and conditions to be complied with and performed by Entercom on or prior to the Closing Date (including delivery of the Purchase Price) shall have been complied with or performed in all material respects. 5.3.3. Entercom shall have complied in all material respects with its obligations to pay Monthly Payments (as defined in the TBA) and to reimburse Sellers for capital expenditures for the Stations under Section 1.2 and Schedule 1.2 of the TBA. 25 ARTICLE VI. ----------- COVENANTS AND AGREEMENTS. ------------------------- 6.1. AFFIRMATIVE COVENANTS OF SELLERS. During the period from the date of this Agreement to the Closing Date, Sellers shall: 6.1.1. Should Sellers acquire any Station or operate any Station prior to the sale of such Station to Entercom pursuant to this Agreement, Sellers shall conduct the business and operations of such Station at least in accordance with the provisions of Sections 6.1.1 through and including 6.1.12 and Sections 6.2.1 through and including 6.2.12 under the Heritage Agreement. 6.1.2. Subject to the provisions of the TBA, cooperate with Entercom in connection with its review, analysis and monitoring of the Assets and the operations of the Stations to the end that an efficient transfer of the Assets may be made at Closing and the business of the Stations may continue on an uninterrupted basis. Sellers or one of them shall obtain Entercom's consent, such consent not to be unreasonably withheld, prior to the exercise of Sellers' or any of their rights under the Heritage Agreement as such rights pertain to the Stations (other than the right to consummate the acquisition of the Stations upon satisfaction of all conditions thereto). In addition to providing information required hereunder or reasonably requested by the other parties hereto, Sellers agree promptly to notify Entercom of any material problems or developments of which any Seller becomes aware with respect to any of the Assets or the business of any of the Stations. 6.1.3. Use their reasonable best efforts to cause Heritage to prosecute, or to prosecute with the Commission, the applications for renewal of the FCC Licenses for the Portland Stations and the Rochester Stations, such that the applications are granted without any material adverse condition and, to the extent reasonably possible, on or prior to the date for expiration of such FCC Licenses. 6.1.4. Use reasonable best efforts to enforce all of its rights under the Heritage Agreement as such rights pertain to the Stations, including, without limitation, causing Heritage to act in conformity with the Heritage Agreement and requiring Heritage to conduct the business of the Stations in the Ordinary Course of Business in accordance with the terms of the Heritage Agreement, except where such would not have a material adverse effect on the business and operations of any Station, and, to the extent consistent with the foregoing, in the same manner in which the same have heretofore been conducted with the intent of preserving the ongoing operations and business of the Stations. 6.1.5. Use their reasonable best efforts to close the transactions contemplated by the Heritage Agreement as they pertain to the Stations in a timely fashion consistent with the terms of such agreement. Sellers shall enforce their rights to the fullest extent possible under the Heritage Agreement as they pertain to the Stations, unless otherwise directed by Entercom. 26 6.1.6. To the extent that Sinclair or Sellers receive notifications from Heritage with respect to the Stations under the Heritage Agreement or otherwise becomes aware of any breach of any representation, warranty, covenant or agreement in the Heritage Agreement or the failure to satisfy any condition in such agreement, in each case with respect to the Stations, Sellers shall promptly notify Entercom, and thereafter use reasonable best efforts to enforce, perform or waive any provision of the Heritage Agreement pertaining to the Stations as may be reasonably requested by Entercom, provided, that Sellers shall not be obligated to take any action at Entercom's request inconsistent with their rights and obligations under the Heritage Agreement. 6.1.7. To the extent permitted under the Heritage Agreement, at Closing Sellers will assign any and all rights with respect to the Stations that it may have against Heritage, News Corp., and their respective subsidiaries to Entercom. Entercom acknowledges that the assignment of such rights by Sellers requires the prior written consent of Heritage, which consent Heritage may withhold in its sole discretion. In this regard, Sellers will use their reasonable efforts (without obligation to spend any amount of money) to obtain any consent of Heritage or News Corp. required to assign such rights to Entercom prior to the Closing Date. The failure of Sellers to obtain such consent shall not limit Entercom's obligation to close if all other conditions precedent to Entercom's obligations have been satisfied or waived; however, in such case, Sellers shall fully enforce their rights which relate to the Stations against Heritage and News Corp. under the Heritage Agreement at Entercom's request, and this covenant shall survive the Closing for the period that Sinclair has any rights under the Heritage Agreement. Any proceeds received by Sellers from the exercise of their rights which relate to the Stations against Heritage and News Corp. and their respective subsidiaries shall be paid over to Entercom within five (5) business days of receipt by Sellers, less any reasonable costs and expenses of enforcement incurred by Sellers in such exercise. 6.1.8. At all times, maintain strict confidentiality with respect to all documents and information furnished to Sellers by or on behalf of Entercom. Nothing shall be deemed to be confidential information that: (a) is known to Sellers at the time of its disclosure to Sellers; (b) becomes publicly known or available other than through disclosure by Sellers; (c) is received by Sellers from a third party not actually known by Sellers to be bound by a confidentiality agreement with or obligation to Entercom; or (d) is independently developed by Sellers. Notwithstanding the foregoing provisions of this Section 6.1.8, Sellers may disclose such confidential information (a) to the extent required or deemed advisable to comply with applicable laws; (b) to its officers, directors, employees, representatives, financial advisors, attorneys, accountants, and agents with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); and (c) to any governmental authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, Sellers will return to Entercom all documents and other material prepared or furnished by Entercom relating to the transactions contemplated hereunder, whether obtained before or after the execution of this Agreement. 27 6.2. NEGATIVE COVENANTS OF SELLERS. Unless Entercom has given its prior consent in writing, which consent shall not be unreasonably withheld or delayed, Sellers shall not, directly or indirectly, during the period from the date of this Agreement to the Closing Date: 6.2.1. Except as set forth on Schedule 4.1.19 hereto, fail to comply with the terms of, waive any of Sellers' rights under or consent to any actions requiring Sinclair's or Sellers' consent under the Heritage Agreement related to the Stations. 6.2.2. Fail to consummate the acquisition of the Stations upon the occurrence or waiver of all conditions precedent thereto under the Heritage Agreement. 6.3. AFFIRMATIVE COVENANTS OF ENTERCOM. During the period from the date of this Agreement to the Closing Date (or solely in the case of Section 6.3.4, from and after the Closing Date), Entercom shall: 6.3.1. Use reasonable efforts to obtain its lenders' consent to Closing of this Agreement upon the consent and approval of the Commission of the Applications but prior to such consent and approval becoming a Final Order. 6.3.2. At all times prior to the Closing, maintain strict confidentiality with respect to all documents and information furnished to Entercom by or on behalf of Sellers. Nothing shall be deemed to be confidential information that: (a) is known to Entercom at the time of its disclosure to Entercom; (b) becomes publicly known or available other than through disclosure by Entercom; (c) is received by Entercom from a third party not actually known by Entercom to be bound by a confidentiality agreement with or obligation to Sellers; or (d) is independently developed by Entercom. Notwithstanding the foregoing provisions of this Section 6.3.2, Entercom may disclose such confidential information (a) to the extent required or deemed advisable to comply with applicable laws; (b) to its officers, directors, partners, employees, representatives, financial advisors, attorneys, accountants, agents, underwriters, lenders, investors and any other potential sources of financing with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); and (c) to any governmental authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, Entercom will return to Sellers all documents and other material prepared or furnished by Sellers relating to the transactions contemplated by this Agreement, whether obtained before or after the execution of this Agreement. 6.3.3. Take all corporate action (including, without limitation, all shareholder action), under the laws of any state having jurisdiction over Entercom necessary to effectuate the transactions contemplated by this Agreement. 6.3.4. From and after the Closing Date, cause to be afforded to representatives of Sellers reasonable access during normal business hours to the offices, books and records, contracts and reports of the Stations, as Sellers shall from time to time reasonably request; provided, however, that (a) such investigation shall only be upon reasonable notice and 28 shall not unreasonably disrupt the personnel or operations of Entercom or the Stations, and (b) under no circumstances shall Entercom be required to provide access to Sellers or any representatives of Sellers (i) any information or materials subject to confidentiality agreements with third parties required to be kept confidential by applicable laws, or (ii) any privileged attorney-client communications or attorney work product. All requests for access to the offices, books and records, contracts and reports of the Stations shall be made to such representatives as Entercom shall designate in writing, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. Entercom agrees not to dispose of any books and records, contracts and reports of the Stations which relate to the operations of the Stations during the period during which the Stations were owned by Sellers without consulting with Sellers prior to disposal thereof and taking any reasonable action requested by Sellers with respect to retention and transfer to Sellers thereof. 6.4. MUTUAL COVENANTS OF SELLERS AND ENTERCOM. 6.4.1. DISCLOSURE SCHEDULES. Sellers and Entercom acknowledge and agree that Sellers shall have the right from time to time after the date hereof to update or correct solely Schedules 2.1.5, 2.1.6, 2.1.8, 2.1.9 and 4.1.17 attached hereto solely to reflect actions by Sellers after the date hereof which are not prohibited by Section 6.1 hereof. The inclusion of any fact or item on a Schedule referenced by a particular section in this Agreement shall, should the existence of the fact or item or its contents, be relevant to any other section, be deemed to be disclosed with respect to such other section whether or not an explicit cross-reference appears in the Schedules. 6.4.2. BULK SALES LAWS.Entercom hereby waives compliance by Sellers, in connection with the transactions contemplated hereby, with the provisions of any applicable bulk transfer laws. 6.4.3. TAX MATTERS.Sellers and Entercom each represent, warrant, covenant and agree with each other that for tax purposes the sale of Assets described herein is not effective until the Closing Date. Sellers and Entercom agree that all Tax returns and reports shall be filed consistent with the sale of assets taking place on the Closing Date. 6.4.4. PRESERVATION OF BOOKS AND RECORDS. For a period of three (3) years after the Closing Date, Sellers agree not to dispose of, and agree to provide Entercom reasonable access to, any material books or records in Sellers' possession immediately after the Closing Date that relate to the business or operation of the Stations prior to the Closing Date. 6.5. NO CONTROL BY ENTERCOM. Subject to the provisions of the TBA, nothing contained in this Agreement shall give to Entercom any right to control the operations of the Stations prior to the Closing Date. Any advice, counsel or consent given to Sellers by Entercom under this Article VI will not mitigate, detract from or otherwise affect Sellers' representations, warranties or obligations under this Agreement. Any advice, counsel or 29 consent given to Entercom by Sellers under this Article VI will not mitigate, detract from or otherwise affect Entercom's representations, warranties or obligations under this Agreement. ARTICLE VII. ------------ PREPARATION FOR CLOSING ----------------------- 7.1. APPLICATION TO COMMISSION. The parties hereto bind themselves to use all reasonable efforts, and to cooperate with each other, in seeking the consent and approval of the Commission to the assignment of all FCC Licenses, as herein provided; and Sellers and Entercom agree that each shall diligently and promptly prepare, sign and file with the Commission within five (5) business days from the date of this Agreement any and all applications requisite or desirable to procure such consent and approval (the "Applications"); and diligently and promptly to prepare and submit to the Commission all information, data, exhibits, amendments, resolutions, statements and other material necessary or proper in connection with the Applications; and diligently to pursue the grant of a Final Order approving such Applications by the Commission. With respect to the foregoing, Sellers hereby agree, commit and bind themselves to prepare and deliver to Entercom on or before five (5) days from the date of this Agreement Sellers' portions of all applications and documents necessary for filing with the Commission to obtain the consent and approval of the Commission as required to permit the consummation of the transactions contemplated by this Agreement. 7.2. INSPECTION BY ENTERCOM. To the extent permitted under the Heritage Agreement, during the period from the date of this Agreement to the Heritage Agreement Closing Date, and between the period from the Heritage Agreement Closing Date and the Closing Date, Sellers shall afford engineers, attorneys, accountants and other consultants and/or representatives of Entercom free access during normal business hours to the employees, offices, studios, transmitter site, equipment, records and other documents pertaining to the Stations and furnish Entercom with all information concerning said Stations as Entercom may reasonably request, including but not limited to applications, responses to the Commission inquiries, and other documents filed by Sellers with the Commission. Without limiting the foregoing, Entercom shall have the right, subject to the limitations set forth above and at its sole expense, to perform such phase I and phase II environmental site assessments of any real property for the Stations included within the Assets, and upon receipt of such assessments agrees to deliver a copy of each to Sellers. No right of termination for Entercom shall arise as a result of any issue identified in such environmental site assessments (unless a separate cause for termination under other provisions of this Agreement may provide such a right); however, following the Closing Date, if Entercom performs remediation for any issues specifically identified in such environmental site assessments requiring remediation under any Environmental Law, Sellers shall reimburse Entercom for the costs and expenses of such remediation, up to a maximum aggregate amount of $250,000, subject to the limitations on indemnification set forth in Section 9.7.4. 7.3. HART-SCOTT-RODINO NOTIFICATION. As promptly as practicable and no later than five (5) business days after the date hereof, the parties hereto shall 30 take all steps reasonably necessary to file and shall participate in the filing of all requisite documents and notifications required to be filed pursuant to the HSR Act. The parties will jointly request early termination of any required waiting period under the HSR Act unless mutually agreed otherwise. The parties agree diligently to take and fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested in order to obtain promptly the expiration of the waiting period under the HSR Act. ARTICLE VIII. ------------- CLOSING ------- 8.1. CLOSING. Closing shall take place at the time and place agreed to by the parties hereto. It is expressly contemplated hereunder that Entercom shall have no right to close on the acquisition of less than all the Stations without the consent of Sellers. In the absence of agreement thereon and except as modified elsewhere herein, the Closing shall take place by mail at 10:00 a.m., Eastern Time, at the offices of Latham & Watkins, 1001 Pennsylvania Avenue, N.W., Suite 1300, Washington, D.C. 2004, on a date selected by Entercom within ten (10) business days after the later of: (a) the satisfaction or waiver of each condition to closing contained herein (other than such conditions as can only be satisfied at the Closing); and (b) the expiration of any period of extension for Closing provided elsewhere in this Agreement. If such date falls on a Saturday, Sunday or legal holiday in the State of New York, then such Closing shall take place as provided herein on the next business day. 8.2. ADJUSTMENTS. 8.2.1. Except as otherwise provided in the TBA, and subject to the terms and conditions of Section 8.2.2, at least five (5) days prior to the Closing Date, Sellers shall make a good faith estimate of the adjustment to the Purchase Price customary in radio broadcast station transactions for Proration Items (the "Proration Amount") to reflect that all Proration Items of all Stations shall be apportioned between Entercom and Sellers in accordance with the principle that Sellers shall receive the benefit of all revenues, refunds, deposits (other than deposits for Program Contracts which shall be prorated based on the percentage of the term that the program was aired on such Stations before the Closing Date and the percentage available to be aired on and after the Closing Date) and prepaid expenses, and shall be responsible for all expenses, costs and liabilities allocable to the conduct of the businesses or operations of such Stations for the period prior to the Closing Date, and Entercom shall receive the benefit of all revenues, refunds, deposits and prepaid expenses, and shall be responsible for all expenses, costs and liabilities allocable to the conduct of the businesses or operations of such Stations from and after the Closing Date; provided, however, that there shall be no adjustment or proration for any negative or positive net trade balance except to the extent that the negative net trade balance for the Stations exceeds $50,000. Determinations pursuant to this Section 8.2.1, shall be made in accordance with generally accepted accounting principles consistently applied for the period prior to the Closing Date. 31 8.2.2. Within ninety (90) days after the Closing Date, Entercom shall deliver to Sellers in writing and in reasonable detail a good faith final determination of the Proration Amount determined as of the Closing Date under Section 8.2.1 (the "Final Proration Amount"). Sellers shall assist Entercom in making such determination, and Entercom shall provide Sellers with reasonable access to the properties, books and records relating to the Stations for the purpose of determining the Final Proration Amount. Sellers shall have the right to review the computations and workpapers used in connection with Entercom's preparation of the Final Proration Amount. If Sellers disagree with the amount of the Final Proration Amount determined by Entercom, Sellers shall so notify Entercom in writing within thirty (30) days after the date of receipt of Entercom's Final Proration Amount, specifying in detail any point of disagreement; provided however, that if Sellers fail to notify Entercom in writing of Sellers' disagreement within such thirty (30) day period, Entercom's determination of the Final Proration Amount shall be final, conclusive and binding on Sellers and Entercom. After the receipt of any notice of disagreement, Entercom and Sellers shall negotiate in good faith to resolve any disagreements regarding the Final Proration Amount. If any such disagreement cannot be resolved by Sellers and Entercom within thirty (30) days after Entercom has received notice from Sellers of the existence of such disagreement, Entercom and Sellers shall jointly select a nationally recognized independent public accounting firm (which has not performed any service for either Entercom or Sellers or any of their respective subsidiaries at anytime during the two (2) year period prior to the date such firm is selected (the "Accounting Firm")), to review Entercom's determination of the Final Proration Amount and to resolve as soon as possible all points of disagreement raised by Sellers. All determinations made by the Accounting Firm with respect to the Final Proration Amount shall be final, conclusive and binding on Entercom and Sellers. The fees and expenses of the Accounting Firm incurred in connection with any such determination shall be shared one-half by Entercom and one-half by Sellers. Upon determination of the Final Proration Amount, the appropriate party owing any prorations shall pay such amounts in cash, within two (2) business days following the final determination of the Final Proration Amount. Any amounts paid pursuant to this Section 8.2.2 shall be by wire transfer of immediately available funds for credit to the recipient at a bank account identified by such recipient in writing. Entercom and Sellers agree that prior to the date of the final determination of the Final Proration Amount pursuant to this Section 8.2.2 (by the Accounting Firm or otherwise), neither party will destroy any records pertaining to, or necessary for, the final determination of the Final Proration Amount. 8.3. CLOSING DELIVERIES TO ENTERCOM. At or before the Closing, Sellers or one of them, as the case may be, shall deliver to Entercom the following items and documents in form satisfactory to counsel for Entercom and properly executed, unless Entercom shall waive in whole or in part in writing such delivery and then only to the extent of such waiver: 8.3.1. One or more Bills of Sale and assignments and other instruments of transfer and conveyance, substantially in the form attached hereto as Exhibit E, transferring to 32 Entercom the Assets to be sold, transferred or assigned hereunder and the rights and interests under the Station Contracts being assigned to Entercom hereunder, copies of all consents from third parties to the assignment of Station Contracts received prior to the Closing Date (if any), and estoppel certifications received prior to the Closing Date (if any) by the other parties to such Station Contracts that Sellers are not then in default under the terms of the Station Contract to which such other party is a party. 8.3.2. An assignment of all right, title and interest of Sellers in and to the FCC Licenses and all pending applications relating to the Stations before the Commission, substantially in the form attached hereto as Exhibit E. 8.3.3. All keys to and actual possession of all of the Assets, in the same condition as the same now is, except for ordinary wear and tear thereof, unless disposed of or otherwise altered as permitted by this Agreement. 8.3.4. Certified copies of resolutions of the Board of Directors and shareholders (if required by law) of each of Sellers, duly authorizing the execution, delivery and performance of this Agreement and all documents to be executed and delivered by each Seller at the Closing and thereafter, and certified copies of resolutions of the Board of Directors of Sinclair, duly authorizing the execution, delivery and performance of the SCI Guarantee. 8.3.5. Certificates signed by authorized officers of each Seller (each certificate being applicable to each Seller only), to the effect that no act or omission by each Seller, or state of facts contrary to the agreements, representations and warranties made herein by each Seller has been taken or has occurred and that, subject to Section 5.2.2 of this Agreement, said representations and warranties are true and correct at and as of the Closing Date as if made on and as of the time of Closing Date, except to the extent that said representations and warranties speak as of a particular date or time other than the Closing Date (in which case such representations and warranties shall be true and correct as of such date or time). 8.3.6. The consents of any public authorities or third persons that may be required in connection with the performance of this Agreement. 8.3.7. All books, records, public files, contracts, leases, Commission filings, correspondence, files and other documents in Sellers' possession relating to and necessary or appropriate to the operation of the Stations, excluding however, accounting records relating to Sellers' period of ownership (provided Entercom is given copies thereof). 8.3.8. A special warranty deed in recordable form transferring to Entercom a fee simple interest in any owned real property included within the Assets and a commitment to issue extended coverage policies of title insurance (ATLA owners and Mortgagee's policy-Form 1970, if available or Form 1984 or 1990 with 1970 endorsements), for the benefit of insuring good and marketable title to such real property free and clear of all liens and encumbrances issued by a title insurance company reasonably acceptable to Entercom and in the amount allocated to such real property hereunder, subject to standard title exceptions and 33 survey exceptions, none of which will impair or interfere with the continued use of such real property as such is currently used. All fees and expenses for the issuance of such title insurance policies shall be paid for by Entercom. 8.3.9. To the extent Sellers have obtained such consent, the consent of Heritage and/or News Corp., as necessary, to the assignment of the rights related to the Stations under the Heritage Agreement to Entercom. 8.3.10. Instructions to the Escrow Agent to deliver the original Letter of Credit to Entercom promptly after the Closing. 8.3.11. Opinions of Thomas & Libowitz, P.A., counsel to Sellers, and of Fisher, Wayland, Cooper, Leader & Zaragoza, regulatory counsel to Sellers, substantially in the forms attached hereto as Exhibits F and G. 8.4. CLOSING DELIVERIES TO SELLERS. At the Closing, Entercom shall deliver to Sellers the Purchase Price as set forth in Section 2.5 allocated between Sellers as Sellers shall direct and deliver the following items and documents in form satisfactory to counsel for Sellers and properly executed unless each Seller waives in whole or part in writing a delivery and then only to the extent of such waiver: 8.4.1. One or more Agreements whereby Entercom assumes and agrees to pay when due any Liabilities of each Seller specifically required to be assumed by Entercom hereunder, substantially in the form attached hereto as Exhibit E. 8.4.2. Certified copies of the resolutions of the Board of Directors of Entercom approving and ratifying this Agreement and all transactions contemplated by this Agreement. 8.4.3. A certificate signed by the President or any Vice President of Entercom to the effect that with respect to any matter which would prevent Entercom from consummating the Closing, no act or omission of Entercom or state of facts contrary to the agreements, representations and warranties made herein by Entercom has been taken or has occurred and that said representations and warranties are true and correct at and as of the Closing Date in all material respects as if made on and as of Closing Date, except to the extent that said representations and warranties speak as of a particular date or time other than the Closing Date (in which case such representations and warranties shall be true and correct in all material respects as of such date or time). 8.4.4. An opinion of John C. Donlevie, General Counsel to Entercom, substantially in the form attached hereto as Exhibit H. 8.5. COVENANTS OF FURTHER ASSURANCE. At and after the time of Closing, upon request of Entercom or Sellers, as the case may be, the parties shall take such reasonable action and deliver to the party so requesting such further instruments of assignment, 34 conveyance or transfer or other documents of further assurance as in the opinion of counsel for either Sellers or Entercom may be reasonably necessary to evidence the full and effective transfer, conveyance and assignment of the Assets and possession thereof to Entercom. 8.6. DAMAGE TO PROPERTY. If, at the time of Closing, any of the real or tangible personal property included in the Assets shall have suffered loss or damage for which Entercom is not responsible under the term of the TBA, Sellers shall use their reasonable efforts to repair, replace or restore the same prior to Closing. In the event that such repair, replacement or restoration cannot be completed prior to the date scheduled for Closing, then, except as provided immediately below, Closing shall occur and Sellers shall assign to Entercom their rights to all insurance proceeds relating to such loss or damage. In the event such loss or damage is uninsured or so material as to prevent one of the Stations (other than WBBF(AM)) from using its studios or any of its transmitter facilities in the normal course, consistent with past practices, Closing shall be deferred until the completion of such repair, replacement or restoration by Sellers to the extent that the Station's or Stations' studios and transmitter facilities are again useable in the normal course, consistent with past practices, and such delay shall not give rise to a right to terminate this Agreement as provided in Section 9.1.4 hereof. 8.7. TAXES ON TRANSACTION. All sales, purchase, transfer, use or documentary taxes, if any, payable by reason of this Agreement or any of the transactions contemplated hereby or the sale, transfer or delivery of any of the Assets to Entercom, whether or not imposed on Entercom or Sellers, shall be paid one-half by Entercom and one-half by Sellers promptly when due. ARTICLE IX. TERMINATION, DEFAULT AND INDEMNIFICATION 9.1. TERMINATION BY REASON OTHER THAN DEFAULT. This Agreement may be terminated by any party hereto not then in default hereunder at the time of such termination upon written notice to the other party if: 9.1.1. The Commission denies or designates for hearing any of the Applications or any portion thereof by Final Order; or 9.1.2. Events occur which give rise to a specific right hereunder to terminate this Agreement by the party seeking to terminate; or 9.1.3. Other than as a result of a default by the party seeking to terminate, any material condition set forth herein to the obligation of the party seeking to terminate this Agreement to complete the transaction has not been satisfied or complied with by the Closing Date and has not been waived by the party seeking to terminate; or 9.1.4. By either party, subject to Section 8.6 hereof, if the Commission does not grant its consent and approval to the Applications and the waiting period required under 35 the HSR Act has not expired or been terminated by the date that is six months after the date of this Agreement and the TBA has not commenced by such six-month anniversary, provided, that if an issue has been raised before the Commission, the DOJ or the FTC concerning either Sellers, or any of their predecessors, on the one hand, or Entercom, on the other hand, and such issue has delayed the consent and approval of the Commission or the expiration or termination of the waiting period contemplated by the foregoing clause, then the party to which such issue relates shall not be permitted to terminate the Agreement pursuant to this provision on such six-month anniversary date. If the TBA has commenced within the six-month period set forth above, the period for termination by either party pursuant to this Section 9.1.4 shall be one (1) year, provided, that on such one-year anniversary date, either party may, subject to Section 8.6 hereof, terminate this Agreement even if an issue has been raised before the Commission concerning such party and such issue has delayed the consent and approval of the Commission. 9.2. EFFECT OF TERMINATION BY REASON OTHER THAN DEFAULT. If this Agreement is duly terminated by either party as provided in Section 9.1, then the Letter of Credit shall be returned to Entercom and all obligations of either party to the other shall cease and both parties shall be fully and finally released herefrom. 9.3. DEFAULT. The following shall constitute a default hereunder: 9.3.1. If any of the representations or warranties of a party contained herein is inaccurate or breached in any material respect; or 9.3.2. If any of the obligations to be performed hereunder by a party hereto is not performed during the period or at or before the time specified herein for such performance. 9.4. REMEDIES OF SELLERS. In the event of a default by Entercom, which is not waived by Sellers, Sellers shall have the following remedies: 9.4.1. Prior to Closing, Sellers may, as their sole remedy, by written notice to Entercom terminate this Agreement in which event Seller shall be entitled to receive the proceeds of the Letter of Credit as liquidated damages in full and final settlement of all claims under this Agreement, and there shall be no other or further obligations, liabilities or remedies of the parties hereunder. 9.4.2. In the event Closing occurs hereunder, Sellers' remedy for any default by Entercom shall be indemnification pursuant to Section 9.7 hereof. 9.5. ENTERCOM'S REMEDIES. In the event of a default by either Seller hereunder, which is not waived by Entercom, Entercom shall have the following remedies: 36 9.5.1. Prior to Closing, subject to the provisions regarding failures of representations and warranties contained in Section 5.2.2 hereof, Entercom may by written notice to Sellers terminate this Agreement in which event Entercom shall be entitled to recover from Sellers, jointly and severally, any damages Entercom sustained as a result of the default by such breaching Seller hereunder. 9.5.2. Prior to Closing, Entercom may seek specific performance by Sellers of Sellers' obligations hereunder and shall also be entitled to any other remedy available at law or in equity, including without limitation the recovery of any damages (including attorneys fees and costs) incurred by Entercom as a result of the default by Sellers hereunder. Each Seller covenants that under such circumstances it shall not assert in defense of an action seeking specific performance of this Agreement in favor of Entercom that Entercom has available adequate remedies at Law. 9.5.3. In the event Closing occurs hereunder, Entercom's remedy for any default by Sellers shall be indemnification pursuant to Section 9.7 hereof. 9.6. LIQUIDATED DAMAGES NOT A PENALTY. With respect to the liquidated damages as described and provided for in Section 9.4.1 hereof, Sellers and Entercom hereby acknowledge and agree that the damage that may be suffered by Sellers in the event of a default by Entercom hereunder is not readily ascertainable and that such liquidated damages as of the date hereof are a reasonable estimate of such damages and are intended to compensate Sellers for any such damage and are not to be construed as a penalty. 9.7. INDEMNIFICATION. 9.7.1. BY SELLERS. Subject to Sections 9.7.4 and 10.3, from and after the Closing Date, Sellers shall, jointly and severally, indemnify, defend and hold Entercom and its officers, directors, employees and affiliates harmless from, against and with respect to any and all loss, damage, claim, obligation, assessment, cost, liability, and reasonable expense (including, without limitation, reasonable attorney's fees and reasonable costs and expenses incurred in investigating, preparing, defending against or prosecuting any litigation or claim, action, suit, proceeding or demand) of any kind or character (a "Loss") incurred, suffered, sustained or required to be paid by any of them and resulting from, related to or arising out of: (a) any breach of any of the covenants, representations or warranties made by Sellers in or pursuant to this Agreement, or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with the Closing hereunder; (b) any failure by Sellers to perform or observe, or to have performed or observed, in full, any covenant, agreement or condition to be performed or observed by them pursuant to this Agreement or in any agreement, document or instrument executed and delivered by or on behalf of them in connection with the Closing hereunder; 37 (c) any and all Liabilities of Sellers, except for Liabilities to be assumed or retained by Entercom under the terms of this Agreement; or (d) Sellers' operation or ownership of the Assets prior to the Adjustment Time, including any and all obligations and liabilities arising under the FCC Licenses or the Station Contracts which accrue or relate to a period of time prior to the Adjustment Time; or 9.7.2. BY ENTERCOM. If Closing does not occur due to a default by Entercom in its obligation to complete such Closing hereunder, Sellers' remedy shall be liquidated damages pursuant to Section 9.4 hereof. Provided Closing occurs hereunder, subject to Section 10.3, Entercom shall indemnify, defend and hold Sellers and their respective officers, directors, employees and affiliates harmless from, against and with respect to any Loss (as defined in Section 9.7.1) incurred, suffered, sustained or required to be paid by any of them and resulting from, related to or arising out of: (e) any breach of any of the covenants, representations or warranties made by Entercom in or pursuant to this Agreement or in any agreement, document or instrument executed and delivered pursuant hereto or in connection with the Closing hereunder; (f) any failure by Entercom to perform or observe, or to have performed or observed, in full, any covenant, agreement or condition to be performed or observed by it pursuant to this Agreement or in any agreement, document or instrument executed and delivered by or on behalf of it in connection with the Closing hereunder; or (g) any and all Liabilities of Entercom except for Liabilities to be assumed or retained by Sellers under the terms of this Agreement; or (h) Entercom's operation or ownership of the Assets after the Adjustment Time, including any and all Liabilities arising under the FCC Licenses or the Station Contracts assumed by Entercom which accrue after the Adjustment Time or which relate to or arise out of events occurring after the Adjustment Time. 9.7.3. PROCEDURES. Any party seeking indemnification under this Agreement (the "Indemnified Party") shall promptly give the party from whom indemnification is sought (the "Indemnifying Party") written notice of any claim or the commencement of any action or proceeding for which the Indemnified Party may seek indemnification, and the Indemnified Party shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting from such claim, unless injunctive relief is sought against the Indemnified Party in which case the Indemnified Party shall have the right to join in any defense. The Indemnified Party's failure to give the Indemnifying Party notice under this clause shall not preclude the Indemnified Party from seeking indemnification from the Indemnifying Party except to the extent that the Indemnified Party's failure has materially prejudiced the Indemnifying Party's ability to defend the claim or litigation. The Indemnifying Party shall not settle any claim 38 for which the Indemnified Party seeks indemnification or consent to entry of any judgment in litigation arising from such a claim without obtaining a written release of the Indemnified Party from all liability in respect of such claim or litigation. If the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, or if injunctive relief is sought against the Indemnified Party, the Indemnified Party may defend against or settle such claim or litigation in such manner as it may deem appropriate, and in such cases, upon a written demand therefore, the Indemnifying Party shall promptly reimburse the Indemnified Party for the amount of all reasonable expenses, legal or otherwise, incurred by the Indemnified Party in connection with the defense against or settlement of such claim or litigation. In addition, if the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, or if injunctive relief is sought against the Indemnified Party, and if no settlement of the claim or litigation is made, upon written demand therefor, the Indemnifying Party shall promptly reimburse the Indemnified Party for the amount of any judgment rendered with respect to such claim or in such litigation and for all reasonable expenses, legal or otherwise, incurred by the Indemnified Party in the defense against such claim or litigation. 9.7.4. LIMITS ON INDEMNIFICATION. Notwithstanding any other provision hereof, Entercom shall not be entitled to make a claim against Sellers for indemnification under this Agreement until the aggregate amount of such claims by Entercom exceeds One Hundred Fifty Thousand Dollars ($150,000) (the "Threshold"), provided, that once the Threshold has been exceeded, Entercom shall be entitled to seek from Sellers, jointly and severally, the full amount of such claims. The amount of the Threshold shall have no bearing on any determination as to what constitutes "material" for purposes of this Agreement. In addition, notwithstanding any other provision of this Agreement to the contrary, in no event shall a Loss include a party's incidental, consequential or punitive damages, regardless of the theory of recovery. ARTICLE X. ---------- GENERAL PROVISIONS ------------------ 10.1. EXPENSES OF THE PARTIES. Except as otherwise expressly provided herein, all expenses involved in the preparation, authorization and consummation of this Agreement, including, without limitation, all fees and expenses of agents, representatives, counsel and accountants in connection therewith and in connection with applications to the Commission hereunder, shall be borne solely by the party who shall have incurred the same, and the other party shall have no liability in respect thereof. The foregoing notwithstanding, the parties agree to pay in equal shares (i) any filing fees of the Commission relating to the filing of the Applications, (ii) fees related to notifications under the HSR Act or to any other governmental agency and (iii) fees and expenses of the Escrow Agent under the Escrow Agreement and the Indemnification Escrow Agreement. In addition, (y) assuming Sellers obtain the consent of Geraghty & Miller to allow Entercom and its lenders to rely upon the phase I environmental site assessment performed for the Real Property and identified on Schedule 4.1.16, Entercom agrees to pay one-half of the total cost of such phase I environmental site assessment performed by Geraghty & Miller and (z) Entercom shall pay all of the cost involved 39 in the update by Geraghty & Miller of such phase I environmental site assessment (as contemplated by Section 4.1.16.1), provided that Entercom shall receive a dollar-for-dollar credit against any amount paid by Entercom pursuant to clause (y) above. 10.2. BROKERS. Each party hereto represents and warrants to the other party hereto that it has not incurred any Liability, contingent or otherwise, for brokerage or finders' fees or agents commissions or other like payment in connection with this Agreement or the transactions contemplated hereby for which the other party will have any Liability, and each party hereto agrees to indemnify and hold the other party hereto harmless against and in respect to any such Liability based in any way on any agreement, arrangement or understanding claimed to have been made by such party with any third party. 10.3. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The provisions hereof which by their terms are to be performed and observed after the Closing Date and the several representations, warranties, indemnities and agreements of Entercom and Sellers herein contained shall survive the Closing Date hereunder for one (1) year following the Closing Date. No claim for indemnification may be made pursuant to Article IX after the survival period set forth in this Section 10.3 (except that all claims which are properly asserted prior to the expiration of the survival period set forth in this Section 10.3 shall survive with respect to such claims until the final resolution thereof). 10.4. AMENDMENT AND WAIVER. This Agreement cannot be changed or terminated orally. Any amendment of modification hereof must be in writing signed by the party against whom enforcement is sought. No waiver of compliance with any provision or condition hereof, and no consent provided for herein, shall be effective unless evidenced by an instrument in writing duly executed by the party sought to be charged with such waiver or consent. 10.5. ASSIGNMENT. Entercom shall have the right to assign all or any portion of its rights under this Agreement to any entity under common control with Entercom or a Qualified Intermediary under Section 1031 of the Code, provided, that no such assignment shall relieve Entercom of its obligations hereunder. Other than as expressly set forth above, no party may assign all or any portion of its rights under the Agreement without the prior written consent of the other parties hereto. 10.6. EFFECT OF THIS AGREEMENT. This Agreement, together with the exhibits and schedules hereto and a letter agreement, among Entercom and SCI, dated of even date herewith, sets forth the entire understanding of the parties and supersedes any and all prior written or oral agreements, arrangements or understandings relating to the subject matter hereof. No representation, promise, inducement or statement of intention has been made by either party which is not embodied in this Agreement or the letter agreement referred to above, and neither party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention not embodied herein unless same shall have been made subsequent hereto, shall be in writing and shall be signed by the party to be charged therewith. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. 40 10.7. HEADINGS. The article or section headings of this Agreement are for convenience of reference only and do not form a part of and do not in any way modify, interpret or construe the intention of the parties. 10.8. COUNTERPARTS. This Agreement may be executed in one or more counterparts and all such counterparts shall be construed as one and the same instrument. 10.9. GOVERNING LAW. The construction and performance of this Agreement shall be governed by the laws of the State of New York, excluding choice of law provisions thereunder. 10.10. NOTICES. Any notice, report, demand, waiver or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: If to Sellers: David D. Smith, President - ------------- Sinclair Communications, Inc. 2000 West 41st Street Baltimore, MD 21211-1420 Telecopy Number: (410) 467-5043 with copies to: Robert Quicksilver, General Counsel Sinclair Communications, Inc. 2000 West 41st Street Baltimore, MD 21211-1420 Telecopy Number: (410) 662-4707 Steven A. Thomas, Esq. Thomas & Libowitz, P.A. 100 Light Street, Suite 1100 Baltimore, MD 21202 Telecopy Number: (410) 752-2046 If to Entercom: Joseph M. Field, President - -------------- Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopy Number: (610) 660-5620 41 with copies to: John C. Donlevie, General Counsel Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopy Number: (610) 660-5620 Joseph D. Sullivan, Esq. Latham & Watkins 1001 Pennsylvania Avenue, N.W., Suite 1300 Washington, D.C. 20004 Telecopy Number: (202) 637-2201 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail, or (iii) the date of telecopy transmission as indicated on the telecopier transmission report provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight courier on the date of the telecopy transmission. Either party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this section. 10.11. STATION EMPLOYEES. Subject to the terms of the TBA, Sellers agree that for a period of one year after the Commencement Date of the TBA, neither they nor any of their affiliates, successors or assignees will employ or solicit for employment, or counsel others to solicit for employment, any current employee of the Stations that Entercom employs after the Closing; provided, that if Entercom terminates any employee of the Stations, such restrictions shall not apply to any such terminated employees. 10.12. SECTION 1031 ASSET EXCHANGE. Entercom may elect to effect the acquisition of all or part of the Assets as part of a deferred like-kind exchange under Section 1031 of the Code, in lieu of buying such assets hereunder; provided, that the consummation of this Agreement is not predicated or conditioned on such exchange. If Entercom so elects, it shall provide notice to Sellers of its election, and thereafter (i) may at any time at or prior to Closing assign its rights under this Agreement to a "qualified intermediary" as defined in Treas. Reg. ss. 1.1031(k)-1(g)(4), subject to all of Sellers' rights and obligations hereunder and (ii) shall promptly provide written notice of such assignment to all parties hereto; provided, that no such assignment shall relieve Entercom of its obligations hereunder. Notwithstanding the assignment of Entercom's rights hereunder, the parties acknowledge and agree that the representations, warranties and covenants of Sellers hereunder are for the benefit of Entercom and shall remain enforceable by Entercom against Sellers in accordance with the terms hereof. Sellers shall cooperate with all reasonable requests of Entercom and the "qualified intermediary" in arranging and effecting the exchange as one which qualifies under Section 1031 of the Code; provided, that Sellers shall incur no additional costs, expenses, delays or liabilities in connection with this transaction as a result of or in connection with the exchange. Without limiting the generality of the foregoing, if Entercom has given notice of its intention to effect the acquisition of all or part 42 of the Assets as part of a tax-deferred exchange, Sellers shall (i) promptly provide Entercom with written acknowledgment of such notice and (ii) at Closing, accept payment for all or that portion of the Assets for which like-kind exchange treatment is sought by Entercom from the "qualified intermediary" rather than from Entercom (which payment shall discharge the obligation of Entercom hereunder to make payment for such assets) and transfer, assign and convey such assets to Entercom. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 43 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized corporate officers on the date first written above. TUSCALOOSA: TUSCALOOSA BROADCASTING, INC. By: ---------------------------------------- Title: ------------------------------------- SRPLI: SINCLAIR RADIO OF PORTLAND LICENSEE, INC. By: ---------------------------------------- Title: ------------------------------------- SRRLI: SINCLAIR RADIO OF ROCHESTER LICENSEE, INC. By: ---------------------------------------- Title: ------------------------------------- ENTERCOM ENTERTAINMENT COMMUNICATIONS, INC. By: ---------------------------------------- Title: ------------------------------------- EX-10.57 3 EXHIBIT 10.57 ================================================================================ TIME BROKERAGE AGREEMENT BY AND AMONG ENTERTAINMENT COMMUNICATIONS, INC., TUSCALOOSA BROADCASTING, INC., SINCLAIR RADIO OF PORTLAND LICENSEE, INC. AND SINCLAIR RADIO OF ROCHESTER LICENSEE, INC. DATED AS OF JANUARY 26, 1998 ================================================================================ TABLE OF SCHEDULES AND EXHIBITS ------------------------------- Schedule 1.1 Programming Schedule 1.2 Compensation Schedule 2.1 Programming Policy Statement Schedule 4.1 Excluded Contracts Schedule 11.1 Time Broker's Actions and Proceedings Schedule 11.2 Licensee's Actions and Proceedings TABLE OF CONTENTS ----------------- Page ---- ARTICLE I. SALE OF TIME.....................................................1 Section 1.1. Broadcast of Programming.........................1 Section 1.2. Payment..........................................1 Section 1.3. Term.............................................2 ARTICLE II. PROGRAMMING AND OPERATING STANDARDS AND PRACTICES................2 Section 2.1. Compliance with Standards........................2 Section 2.2. Political Broadcasts.............................2 Section 2.3. Handling of Communications.......................2 Section 2.4. Preemption.......................................3 Section 2.5. Broadcasting Obligations of Licensee.............3 Section 2.6. Rights in Programs...............................4 Section 2.7. "Payola" and "Plugola"...........................4 Section 2.8. Advertising and Programming......................4 Section 2.9. Format and Transmitter Location..................4 Section 2.10. Compliance with Laws.............................4 Section 2.11. Certifications...................................5 ARTICLE III. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES........................5 Section 3.1. Time Broker's Employees..........................5 Section 3.2. Licensee's Employees.............................5 Section 3.3. Time Broker's Expenses...........................5 Section 3.4. Operating Expenses...............................6 Section 3.5. Employee Matters.................................6 ARTICLE IV. ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS......................8 Section 4.1. Assignment.......................................8 Section 4.2. Proration........................................9 Section 4.3. Accounts Receivable..............................9 ARTICLE V. OPERATION OF STATION............................................10 ARTICLE VI. GRANT OF LICENSES...............................................10 Section 6.1. License to Use Station Facilities...............10 Section 6.2. License of Intellectual Property................11 i ARTICLE VII. INDEMNIFICATION.................................................11 Section 7.1. Indemnification Rights..........................11 Section 7.2. Procedures......................................11 ARTICLE VIII. DEFAULT.........................................................12 Section 8.1. Time Broker Events of Default...................12 Section 8.2. Licensee's Events of Default....................12 Section 8.3. Cure Periods....................................12 Section 8.4. Other Defaults..................................13 ARTICLE IX. TERMINATION.....................................................13 Section 9.1. Termination.....................................13 Section 9.2. Certain Matters Upon Termination................14 ARTICLE X. REMEDIES .......................................................15 ARTICLE XI. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES................................................15 Section 11.1. Representations and Warranties of Time Broker..15 Section 11.2. Representations, Warranties and Covenants of Licensee......................................16 ARTICLE XII. MISCELLANEOUS...................................................17 Section 12.1. Modification and Waiver........................17 Section 12.2. No Waiver; Remedies Cumulative.................17 Section 12.3. Construction...................................17 Section 12.4. Headings.......................................17 Section 12.5. Successors and Assigns.........................17 Section 12.6. Force Majeure..................................17 Section 12.7. Broker.........................................18 Section 12.8. Counterpart Signatures.........................18 Section 12.9. Notices........................................18 Section 12.10. Entire Agreement...............................19 Section 12.11. Severability...................................19 Section 12.12. No Joint Venture...............................19 Section 12.13. Damage to Stations.............................20 Section 12.14. Noninterference................................20 Section 12.15. Regulatory Changes.............................20 ii TIME BROKERAGE AGREEMENT This Time Brokerage Agreement (this "Agreement") is made as of the 26th day of January, 1998, by and among Entertainment Communications, Inc., a Pennsylvania corporation ("Time Broker"), and Tuscaloosa Broadcasting, Inc., a Maryland corporation ("Tuscaloosa"), Sinclair Radio of Portland Licensee, Inc., a Maryland corporation ("SRPLI") and Sinclair Radio of Rochester Licensee, Inc., a Maryland corporation ("SRRLI") (Tuscaloosa, SRPLI and SRRLI are sometimes collectively referred to herein as "Licensee"). Upon the consummation of the transactions contemplated by that certain Asset Purchase Agreement, dated July 16, 1997, among Sinclair Broadcast Group, Inc. ("Sinclair") and various subsidiaries of Heritage Media Corporation ("HMC") (control of which subsidiaries, on August 20, 1997, was transferred to William G. Evans, Trustee) (HMC is sometimes collectively referred to with its subsidiaries as "Heritage"), SRPLI will become the licensee of broadcast stations KKSN(AM), Vancouver, Washington, KKSN-FM, Portland, Oregon and KKRH(FM), Salem, Oregon (collectively, the "Portland Stations"), and SRRLI will become the licensee of broadcast stations WKLX(FM), Rochester, New York, WBEE(FM), Rochester, New York, WBBF(AM), Rochester, New York and WQRV(FM), Avon, New York (collectively, the "Rochester Stations" and together with the Portland Stations, the "Stations"). Time Broker and Licensee desire to enter into an agreement providing for the programming and sale, upon the acquisition by Licensee of the Stations from Heritage, of substantially all of the broadcast time of the Stations to Time Broker, subject to and in compliance with the rules and policies of the Federal Communications Commission (the "FCC"). Simultaneously herewith, Time Broker and Licensee are entering into an Asset Purchase Agreement (the "Purchase Agreement") providing for the acquisition by Time Broker of the Stations. Accordingly, in consideration of the foregoing and of the mutual promises, covenants, and conditions set forth below, the parties agree as follows: ARTICLE I. SALE OF TIME Section 1.1. Broadcast of Programming. Effective upon the date (the "Commencement Date") that is the later to occur of (a) the date that Licensee acquires the Stations from Heritage or (b) the date that is ten (10) business days after the expiration or early termination of any waiting period applicable to the transfer of the Stations to Time Broker under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), Licensee shall broadcast on the Stations, or cause to be broadcast on the Stations, programs which are presented to it by Time Broker as described in greater detail on Schedule 1.1 (the "Programming"). Section 1.2. Payment. Time Broker shall pay Licensee for broadcast of the Programming the amounts set forth in Schedule 1.2 (the "Monthly Payment"), subject to adjustment as set forth in Sections 2.4 and 2.5 below. All payments shall be made by wire 1 transfer of immediately-available funds by the last business day of each calendar month, in arrears, to which such payment pertains. Section 1.3. Term. This Agreement shall commence on the Commencement Date and shall terminate on the earlier of (i) 12:01 a.m. on the Closing Date (as defined in the Purchase Agreement) under the Purchase Agreement, (ii) the date the Purchase Agreement is terminated, or (iii) the date this Agreement is terminated pursuant to Section 9.1 hereof. ARTICLE II. PROGRAMMING AND OPERATING STANDARDS AND PRACTICES Section 2.1. Compliance with Standards. All Programming delivered by Time Broker during the term of this Agreement shall be in accordance with applicable statutes, FCC requirements and the programming policies set forth on Schedule 2.1. Licensee reserves the right to refuse to broadcast any Programming containing matter which the Licensee believes is unsuitable or not consistent with the needs and interests of its service area or may be violative of any right of any third party, or which may constitute a "personal attack" as that term is and has been defined by the FCC or which Licensee reasonably determines is, or in the reasonable opinion of Licensee may be deemed to be, indecent (and not broadcast during the safe harbor for indecent programming established by the FCC) or obscene by the FCC or any court or other regulatory body with authority over Licensee or the Station. Section 2.2. Political Broadcasts. Time Broker shall maintain and deliver to Licensee all records and information required by the FCC to be placed in the public inspection files of the Stations pertaining to the broadcast of political programming and controversial issue advertisements, in accordance with the provisions of Sections 73.1212 and 73.3526 of the FCC's rules, and agrees to broadcast sponsored programming addressing political issues or controversial subjects of public importance, in accordance with the provisions of Section 73.1212 of the FCC's rules. Time Broker shall consult and cooperate with Licensee and adhere to all applicable statutes and the rules, regulations and policies of the FCC, as announced from time to time, with respect to the carriage of political advertisements and programming and the charges permitted therefor. Time Broker shall promptly provide to Licensee such documentation relating to such programming as Licensee is required to maintain in its public inspection files or as Licensee shall reasonably request. Licensee shall be responsible for the maintenance of the public inspection files of the Stations. Section 2.3. Handling of Communications. Time Broker shall cooperate with Licensee in promptly responding to all mail, cables, telegrams or telephone calls directed to the Stations in connection with the Programming provided by Time Broker or any other matter relevant to its responsibilities hereunder. Promptly upon receipt, Time Broker shall provide copies of all such correspondence to Licensee. Time Broker shall promptly advise Licensee of any public or FCC complaint or inquiry known to Time Broker concerning such Programming, and shall provide Licensee with copies of any letters to Time Broker from the public, including complaints concerning such Programming. Upon Licensee's request, Time Broker shall provide Licensee with such information as will allow Licensee to respond to such complaints and inquiries. Notwithstanding the foregoing, Licensee shall handle all matters or inquiries relating 2 to FCC complaints and any other matters required to be handled by Licensee under the rules and regulations of the FCC. Section 2.4. Preemption. Licensee may, from time to time, preempt portions of the Programming to broadcast emergency information or programs it deems would better serve the public interest. Time Broker shall be notified at least one week in advance of any preemption of any of the Programming for the purpose of broadcasting programs Licensee deems necessary to better serve the public interest unless such advance notice is impossible or impractical, in which case Licensee shall notify Time Broker promptly upon making such determination. In the event of any such preemption, Time Broker shall be entitled to a credit against any other amounts due Licensee under this Agreement in an amount equal to the product of (a) the Monthly Payment and (b) the result of dividing the number of hours so affected by the aggregate number of hours available for Programming during such month. Licensee represents and covenants that preemption pursuant to this Section 2.4 shall only occur to the extent Licensee deems necessary to carry out its obligations as an FCC licensee, and expressly agrees that its right of preemption shall not be exercised for the commercial advantage of Licensee or others. Section 2.5. Broadcasting Obligations of Licensee. During the term of this Agreement, except as set forth in Sections 2.1 and 2.4 and this Section 2.5, Licensee will broadcast the Programming in its entirety (including commercials), without interruption, deletion or addition of any kind: i. Licensee may temporarily refrain from broadcasting the Programming from the main transmitter of each Station between the hours of 12:30 a.m. and 5:30 a.m. (or at such other time in the event that weather conditions or contractual arrangements relating to transmitter sites dealing with the exposure of humans to RF radiation so require or as may otherwise be required under compelling circumstances that cannot be rescheduled between the hours of 12:30 a.m. and 5:30 a.m.) in order to perform normal, customary and routine maintenance on the Station's main transmitting facilities; provided, that Licensee shall provide written notice to Time Broker of its intent to refrain from broadcasting the Programming from the main transmitter of each Station at least forty-eight (48) hours in advance, except when an emergency requires such suspension, and provided further that Licensee shall use its best efforts to minimize the impact, frequency and duration of such interruptions, including without limitation by way of use of any auxiliary transmitter that may be available for the applicable Station; and ii. Licensee may temporarily cease broadcasting the Programming from the main transmitter of each Station as a result of a technical malfunction, natural disaster, act of public enemy, act of God, or any other cause beyond the control of Licensee; provided that in any such case, Licensee will act expediently and use its best efforts to resume the broadcast of the Programming from the main transmitter of each Station as quickly as the applicable circumstances will allow, and will use its best efforts to broadcast the Programming from any auxiliary transmitter that may be available for the applicable Station. In the event of any interruption pursuant to this Section (other than (a) interruption pursuant to Section 2.5(i) occurring between the hours of 12:30 a.m. and 5:30 a.m. and (b) 3 interruption pursuant to Section 2.5(ii)), if Licensee is not able to broadcast the Programming from an available auxiliary transmitter, Time Broker shall be entitled to a credit against the Monthly Payment or any other sums due hereunder, in an amount equal to the product of (a) the Monthly Payment and (b) the result of dividing the number of hours so affected by the aggregate number of hours available for Programming during such month. Section 2.6. Rights in Programs. All right, title and interest in and to the Programming, and the right to authorize the use of the Programming in any manner and in any media whatsoever, shall be and remain vested at all times solely in Time Broker. Section 2.7. "Payola" and "Plugola". Time Broker agrees that it will not accept any gift, gratuity or other consideration, including, but not limited to, a commission, discount, bonus, material supplies or other merchandise, services or labor (collectively, the "Consideration"), directly or indirectly, from any person or company for the playing of records, the presentation of any programming or the broadcast of any commercial announcement over the Stations unless the payor is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act of 1934, as amended (the "Communications Act") and the FCC requirements. It is further understood and agreed that no commercial message, plugs, or undue reference shall be made in programming presented over the Stations to any business venture, profit-making activity or other interest (other than non-commercial announcements for bona fide charities, church activities or other public service activities) unless the payor is identified in the program for which Consideration was provided as having paid for or furnished such Consideration, in accordance with the Communications Act and the FCC requirements. In addition, Time Broker agrees that it will take steps, including the continuation of Licensee's system for periodic execution of affidavits, reasonably designed to assure that it, its employees and agents comply with this Section 2.7. Section 2.8. Advertising and Programming. Beginning with the Commencement Date, Time Broker shall be solely responsible for any expenses incurred in connection with and shall be entitled to all revenue from the sale of advertising or program time in the Programming. Except as otherwise provided herein, Time Broker does not assume any obligation of Licensee under any contract or advertising arrangement entered into by Licensee on or after the Commencement Date. Licensee shall indemnify Time Broker for the amount of any lost revenue caused by any sale of advertising time made by Licensee that would lower the Station's lowest unit charge for political advertising. Section 2.9. Format and Transmitter Locations. During the term of this Agreement, except as otherwise consented to in writing by Licensee or as otherwise provided in the following sentence, Time Broker agrees that it will not make any material changes in the Stations' existing programming formats or seek to change the location of any of the Stations' studio or transmitting facilities. Notwithstanding the foregoing, (i) the parties expressly agree that Time Broker, in its sole discretion, is permitted during the term of this Agreement to exchange the programming formats on KKSN(AM) and KFXX(AM) (which is owned and operated by Time Broker) (it being understood that, should this Agreement terminate other than as a result of the Closing (as defined in the Purchase Agreement) under the Purchase Agreement, 4 Time Broker shall, promptly upon such termination, change the programming formats on each such station back to their programming formats substantially as they exist on the date of this Agreement) and (ii) Licensee agrees that it will not unreasonably withhold consent to any request by Time Broker to change the programming format for WBBF(AM). Section 2.10. Compliance with Laws. At all times during the term of this Agreement, Time Broker and Licensee shall comply in all material respects with all applicable federal, state and local laws, rules and regulations. Section 2.11. Certifications. Pursuant to Section 73.3555(a)(3)(ii) of the FCC's rules, Licensee certifies that it maintains ultimate control over the Station's facilities, including specifically control over station finances, personnel and programming, and Time Broker certifies that this Agreement complies with the provisions of Section 73.3555(a) of the FCC's rules. ARTICLE III. RESPONSIBILITY FOR EMPLOYEES AND EXPENSES Section 3.1. Time Broker's Employees. Time Broker shall employ and be responsible for the payment of salaries, taxes, insurance and all other costs related to all personnel used in the production of the Programming. Except as provided in Section 3.5 with respect to Transferred Employees, Time Broker will not incur any liability on account of Licensee's employees arising and accruing prior to the Commencement Date including, without limitation, any such liability on account of unemployment insurance contributions, termination and severance payments, accrued sick leave or accrued vacation. Section 3.2. Licensee's Employees. Licensee shall employ and be responsible for the payment of salaries, taxes, insurance and all other costs related to the personnel necessary to fulfill its obligations as Licensee and under this Agreement, and to produce Licensee's programming on the Stations subject to reimbursement as provided in Schedule 1.2. Time Broker shall have no authority and shall not supervise persons in the employ of Licensee after the Commencement Date. Licensee acknowledges that its employees may have access to certain confidential information of Time Broker. Licensee shall, therefore, inform its employees of the confidential nature of such information and require that each such employee keep such information confidential. Section 3.3. Time Broker's Expenses. Time Broker shall pay for all costs associated with the production and delivery of the Programming, including but not limited to (i) all ASCAP, BMI, SESAC and other copyright fees, (ii) any expenses incurred in connection with its sale of advertising time hereunder (including without limitation sales commissions) in connection with the Programming and (iii) the salaries, taxes, insurance and related costs for all of Time Broker's personnel used in the production of the Programming and all of Time Broker's sales personnel (including salespeople, traffic personnel, and programming staff). Section 3.4. Operating Expenses. Licensee shall be responsible for the payment when due of all fees and expenses relating to operation and maintenance of the Stations to the extent necessary for Licensee to maintain the licensed transmitting capability of the 5 Stations and to fulfill its obligations as an FCC licensee, including, without limitation, salaries, benefits and similar expenses for Licensee's employees, Licensee's federal, state and local taxes, rent, utilities (excluding telephone), maintenance and repairs at each of the Station's transmitter and studio sites, any capital expense at each of the Station's transmitter and studio sites, insurance on the Stations' equipment, insurance deductibles on claims on the Stations' equipment, and ad valorem property taxes, subject to reimbursement as provided in Schedule 1.2. Section 3.5. Employee Matters. 3.5.1 On the Commencement Date, Time Broker shall offer employment to each of the employees of the Stations (including those on leave of absence, whether short-term, long-term, family, maternity, disability, paid, unpaid or other), other than those employees that are retained by Licensee pursuant to Section 3.2 above during the term of this Agreement, at a comparable salary, position and place of employment as held by each such employee immediately prior to the Commencement Date (such employees who are given such offers of employment are referred to herein as the "Transferred Employees"). Nothing in this Section 3.5.1 is intended to guarantee employment for any Transferred Employee for any length of time after the Commencement Date. 3.5.2 Except as provided otherwise in this Section 3.5, Licensee shall pay, discharge and be responsible for (a) all salary and wages arising out of or relating to the employment of the employees of the Stations prior to the Commencement Date and (b) any employee benefits arising under the Benefit Plans (as defined in the Purchase Agreement) of Licensee and their Affiliates during the period prior to the Commencement Date. From and after the Commencement Date, Time Broker shall pay, discharge and be responsible for all salary, wages and benefits arising out of or relating to the employment of the Transferred Employees by Time Broker on and after the Commencement Date. Time Broker shall be responsible for all severance Liabilities (as such term is defined in the Purchase Agreement), and all COBRA Liabilities for any Transferred Employees of the Stations terminated on or after the Commencement Date. 3.5.3 Time Broker shall cause all Transferred Employees as of the Commencement Date to be eligible to participate in the "employee welfare benefit plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2) of ERISA, respectively) of Time Broker in which similarly situated employees of Time Broker are generally eligible to participate; provided, however, that all Transferred Employees and their spouses and dependents shall be eligible for coverage immediately after the Commencement Date (and shall not be excluded from coverage on account of any preexisting condition) to the extent provided under such plans with respect to Transferred Employees. 3.5.4 For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service in any such plan for which a Transferred Employee may be eligible after the Commencement Date, Time Broker shall ensure that, to the extent permitted by law, service by such Transferred Employee with Heritage, Licensee or any Affiliate of Heritage or Licensee shall be deemed to have been service with the Time Broker. In addition, Time Broker shall ensure that each Transferred Employee receives credit under any welfare benefit plan of Time Broker for any deductibles or co-payments paid by 6 such Transferred Employee and his or her dependents for the current plan year under a plan maintained by Heritage or Licensee or any Affiliate of Heritage or Licensee. Time Broker shall grant credit to each Transferred Employee for all sick leave in accordance with the policies of Time Broker applicable generally to its employees after giving effect to service for Heritage or Licensee as service for Time Broker. To the extent taken into account in determining prorations under Section 4.2 hereunder, Time Broker shall assume and discharge Licensee's liabilities for the payment of all unused vacation leave accrued by Transferred Employees as of the Commencement Date. To the extent any claim with respect to such accrued vacation leave is lodged against Licensee, with respect to any Transferred Employee, Time Broker shall indemnify, defend and hold harmless Licensee from and against any and all losses, directly or indirectly, as a result of, or based upon or arising from the same, up to the amount of the proration credit received by Time Broker under Section 4.2 for such items. 3.5.5 [Intentionally omitted] 3.5.6 As soon as practicable following the Commencement Date, Time Broker shall establish and maintain a defined contribution plan or plans (which may be a preexisting plan or plans) (the "Time Broker's Plan") intended to be qualified under Section 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), for the benefit of the Transferred Employees. Effective as of the Commencement Date, Licensee shall cause appropriate amendments to be made to its defined contribution plan or plans (the "Licensee's Plan") to provide that the Transferred Employees shall be fully vested in their accounts under the Licensee's Plan. As soon as practicable after the Commencement Date, Time Broker shall take all necessary action to qualify Time Broker's Plan under the applicable provisions of the Code (including but not limited to Section 401), if it is not yet so qualified, and Time Broker and Licensee shall make any and all filings and submissions to the appropriate governmental agencies required to be made by them in connection with the transfer of assets described hereafter. As soon as practicable following the earlier of the receipt of a favorable determination letter from the Internal Revenue Service regarding the qualified status of both the Licensee's Plan and the Time Broker's Plan (each as amended to the date of transfer) or sooner, if Licensee and Time Broker so agree, Licensee shall cause to be transferred to Time Broker's Plan, in cash, all of the individual account balances of Transferred Employees under the Licensee's Plan, including any outstanding plan participant loan receivables allocated to such accounts. 3.5.7 Subject to Section 3.2, Time Broker acknowledges and agrees that Time Broker's obligations pursuant to this Section 3.5 are in addition to, and not in limitation of, Time Broker's obligation to assume the employment contracts set forth on Schedule 2.1.8 to the Purchase Agreement. 3.5.8 Except as otherwise provided in this Section 3.5 or in any employment, severance or retention agreements of any Transferred Employees, all Transferred Employees shall be at-will employees, and Time Broker may terminate their employment or change their terms of employment at will. No employee (or beneficiary of any employee) of Seller may sue to enforce the terms of this Agreement, including specifically this Section 3.5, and no employee or beneficiary shall be treated as a third party beneficiary of this Agreement. Except to the extent provided for herein, Time Broker may cover the Transferred Employees 7 under existing or new benefit plans, programs, and arrangements, and may amend or terminate any such plans, programs, or arrangements at any time. 3.5.9 Upon the Closing (as defined in the Purchase Agreement) of the Purchase Agreement, Time Broker shall offer employment to each of the employees of the Stations that have been retained during the term of this Agreement by Licensee pursuant to Section 3.2. Such offer of employment will be at a comparable salary, position and place of employment as held by each such employee immediately prior to the Closing Date (as defined in the Purchase Agreement) (such employees who are given such offers of employment are referred to herein as the "Closing Date Transferred Employees"). Nothing in this Section 3.5.9 is intended to guarantee employment for any such Closing Date Transferred Employee for any length of time after the Closing Date (as defined in the Purchase Agreement). Upon the Closing (as defined in the Purchase Agreement) of the Purchase Agreement, the provisions of Sections 3.5.2 through and including 3.5.8 of this Agreement shall also apply to such Closing Date Transferred Employees after substituting (i) "Closing Date Transferred Employees" for "Transferred Employees," in each instance, and (ii) "Closing Date" for "Commencement Date," in each instance. ARTICLE IV. ASSIGNMENT OF CERTAIN AGREEMENTS AND RIGHTS Section 4.1. Assignment. On the Commencement Date, Licensee shall assign to Time Broker all Station Contracts (as defined in the Purchase Agreement) other than those contracts and other agreements identified on Schedule 4.1 (the "Excluded Contracts"). All such Station Contracts to be assigned hereunder are referred to collectively as the "Assigned Contracts." Time Broker shall assume, pay, perform, and discharge all liabilities arising on or after the Commencement Date under the Assigned Contracts (including, without limitation, Trade-out Agreements) pursuant to their terms (except for liabilities for any breaches thereunder by Licensee or Heritage occurring prior to the Commencement Date). Licensee has provided Time Broker with true and complete copies, including amendments, of the Assigned Contracts. The Assigned Contracts are freely assignable, or, if consent of the other contracting party to the assignment is required, Licensee shall make reasonable best efforts to obtain all such consents prior to the Commencement Date. Subject to and in compliance with the provisions of Section 3.3 of the Purchase Agreement, to the extent that any such consents are not obtained prior to the Commencement Date, during the period between the Commencement Date and the date that Licensee obtains such consent, the parties shall cooperate to cause Time Broker to receive the benefit of the Assigned Contract in exchange for performance by Time Broker of all of Licensee's obligations under such Assigned Contract (including but not limited to the payment to Licensee of all amounts due under the Assigned Contract on and after the Commencement Date for services provided by Licensee). Section 4.2. Proration. All expenses and income arising under the Assigned Contracts shall be prorated between Licensee and Time Broker as of the Commencement Date in a manner such that the costs and benefits thereunder through the date before the Commencement Date shall be for the account of Licensee and, thereafter, during the term of this Agreement, for the account of Time Broker. With respect to any items of salary, accrued vacation or other 8 benefits relating to Transferred Employees, such prorations shall also include an amount payable for applicable payroll taxes. Such proration shall include an adjustment for Trade-out Agreements (as defined in the Purchase Agreement) which are included in the Assigned Contracts only to the extent that any Net Negative Trade Balance (as defined below) for the Stations exceeds $50,000. "Net Negative Trade Balance" means the extent, if any, to which the value (at current rates for time on each Station as of the Commencement Date) of unfulfilled obligations of the Station under Trade-out Agreements exceed the stated consideration yet to be received by the Station pursuant to such Trade-out Agreements. Such prorations shall be completed and any necessary payments on account of such prorations paid within sixty (60) days of the Commencement Date. If any disagreement with respect to the proration of such income and expenses cannot be resolved by the parties, Licensee and Time Broker will select a certified public accountant knowledgeable in the broadcast industry to resolve the dispute. The parties will use their best efforts in good faith to cause to occur as expeditiously as possible the appointment of the certified public accountant, and once appointed, the resolution of the dispute. The resolution of such accountant shall be binding on the parties and subject to judicial enforcement. Payment of the cost of the accountant shall be shared equally between Time Broker and Licensee. Section 4.3. Accounts Receivable. All cash accounts receivable for broadcasts on the Stations which occur prior to the Commencement Date (the "Accounts Receivable") shall belong to Licensee and all Accounts Receivable for Programming which occurs thereafter shall belong to Time Broker. Within ten business (10) days following the Commencement Date, Licensee shall deliver to Time Broker a schedule of Cash Accounts Receivable for the Stations as of the Commencement Date, by accounts and the amounts then owing (the "Schedule of Accounts Receivable"). Time Broker agrees to use its reasonable efforts (with at least the care and diligence that Time Broker uses to collect its own accounts receivable) to collect for Licensee its Accounts Receivable as shown on the Schedule of Accounts Receivable delivered by Licensee for a period of one hundred fifty (150) days following the Commencement Date; provided, that Time Broker's obligation to collect the Accounts Receivable shall survive the Closing Date (as defined in the Purchase Agreement) to the extent necessary for Time Broker to collect the Accounts Receivable for a period of one hundred fifty (150) days following the Commencement Date. All payments received by Time Broker from any customer whose name appears in the Schedule of Accounts Receivable shall be first applied to the oldest balance then due on the Accounts Receivable unless the account debtor indicates in writing that payment is to be applied otherwise due to a dispute over an Account Receivable. Time Broker shall keep accurate records of the payment received by it on such Accounts Receivable and Licensee shall have access at reasonable times to Time Broker's records to verify such status of the Accounts Receivable. On the fifth day following the last day of each month during such one hundred fifty (150) day period (or, if any such day is a Saturday, Sunday or holiday, on the next day on which banking transactions are resumed), Time Broker shall remit to Licensee collections received by Time Broker with respect to the Accounts Receivable. Any Accounts Receivable that have not been collected within such one hundred fifty (150) day period shall be reassigned, without recourse to Time Broker, to Licensee, together with all records in connection therewith, whereupon Licensee may pursue collection thereof in such manner as it, in its sole discretion, may determine. Time Broker shall not make any referral or compromise of any Accounts 9 Receivable to a collection agency or attorney for collection and shall not compromise for less than full value any Account Receivable without the prior written consent of Licensee. Except to remit collected Accounts Receivable in accordance herewith, Time Broker shall have no liability or obligation to Licensee with respect to the collection of its accounts and shall not be obligated to take any action to collect such accounts. ARTICLE V. OPERATION OF STATION Notwithstanding any provision of this Agreement to the contrary, Licensee shall retain full authority and power with respect to the management and operation of the Stations during the term of this Agreement. Licensee shall employ the General Manager of the Stations and such other personnel as Licensee determines may be necessary to fulfill its obligations as a licensee under the Communications Act and its obligations in accordance with Section 3.2 hereof. Licensee shall retain full authority and control over the policies, programming and operations of the Stations, including, without limitation, the decision whether to preempt Programming in accordance with Section 2.4 hereof. Licensee shall have ultimate responsibility to effectuate compliance with the Communications Act and with FCC rules, regulations and policies. In no event shall Time Broker or its employees represent, depict, describe or portray Time Broker as the licensee of the Stations. ARTICLE VI. GRANT OF LICENSES Section 6.1. License to Use Station Facilities. Effective as of the Commencement Date, Licensee grants Time Broker permission to access and use all of the studio and office space and other facilities of the Stations ("Station Facilities") and all equipment and furnishings contained therein ("Station Equipment") as reasonably necessary for the production and broadcasting of the Programming and sales and administration relating thereto, in accordance with the terms set forth in this Article VI. Time Broker shall not remove from the Station Facilities or modify any Station Equipment owned by or leased or licensed to Licensee without Licensee's prior written consent, such consent not to be unreasonably withheld. Licensee shall not license the use of the Station Facilities to any other party during the term of this Agreement; and Time Broker's use of the Station Facilities shall be exclusive except for Licensee's right to use such facilities as it deems appropriate in connection with the satisfaction of its obligations as the Licensee of the Station, including the use of such facilities and adequate office space for the employees of Licensee that are required for Licensee to comply with its obligations under Sections 3.2 and 5 hereof. Time Broker shall use due care in the use of any property of Licensee. Time Broker shall indemnify Licensee for any damage (normal wear and tear excepted) to Licensee's property caused by Time Broker or any employee, contractor, agent or guest of Time Broker. Time Broker shall have the right to install any additional equipment at the Station Facilities deemed by Time Broker to be necessary to deliver the Programming. If this Agreement shall terminate other than pursuant to the Closing under the Purchase Agreement, Time Broker shall, promptly after such termination, remove all such equipment and make all repairs necessitated by such removal. 10 Section 6.2. License of Intellectual Property. Effective as of the Commencement Date and subject to the terms of any existing license agreement, Licensee grants Time Broker the right to use all intellectual property owned by or licensed to Licensee and used solely in the operation of the Stations (including, but not limited to, logos, jingles, promotional materials, call signs and goodwill). Time Broker shall own all trademarks, service marks, trade names, characters, formats, jingles, promotional materials, logos and positioning statements which Time Broker develops for the Programming during the term of this Agreement. ARTICLE VII. INDEMNIFICATION Section 7.1. Indemnification Rights. Each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and all liability, including without limitation reasonable attorneys' fees arising out of or incident to (i) any breach by such party of a representation, warranty or covenant made herein, (ii) the programming produced or furnished by such party hereunder, or (iii) the conduct of such party, its employees, contractors or agents (including negligence) in performing its or their obligations hereunder. Without limiting the generality of the foregoing, each party will indemnify and hold harmless the other party, and the directors, officers, partners, employees, agents and affiliates of such other party, from and against any and all liability for libel, slander, infringement of trademarks, trade names, or program titles, violation of rights of privacy, and infringement of copyrights and proprietary rights resulting from the programming produced or furnished by it hereunder. The parties' indemnification obligations hereunder shall survive any termination or expiration of this Agreement. Section 7.2. Procedures. Any party seeking indemnification under this Agreement (the "Indemnified Party") shall promptly give the party from whom indemnification is sought (the "Indemnifying Party") written notice of any claim or the commencement of any action or proceeding for which the Indemnified Party may seek indemnification, and the Indemnified Party shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting from such claim, unless injunctive relief is sought against the Indemnified Party in which case the Indemnified Party shall have the right to join in any defense. The Indemnified Party's failure to give the Indemnifying Party notice under this clause shall not preclude the Indemnified Party from seeking indemnification from the Indemnifying Party except to the extent that the Indemnified Party's failure has materially prejudiced the Indemnifying Party's ability to defend the claim or litigation. The Indemnifying Party shall not settle any claim for which the Indemnified Party seeks indemnification or consent to entry of any judgment in litigation arising from such a claim without obtaining a written release of the Indemnified Party from all liability in respect of such claim or litigation. If the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, or if injunctive relief is sought against the Indemnified Party, the Indemnified Party may defend against or settle such claim or litigation in such manner as it may deem appropriate, and in such cases, upon a written demand therefore, the Indemnifying Party shall promptly reimburse the Indemnified Part for the amount of all reasonable expenses, legal or otherwise, incurred by the Indemnified Party in connection with the defense against or settlement of such claim or litigation. In addition, if the Indemnifying Party shall not assume the defense of any such claim or litigation resulting therefrom, or if 11 injunctive relief is sought against the Indemnified Party, and if no settlement of the claim or litigation is made, upon written demand therefor, the Indemnifying Party shall promptly reimburse the Indemnified Party for the amount of any judgment rendered with respect to such claim or in such litigation and for all reasonable expenses, legal or otherwise, incurred by the Indemnified Party in the defense against such claim or litigation. ARTICLE VIII. DEFAULT Section 8.1. Time Broker Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Time Broker under this Agreement: (a) Time Broker's failure to timely pay any Monthly Payment provided for in Section 1.2 or other payments required hereunder; (b) except as otherwise provided for in this Agreement, the failure of Time Broker to supply the Programming; (c) any termination of this Agreement by Time Broker other than as permitted in Section 9.1; or (d) the issuance by the FCC of an order designating an evidentiary hearing which arises out of, relates to or is attributable solely to the acts or omissions of Time Broker under this Agreement but excluding issues which are based upon Licensee's conduct hereunder for which Time Broker may be held responsible. Section 8.2. Licensee's Events of Default. The occurrence of any of the following, after the expiration of the applicable cure periods, if any, will be deemed to be an Event of Default by Licensee under this Agreement: (a) except as otherwise provided for in this Agreement, the failure of Licensee to broadcast the Programming; (b) any termination of this Agreement by Licensee other than as permitted in Section 9.1; or (c) the issuance by the FCC of an order designating an evidentiary hearing which arises out of, relates to or is attributable solely to the acts or omissions of Licensee under this Agreement or during any period prior to the Commencement Date during which Licensee owns the Stations, but excluding issues which are based upon Time Broker's conduct hereunder for which Licensee may be held responsible. Section 8.3. Cure Periods. The cure periods before any event listed in Sections 8.1 or 8.2 shall become an Event of Default are as follows: (a) Payment by Time Broker. The Monthly Payment or other payments required hereunder to be paid to Licensee must be received by Licensee within five (5) business days after Licensee gives written notice of non-payment to Time Broker. (b) Certain Matters. There shall be no cure period for (i) the matters relating to the FCC set forth in Sections 8.1(d) or 8.2(c) hereof, (ii) a termination by Time Broker described in Section 8.1(c); or (iii) a termination by Licensee described in Section 8.2(b) hereof. (c) Programs and Broadcast Matters. With respect to Time Broker's failure to provide the Programming referred to in Section 8.1(b) hereof or Licensee's failure to broadcast the Programming referred to in Section 8.2(a) hereof, the period allowed for cure shall be three business days from the giving of written notice of such failure to the defaulting party by the non-defaulting party. 12 Section 8.4. Other Defaults. For any other breach of a representation, warranty or covenant made herein that is not listed in Sections 8.1 or 8.2, a party's sole remedy shall be indemnification pursuant to Article VII hereof. ARTICLE IX. TERMINATION This Agreement shall automatically terminate upon the expiration of the term of this Agreement as set forth in Section 1.3. In addition, this Agreement shall terminate as provided below. Section 9.1. Termination. In addition to other remedies available at law or equity, this Agreement may be terminated by either Licensee or Time Broker by written notice to the other, specifying an effective date of termination which is not less than seven (7) days nor more than ninety (90) days from the date such notice is given, if the party seeking to terminate is not then in material default or breach hereof, upon either: (a) an uncured Event of Default, or (b) as provided in Section 12.15, or (c) upon the event that the party not seeking to terminate makes a general assignment for the benefit of creditors, files or has filed against it a petition for bankruptcy, reorganization or an arrangement for the benefit of creditors, or for the appointment of a receiver, trustee or similar creditors' representative for the property or assets of such party under any federal or state insolvency law, which if filed against such party has not been dismissed within sixty (60) days thereof. In the event that the non-defaulting party does not exercise such right of termination by giving such written notice within sixty (60) days of the occurrence of an uncured Event of Default, then the Event of Default giving rise to such right of termination shall be deemed waived and the Agreement shall continue in full force and effect. Section 9.2. Certain Matters Upon Termination. (a) Upon any termination of this Agreement, Licensee shall have no further obligation to provide to Time Broker any broadcast time or broadcast transmission facilities and Time Broker shall have no further obligations to make any payments to Licensee under Section 1.2 hereof. Upon any termination, Time Broker shall be responsible for all debts and obligations of Time Broker to third parties based upon the purchase of air time and use of Licensee's transmission facilities including, without limitation, accounts payable, barter agreements and unaired advertisements, but not for Licensee's federal, state and local income and business franchise tax liabilities or taxes levied upon Licensee's personal property. Notwithstanding anything herein to the contrary, to the extent that any invoice, bill or statement submitted to Licensee after the termination of this Agreement or any payment made by Time Broker prior to the termination of this Agreement relates to expenses incurred in operating the 13 Stations, for periods both before and after the termination of this Agreement, such expenses shall be prorated between Licensee and Time Broker in accordance with the principle that Time Broker shall be responsible for expenses allocable to the period prior to the termination of this Agreement and Licensee shall be responsible for expenses allocable to the period on and after the termination of this Agreement. Such proration shall include an adjustment for Time Broker's Trade-out Agreements only to the extent that Time Broker's Net Negative Trade Balance exceeds $50,000. Each party agrees to reimburse the other party for expenses paid by the other party to the extent appropriate to implement the proration of expenses pursuant to the preceding sentence. (b) If this Agreement terminates other than as a result of the Closing (as defined in the Purchase Agreement), Time Broker shall (i) assign to Licensee and Licensee shall assume all Assigned Contracts (including those employment contracts assumed by Time Broker pursuant to this Agreement) and all renewals, replacements or other contracts entered in the ordinary course of business relating to the Stations and customary for radio stations of similar type between the Commencement Date and the date of termination of this Agreement ("Supplemental Contracts") in effect on the date of such termination or expiration; (ii) be responsible for only those obligations under the Assigned Contracts and Supplemental Contracts arising on or after the Commencement Date and prior to the termination of this Agreement and, (iii) terminate, and Licensee shall hire, all Transferred Employees in accordance with the principles set forth in Section 3.5, except that, for purposes of this Section 9.2(b)(iii), "Transferred Employees" shall not include any employees hired by Time Broker pursuant to Section 3.5 who also perform substantial services for other stations in the applicable market operated by Time Broker. (c) Notwithstanding anything in Section 7.1 to the contrary, no expiration or termination of this Agreement shall terminate the obligation of each party to indemnify the other for claims under Article VII hereof or limit or impair any party's rights to receive payments due and owing hereunder on or before the date of such termination. ARTICLE X. REMEDIES In addition to a party's rights of termination hereunder (and in addition to any other remedies available to it or provided under law), in the event of an uncured Event of Default with respect to either party, the other may seek specific performance of this Agreement, in which case the defaulting party shall waive the defense in any such suit that the other party has an adequate remedy at law and interpose no opposition, legal or otherwise, as to the propriety of specific performance as a remedy hereunder. ARTICLE XI. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES Section 11.1. Representations and Warranties of Time Broker. Time Broker hereby represents and warrants to Licensee as follows: 14 11.1.1 Corporate Organization. Time Broker is a corporation duly organized, validly existing and in good standing under the laws of the state of its jurisdiction of organization and is duly qualified to do business in and is in good standing in any jurisdiction where it owns or operates a radio station and in each other jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified could not, individually or in the aggregate, have a material adverse effect on the ability of Time Broker to perform its obligations hereunder. 11.1.2 Authorization of Agreement; No Breach. Time Broker has the corporate power and authority to execute, deliver and perform this Agreement. This Agreement constitutes the valid and binding obligation of Time Broker, enforceable against Time Broker in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming the consents and approvals required elsewhere herein are obtained, neither such execution, delivery and performance nor compliance by Time Broker with the terms and provisions hereof will conflict with or result in a breach of any of the terms, conditions or provisions of the organizational documents of Time Broker or any judgment, order, injunction, decree, regulation or ruling of any court or any other governmental authority to which Time Broker is subject or any material agreement or contract to which Time Broker is a party or to which it is subject, or constitute a material default thereunder. 11.1.3 Actions and Proceedings. Except as disclosed in Schedule 11.1, Time Broker is not subject to any judgment, award, order, writ, injunction, arbitration decision or decree which prohibits the performance of this Agreement or the consummation of any transaction contemplated under this Agreement, and there is no litigation, administrative action, arbitration, proceeding or investigation pending, or to the knowledge of Time Broker, threatened, against Time Broker or affecting Time Broker in any federal, state or local court, or before any administrative agency or arbitrator that would adversely affect Time Broker's ability to perform its obligations under this Agreement or would prohibit the consummation of the transactions contemplated hereunder. 11.1.4 Qualifications. Time Broker is qualified in accordance with the Communications Act and the rules and policies of the FCC to enter into this Agreement and provide Programming on the Stations in accordance with its terms. Between the date hereof and the termination of this Agreement, either by the Closing of the Purchase Agreement or the earlier termination in accordance with Article IX hereof, Time Broker will not take any action that Time Broker knows, or has reason to believe, would disqualify it from providing programming on the Stations pursuant to this Agreement. Section 11.2. Representations, Warranties and Covenants of Licensee. Licensee hereby represents, warrants and covenants to Time Broker as follows: 11.2.1 Corporate Organization. Tuscaloosa, SRPLI and SRRLI are corporations, duly organized, validly existing and in good standing under the laws of the states of their respective organizations, and are duly qualified to do business and are in good standing in any jurisdiction where they own or operate a radio station and in each other jurisdiction where such qualification 15 is necessary, except for those jurisdictions where the failure to be so qualified could not, individually or in the aggregate, have a material adverse effect on the ability of Tuscaloosa, SRPLI or SRRLI to perform their obligations hereunder. 11.2.2 Authorization of Agreement; No Breach. Tuscaloosa, SRPLI and SRRLI have the corporate power and authority to execute, deliver and perform this Agreement. This Agreement constitutes the valid and binding obligation of each of Tuscaloosa, SRPLI and SRRLI, enforceable against each in accordance with its terms, except as such enforceability may be limited by bankruptcy and laws affecting the enforcement of creditors' rights generally or equitable principles. Assuming the consents and approvals required elsewhere herein are obtained and that this Agreement is filed with the FCC, neither such execution, delivery and performance nor compliance by Tuscaloosa, SRPLI and SRRLI with the terms and provisions hereof will conflict with or result in a breach of any of the terms, conditions or provisions of the organizational documents of such entities or any judgment, order, injunction, decree, regulation or ruling of any court or any other governmental authority to which each is subject or any material agreement or contract to which each is a party or to which they are subject, or constitute a material default thereunder. 11.2.3 Actions and Proceedings. Except as disclosed in Schedule 11.2, none of Tuscaloosa, SRPLI or SRRLI is subject to any judgment, award, order, writ, injunction, arbitration decision or decree which prohibits or prevents the performance of this Agreement or the consummation of any transaction contemplated under this Agreement, and there is no litigation, administrative action, arbitration, proceeding or investigation pending, or to the knowledge of Tuscaloosa, SRPLI or SRRLI, threatened, against each or affecting each in any federal, state or local court or before any administrative agency or arbitrator that would adversely affect Tuscaloosa's, SRPLI's or SRRLI's ability to perform their obligations under this Agreement or would prohibit the consummation of the transactions contemplated hereunder. 11.2.4 Maintenance of Current Operations. The Stations' transmission equipment shall be maintained by Tuscaloosa, SRPLI and SRRLI in a condition consistent with good engineering practices and in compliance in all material respects with the Communications Act and all other applicable rules, regulations and technical standards of the FCC. 11.2.5 Other Agreements. During the term of this Agreement, Tuscaloosa, SRPLI and SRRLI will not enter into any other time brokerage, program provision, local management or similar agreement with any third party with respect to the Stations. ARTICLE XII. MISCELLANEOUS Section 12.1. Modification and Waiver. No modification or waiver of any provision of this Agreement shall in any event be effective unless the same shall be in writing signed by the party against whom the waiver is sought to be enforced, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. 16 Section 12.2. No Waiver; Remedies Cumulative. Except as otherwise provided herein, no failure or delay on the part of Licensee or Time Broker in exercising any right or power hereunder shall operate as a waiver thereof, nor any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Licensee and Time Broker herein provided are cumulative and are not exclusive of any rights or remedies which they may otherwise have. Section 12.3. Construction. The construction and performance of this Agreement shall be governed by the laws of the State of New York, excluding choice of law provisions thereunder, and the obligations of the parties hereto are subject to all federal, state or municipal laws or regulations now or hereafter in force and to the regulations of the FCC and all other governmental bodies or authorities presently or hereafter duly constituted. Section 12.4. Headings. The headings contained in this Agreement are included for convenience only and no such heading shall in any way alter the meaning of any provision. Section 12.5. Successors and Assigns. Any party may assign all or any part of this Agreement or the rights and obligations hereunder to a person or entity controlling, controlled by or under common control with such party, provided that any such assignment shall not relieve such party of its obligations hereunder. Except as otherwise provided herein, this Agreement and the rights and obligations hereunder may not be assigned by any party hereto without the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Section 12.6. Force Majeure. The parties acknowledge and agree that a party will not be liable for any failure to timely perform any of its obligations under this Agreement if such failure is due, in whole or in part, directly or indirectly, to accidents, fires, floods, governmental actions, war, civil disturbances, other causes beyond such party's control or any other occurrence which would generally be considered an event of force majeure. Section 12.7. Broker. The parties agree to indemnify and hold each other harmless against any claims from any broker or finder based upon any agreement, arrangement, or understanding alleged to have been made by the indemnifying party. Section 12.8. Counterpart Signatures. This Agreement may be signed in one or more counterparts. Section 12.9. Notices. Any notice, report, demand, waiver or consent required or permitted hereunder shall be in writing and shall be given by hand delivery, by prepaid registered or certified mail, with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery or by telecopy addressed as follows: 17 If the notice is to Time Broker: Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Attention: Joseph M. Field, President Telecopy Number: (610) 660-5641 With copies to: John C. Donlevie, General Counsel Entertainment Communications, Inc. 401 City Avenue, Suite 409 Bala Cynwyd, PA 19004 Telecopy Number: (610) 660-5641 Joseph D. Sullivan, Esq. Latham & Watkins 1001 Pennsylvania Ave., N.W., Suite 1300 Washington, D.C. 20004 Telecopy Number: (202) 637-2201 If the notice is to Licensee: Sinclair Communications, Inc. 2000 West 41st Street Baltimore, MD 21211-1420 Attention: David Amy, Chief Financial Officer Telecopy Number: (410) 467-5043 With copies to: Robert E. Quicksilver, General Counsel Sinclair Communications, Inc. 2000 West 41st Street Baltimore, MD 21211-1420 Telecopy Number: (410) 662-4707 Steven A. Thomas, Esq. Thomas & Libowitz 100 Light Street, 11th Floor Baltimore, MD 21202-1053 Telecopy Number: (410) 752-2046 The date of any such notice and service thereof shall be deemed to be: (i) the day of delivery if hand delivered or delivered by overnight courier; (ii) the day of delivery as indicated on the return receipt if dispatched by mail; or (iii) the date of telecopy transmission as indicated on the 18 telecopier transmission report provided that any telecopy transmission shall not be effective unless a paper copy is sent by overnight delivery on the date of the telecopy transmission. Either party may change its address for the purpose of notice by giving notice of such change in accordance with the provisions of this Section. Section 12.10. Effect of this Agreement. This Agreement and the Purchase Agreement, together with the exhibits and schedules hereto and thereto and a letter agreement among Time Broker and Sinclair Communications, Inc. dated of even date herewith, set forth the entire understanding of the parties and supersede any and all prior written or oral agreements, arrangements or understandings relating to the subject matter hereof. No representation, promise, inducement or statement of intention has been made by either party which is not embodied in this Agreement, the Purchase Agreement or the letter agreement referenced above and neither party shall be bound by, or be liable for, any alleged representation, promise, inducement or statement of intention not embodied herein unless same shall have been made subsequent hereto in writing and signed by the party to be charged therewith. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Section 12.11. Severability. Except as expressly set forth in Section 12.15, if any provision contained in this Agreement is held to be invalid, illegal or unenforceable in any respect by any court or other authority, then such provision shall be deemed limited to the extent that such court or other authority deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court or other authority shall deem any such provision wholly unenforceable, this shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had not been contained herein. Section 12.12. No Joint Venture. The parties agree that nothing herein shall constitute a joint venture or agency between them. The parties acknowledge that call letters, trademarks and other intellectual property shall at all times remain the property of the respective parties and that neither party shall obtain any ownership interest in the other party's intellectual property by virtue of this Agreement (subject to Section 6.2). Section 12.13. Damage to Stations. In the event of damage or destruction to any of the Stations (other than damage or destruction caused by Time Broker), Licensee shall proceed to repair, replace or restore the applicable Station to its former condition as promptly as is commercially reasonable. If Time Broker causes damage or destruction to any of the Stations, Time Broker shall proceed to repair, replace or restore the applicable Station to its former condition as promptly as is commercially reasonable. If Time Broker must undertake repairs, replacements or restorations pursuant to the previous sentence, Licensee shall reimburse Time Broker for the cost of such repairs, replacements or restorations out of the proceeds from any insurance policies maintained by Licensee that are received by Licensee as a result of such damage or destruction. Licensee shall use reasonable efforts to effect the maximum possible recovery for such damage or destruction under such insurance policies. 19 Section 12.14. Noninterference. During the term of this Agreement, neither Licensee nor any of their employees shall take any actions that might impair the operations of Time Broker conducted hereunder, except to the extent expressly contemplated by this Agreement or as otherwise required by law. Section 12.15. Regulatory Changes. In the event of any order or decree of an administrative agency or court of competent jurisdiction, including without limitation any material change or clarification in FCC rules, policies, or precedent, that would cause this Agreement to be invalid or violate any applicable law, and such order or decree has become effective and has not been stayed, the parties will use their respective best efforts and negotiate in good faith to modify this Agreement to the minimum extent necessary so as to comply with such order or decree without material economic detriment to either party, and this Agreement, as so modified, shall then continue in full force and effect. In the event that the parties are unable to agree upon a modification of this Agreement so as to cause it to comply with such order or decree without material economic detriment to either party, then this Agreement shall be terminated. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 20 IN WITNESS WHEREOF, the parties have executed this Time Brokerage Agreement as of the date first above written. ENTERTAINMENT COMMUNICATIONS, INC. ____________________________________ By: Title: TUSCALOOSA BROADCASTING, INC. ____________________________________ By: Title: SINCLAIR RADIO OF PORTLAND LICENSEE , INC. ____________________________________ By: Title: SINCLAIR RADIO OF ROCHESTER LICENSEE , INC. ___________________________________ By: Title: 21 SCHEDULE 1.1 PROGRAMMING The Programming shall consist of one hundred sixty-six (166) hours per week on each of the Stations in an entertainment format to be chosen by Time Broker, subject to Article II of this Agreement. The Programming shall include (a) news and weather information; (b) public service announcements; (c) an announcement in form sufficient to meet the station identification requirements of the FCC at the beginning of each hour; (d) an announcement at the beginning of each segment of Programming to indicate that program time has been purchased by Time Broker; and (e) any other announcement that may be required by applicable law or regulation. Time Broker shall maintain and deliver to Licensee copies of all programming information, including, without limitation, information concerning portions of the Programming that are responsive to issues of public importance identified to Time Broker by Licensee, necessary for Licensee to maintain its FCC public inspection file, and all other records required to be kept by FCC rule or policy. Time Broker shall have the sole and exclusive right to sell advertising to be included in the Programming and shall be entitled to retain all the revenues derived from the sale thereof, provided, however, that Licensee shall be entitled to sell such time as it deems necessary to comply with the political advertising rules of the FCC in the event the Programming does not comply with such rules. Notwithstanding any other provision of this Agreement, Time Broker recognizes that Licensee has certain obligations to broadcast programming to meet the needs and interests of the communities of license for the Stations. Licensee shall have the right to air specific programming on issues of local importance to the communities. Nothing in this Agreement shall abrogate the unrestricted authority of Licensee to discharge its obligations to the public and to comply with the laws, rules and policies of the FCC with respect to meeting the ascertained needs and interests of the public. Accordingly, Licensee may air or cause Time Broker to produce and present under Licensee's supervision two (2) hours a week on each of the Stations such public affairs programming that responds to the needs and interests of listeners in each such Station's community of license. Such public affairs programming shall be presented between 6:00 a.m. and 9:00 a.m. on Saturdays and/or Sundays or at such other times as the public interest may require. SCHEDULE 1.2 COMPENSATION (A) Beginning on the Commencement Date, Time Broker shall pay a monthly fee (the "Monthly Payment") in the amount of the Monthly Projected Broadcast Cash Flow (as defined below) for the Stations. The "Monthly Projected Broadcast Cash Flow" for the Stations shall be the broadcast cash flow for the Stations that is projected by the parties in good faith for the term of this Agreement, and is expressly agreed to equal $631,500 per month. In the event that the Commencement Date occurs on a day other than the first day of a month, the initial Monthly Payment shall be an amount equal to the Monthly Payment as determined above multiplied by a ratio, the numerator of which is the number of days between the Commencement Date and the end of the month in which the Commencement Date occurs and the denominator of which is the number of days in the month in which the Commencement Date occurs. In the event that the day in which the term of this Agreement ends is not the last day of a month, the Monthly Payment for the month in which such day occurs shall be similarly prorated. (B) Except as otherwise provided in this Agreement (specifically including Paragraph (C) to this Schedule 1.2 below), Time Broker shall reimburse Licensee for all of its ordinary and customary expenses (excluding only Licensee's federal, state and local income taxes) incurred in operating the Stations (the "Operating Expenses"), including but not limited to, rent, utilities (excluding telephone expenses incurred by Licensee), maintenance and repairs at each of the Stations' studio and transmitter sites, insurance on the Stations' equipment, insurance deductibles on claims on the Stations' equipment payable in respect of damage to the Stations' equipment caused by Time Broker, and ad valorem property taxes. Licensee shall bill Time Broker for such Operating Expenses on a monthly basis by delivery of a statement in reasonable detail with back-up invoices, payment for which shall be due within thirty (30) days of such billing. (C) During the term of this Agreement, Licensee shall make all capital expenditures required to maintain the Stations consistent with past practice of the Stations and as required to make the Stations operate in full compliance with all FCC rules and regulations. At the Closing of the Purchase Agreement, Time Broker shall reimburse Licensee for all costs of such capital expenditures. SCHEDULE 2.1 PROGRAMMING POLICY STATEMENT Time Broker agrees to cooperate with Licensee in the broadcasting of programs of the highest possible standard of excellence and for this purpose to observe the following regulations in the preparation, writing and broadcasting of its programs. Further, Time Broker agrees that all material broadcast on the Stations shall comply with all federal, state and local applicable laws, rules and regulations. I. No Plugola or Payola. The broadcast of any material for which any money, service or other valuable consideration is directly or indirectly paid, or promised to or charged or accepted by, the Time Broker, from any person, shall be prohibited, unless, at the time the same is broadcast, it is announced as paid for or furnished by such person. II. Political Broadcasting. Within thirty (30) days of the Commencement Date, Time Broker shall distribute to all parties making requests for the purchase of political time on the Stations, and provide Licensee with, a written political advertising disclosure statement which fully and accurately discloses how the Time Broker sells programming and advertising time and which makes parties purchasing political programming and advertising time fully aware of the lowest unit charge provisions of Section 315 of the Communications Act. In addition, at least thirty (30) days before the start of any primary or election campaign, Time Broker will clear with the Stations' general manager the rate Time Broker will charge for the time to be sold to candidates to make certain that the rate charged is in conformance with the applicable law and station policy. III. Required Announcements. Time Broker shall broadcast (i) announcements in a form satisfactory to Licensee at the beginning of each hour to identify the Stations and (ii) any other announcements that may be required by law, regulation, or Licensee's station policy. IV. No Illegal Announcements. No announcements, broadcasts or promotions prohibited by federal, state or local law shall be made over the Stations. This prohibition specifically includes, but is not limited to, any and all unlawful programming or other broadcast material concerning tobacco or alcohol related products. The airing of any broadcast material concerning contests, lotteries or games must be conducted in accordance with all applicable law, including FCC rules and regulations. Any obscene, indecent, or fraudulent programming is prohibited. All sponsored programming or other broadcast material must be identified in accordance with applicable law, including FCC rules and regulations. V. Licensee Discretion Paramount. In accordance with the Licensee's responsibility under the Communications Act and the rules and regulations of the FCC, Licensee reserves the right to reject or terminate any programming (including advertising) proposed to be presented or being presented over the Stations which is in conflict with station policy or which in Licensee's or its general manager's reasonable judgment would not serve the public interest. In any case where questions of policy or interpretation arise, Time Broker should submit the same to Licensee for decision before making any commitments in connection therewith. SCHEDULE 4.1 EXCLUDED CONTRACTS [To be provided by Sinclair] EX-10.58 4 EXHIBIT 10.58 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT (the "Purchase Agreement") is entered into as of February 3, 1998 by and between Montecito Broadcasting Corporation, a Delaware corporation ("MBC"), Jamie Kellner, Douglas Gealy and Thomas Allen, the sole stockholders of MBC (collectively the "MBC Sellers") and Sinclair Communications, Inc., a Maryland corporation ("Buyer"). R E C I T A L S: A. On this same date MBC acquired all of the issued and outstanding capital stock (the "Company Stock") of Channel 33, Inc., a Nevada corporation (the "Company"), which owns and operates television station KFBT-TV, Channel 33, Las Vegas, Nevada (the "Station"), pursuant to licenses issued by the Federal Communications Commission ("FCC"). B. MBC acquired the Company Stock pursuant to consummation (the "Consummation") of that certain Stock Purchase Agreement dated September 17, 1997 (the "Koker Agreement") by and among Acme Television Holdings, LLC ("Acme"), a predecessor-in-interest of MBC, the Company, and the selling shareholders named therein (collectively, the "Sellers"). C. Acme and Buyer entered into a certain Letter Agreement (the "Letter Agreement") dated September 15, 1997 setting forth certain undertakings of Buyer to become effective upon the Consummation of the Koker Agreement, including exercise of a certain option to enter into this Purchase Agreement. D. Acme and Buyer entered into a certain Option Agreement (the "Option Agreement") dated September 25, 1997 whereby Acme granted to Buyer an option to enter into a Time Brokerage Agreement ("TBA") with the Company upon consummation of the Koker Agreement, to become effective when all necessary regulatory approval had been obtained (the "TBA Effective Date"). E. Acme has assigned to MBC, and MBC has thereby assumed, all of Acme's rights and obligations under the Koker Agreement, the Letter Agreement and the Option Agreement. F. MBC consummated the Koker Agreement with loan funds (the "Loan") provided by The Chase Manhattan Bank and one or more other lenders (collectively, the "Lender") pursuant to a loan agreement (the "Loan Agreement") dated February 3, 1998, and Buyer agreed to certain undertakings in the Letter Agreement and Option Agreement with respect to the Loan Agreement and the payments to be made to the Lender pursuant to the Loan Agreement. G. The MBC Sellers desire to sell, and Buyer desires to purchase, all of the issued and outstanding stock of MBC (the "MBC Stock") on the terms and conditions set forth herein. In consideration of the above recitals and the mutual agreements and covenants contained in this Purchase Agreement, the parties to this Purchase Agreement, intending to be bound legally, hereby agree as follows: SECTION 1. CERTAIN DEFINITIONS. 1.1.Terms Defined in this Section. The following terms, as used in this Purchase Agreement, have the meanings set forth in this Section: (a) "Accounts Receivable" means the right of MBC or the Company as of the TBA Effective Date to payment for the sale of advertising time and other goods and services provided by the Station prior to the TBA Effective Date. (b) "Affiliate" means (i) any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with another Person; (ii) an officer or director of an affiliate within the meaning of (i) above; or (iii) any Person that owns more than fifty percent (50%) of voting control of another Person. For purposes of (i) above, (A) a Person shall be deemed to control another Person if such Person (1) has sufficient power to enable such Person to elect a majority of the board of directors of a corporation, or (2) owns a majority of the beneficial interests in income and capital of such other Person; and (B) a general partner shall be deemed to control a limited partnership if such general partner owns a majority of that portion of the beneficial interests in income and capital of such limited partnership owned by all general partners of such limited partnership. (c) "Assets" means the assets owned or held by MBC and the Company and include those assets necessary for the operation of the Station as presently conducted, all as specified in Section 2.2(a). (d) "Closing" means the consummation of the purchase and sale of the MBC Stock pursuant to this Purchase Agreement in accordance with the provisions of Section 8. (e) "Closing Date" means the date on which the Closing occurs, as determined pursuant to Section 8. (f) "Communications Act" means the Communications Act of 1934, as amended. (g) "Consents" means the consents, permits, or approvals of government authorities and other third parties necessary to transfer the MBC Stock to Buyer and to maintain and preserve all contract, lease and other rights of MBC or the Company existing currently and as of the Closing Date in connection with the consummation of the transactions contemplated by this Purchase Agreement. (h) "Contracts" means all contracts, leases, nongovernmental licenses, and other agreements (including leases for personal or real property and employment agreements), written or oral (including any amendments and other modifications thereto), to which MBC or the Company is a party or that are binding upon MBC or the Company, and (i) that are in effect on the date of this Purchase Agreement or (ii) that are entered into by MBC or the Company between the date of this Purchase Agreement and the Closing Date as permitted by the terms hereof. (i) "FAA" means the Federal Aviation Administration. (j) "FCC" means the Federal Communications Commission. (k) "FCC Consent" means action by the FCC granting its consent to the transfer of control of MBC and the Company as contemplated by this Purchase Agreement. (l) "FCC Licenses" means those licenses, permits, and authorizations issued by the FCC to the Company in connection with the business and operations of the Station. (m) "Final Order" means an action by the FCC that has not been reversed, stayed, enjoined, set aside, annulled, or suspended, and with respect to which no requests are pending for administrative or judicial review, reconsideration, appeal, or stay, and the time for filing any such requests and the time for the FCC to set aside the action on its own motion have expired. (n) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (o) "Intangibles" means all copyrights, trademarks, trade names, service names, licenses, patents, permits, jingles, proprietary information, technical information and data, machinery and equipment warranties, and other similar intangible property rights and interests (and any goodwill associated with any of the foregoing) applied for, issued to, or owned by MBC or the Company or under which MBC or the Company is licensed or franchised and that are used or useful in the business and operations of the Station, together with any additions thereto between the date of this Purchase Agreement and the Closing Date. (p) "GAAP" means generally accepted accounting principles as consistently applied in the United States. (q) "Licenses" means all licenses, permits, construction permits, and other authorizations issued by the FCC, the FAA, or any other federal, state, or local governmental authorities to MBC or the Company which are in effect as of the date of this Purchase Agreement as are necessary in connection with the conduct of the business or operations of the Station as presently conducted together with any additions thereto between the date of this Purchase Agreement and the Closing Date. (r) "Material Contract" means any material contract, lease, nongovernmental license, agreement, or commitment, except for any contract, lease, non-governmental license, agreement, or commitment the obligations under which will be performed prior to Closing. (s) "Person" means an individual, corporation, association, partnership, joint venture, trust, estate, limited liability company, limited liability partnership, or other entity or organization. (t) "Programming Contract" means a contract for the acquisition of programming to be aired on the Station in exchange for payment of consideration. (u) "Station" means television station KFBT-TV, Channel 33, Las Vegas, Nevada. (v) "Stock" means, as the case may be, all the issued and outstanding shares of capital stock of MBC or the Company. (w) "Tangible Personal Property" means all property owned by MBC or the Company as of the date of the Consummation plus any replacements or substitutions thereof, listed on Schedule 2.2(a)(1) attached hereto. (x) "Taxes" (and with correlative meaning "Taxes" and "Taxable") means all federal, state, local or foreign income, gross receipts, windfall profits, severance, property, production, sales, use, license, excise, franchise, capital transfer, employment, withholding and other taxes and assessments, together with any interest, additions or penalties with respect thereto and any interest in respect of such addition, or penalties, and "Tax" means any one of such Taxes. (y) "Tax Returns" means all federal, state, local and foreign income, franchise, sales, use, occupation, property, excise, alternative or add-on minimum, social security, employees' withholding, unemployment, disability, transfer, capital stock and other tax returns and tax reports, and "Tax Return" means any one of such Tax Returns, franchise tax returns, declarations of estimated tax, tax reports and other tax statements and other similar filings required to be filed. (z) "TBA Effective Date" means the date upon which the Buyer commences certain sales and programming activities with respect to the Station pursuant to the TBA. 1.12.Terms Defined Elsewhere in this Agreement. For purposes of this Agreement, the following terms have the meanings set forth in the sections indicated: Term Section Buyer Preamble Claimant Section 10.4(a) Company Preamble DOJ Section 6.4 FTC Section 6.4 Indemnifying Party Section 10.4 Leases Section 2.2(a)(ii) Purchase Price Section 2.3 MBC Sellers Preamble MBC Stock Recitals Studio Lease Section 2.2(a)(ii) Tower Lease Section 2.2(a)(ii) 0.3.Clarifications. Words used herein, regardless of the gender and number specifically used, shall be deemed and construed to include any other gender and any other number as the context requires. Use of the word "including" herein shall be deemed and construed to mean "including but not limited to." Except as specifically otherwise provided in this Purchase Agreement in a particular instance, a reference to a Section or Schedule is a reference to a Section of this Purchase Agreement or a Schedule hereto, and the terms "hereof," "herein" and other like terms refer to this Agreement as a whole, including the Schedules hereto, and not solely to any particular part hereof. SECTION 1. EXCHANGE OF CONSIDERATION. 1.1.Agreement to Sell and Buy. Subject to the terms and conditions set forth in this Agreement, the MBC Sellers hereby agree to sell, transfer, and deliver to Buyer on the Closing Date, and Buyer hereby agrees to purchase on the Closing Date, the MBC Stock, free and clear of any claims, liabilities, security interests, mortgages, liens, pledges, conditions, charges, or encumbrances of any nature whatsoever, except those permitted or identified hereunder. 1.2.Assets and Liabilities at Closing. (aa) Assets of the Company at Closing. The Assets owned by MBC or the Company at the Closing shall include the following: (i) the Tangible Personal Property listed on Schedule 2.2(a)(i); (ii) the Leases ("Leases") listed on Schedule 2.2(a)(ii), specifically, including a certain Broadcast Facilities Lease (the "Studio Lease") assigned to MBC on October 16, 1997, and a certain Tower Lease (the "Tower Lease") assigned to MBC on October 16, 1997; (iii) the Licenses listed on Schedule 2.2(a)(iii). (i) the Contracts listed on Schedule 2.2(a)(iv); (ii) the Intangibles listed on Schedule 2.2.(a)(v) of MBC or the Company relating to the Station and those intangibles that are not specifically listed on Schedule 2.2(a)(v), including the goodwill of the Station, if any; (iii) all of MBC's and the Company's proprietary information, technical information and data, machinery and equipment warranties, maps, computer discs and tapes, plans, diagrams, blueprints, and schematics, including filings with the FCC relating to the business and operation of the Station; and (iv) all books and records of the Station including, but not limited to, financial statements, Tax Returns, program logs, executed copies of Contracts, and all records required by the FCC to be kept by the Station. (ab) Liabilities of MBC and the Company at Closing. (v) At the Closing, MBC and the Company shall have no liabilities or obligations other than (A) liabilities and obligations incurred in the ordinary course of business at the Station; (B) liabilities or obligations arising under Contracts after the Closing Date as permitted hereunder or under the TBA; and (C) liabilities for taxes that are not yet due and payable for any period of time subsequent to the Closing Date. (vi) The liabilities and obligations of MBC and the Company at Closing shall not include: (A) any obligations or liabilities under any Contract (including any Programming Contract) (i) not identified in Schedule 2.2(a)(iv) or (ii) entered into after the date hereof unless permitted hereunder or by the TBA, (B) any credit agreements, promissory notes, note purchase agreements, indentures, capital leases or other financing arrangements, (C) any obligations or liabilities, if any, related to any litigation, arbitration proceeding or proceeding before or by any court, arbitration panel, commission, agency or other administrative or regulatory body or authority based solely on a breach by MBC or the MBC Sellers of their respective obligations under this Purchase Agreement for matters occurring prior to the Closing Date; and (D) any liability incurred after the TBA Effective Date arising from Buyer's acts or omissions pursuant to the TBA. 43.Consideration to be Paid to MBC Sellers. (ac) Purchase Price. The purchase price for the MBC Stock (the "Purchase Price") shall be Thirty Three Million Dollars ($33,000,000). The Purchase Price shall be paid as follows: (iv) Deposits. (A) MBC acknowledges receipt from Buyer of One Million Dollars ($1,000,000) referred to in the Letter Agreement as the LMA Option Grant Price. At the Consummation of the Koker Agreement, MBC shall borrow $33,000,000 pursuant to the Loan Agreement. MBC shall refund to Buyer, on behalf of Acme, the sum of $1,000,000: provided, that the payments due to MBC upon the execution of this Agreement described in Section 2.3(c), shall be deducted from such refund and shall be paid to MBC, with the balance, if any, paid to Buyer. (B) Buyer shall pay MBC quarterly payments as follows: QUARTERLY PAYMENT DATE AGGREGATE AMOUNT (DOLLARS) June 30, 1998 $190,000 September 30, 1998 $190,000 December 31, 1998 $190,000 March 31, 1999 $190,000 June 30, 1999 $190,000 September 30, 1999 $190,000 December 31, 1999 $190,000 March 31, 2000 $190,000 June 30, 2000 $190,000 September 30, 2000 $190,000 December 31, 2000 $190,000 (v) Balance. The payments referred to in Section 2.3(a)(i)(B) hereof shall constitute a credit to Buyer at Closing against the Purchase Price. The remaining balance of the Purchase Price shall be paid by the Buyer by wire transfer of same day Federal funds at the time of Closing, and such balance shall be paid directly to The Chase Manhattan Bank, as agent for the Lender, pursuant to the Loan Agreement. (ad) Operating Payments. From the date hereof until the TBA Effective Date, Buyer shall make a payment to MBC on the last day of each calendar month equal to the amount certified by MBC by which the monthly expenses, exclusive of debt service, of the Station exceed the monthly income. (ae) Transaction Expenses. Upon execution of this Purchase Agreement, Buyer shall pay to MBC: (i) the sum of $275,000 which represents the transaction costs as of the date hereof, including professional fees, incurred by MBC in connection with the Koker Agreement, the Consummation, the Letter Agreement, the Option Agreement, the TBA, this Purchase Agreement and the Loan Agreement as of the date hereof; (ii) all fees, costs, expenses and other monetary obligations of MBC arising under the Loan Agreement and due and payable on the Closing Date; and (iii) deposits payable on the Closing Date by MBC for the Leases. (af) Monthly Extension Fees. Until the Closing Date, the Buyer shall pay to MBC a monthly closing extension fee of $200,000 commencing on March 1, 1998 and continuing on the first day of each month thereafter. SECTION 2. REPRESENTATIONS AND WARRANTIES OF MBC AND THE MBC SELLERS. The MBC Sellers and MBC, jointly and severally, represent and warrant to Buyer as follows: 0.4.Organization and Authority of MBC. MBC is a corporation duly organized, validly existing and in good standing under the laws of Delaware. MBC has the requisite power and authority to execute, deliver and perform this Purchase Agreement and the documents contemplated hereby according to their respective terms. 0.5.Authorization and Binding Obligation. The execution, delivery and performance of this Purchase Agreement by MBC has been duly authorized by all necessary corporate or other action on the part of MBC. This Purchase Agreement has been duly executed and delivered by MBC and each MBC Seller and constitutes the legal, valid, and binding obligation of MBC and each MBC Seller, enforceable against it or him in accordance with its terms except as the enforceability of this Purchase Agreement may be affected by bankruptcy, insolvency, or similar laws affecting creditors' rights generally and by judicial discretion in the enforcement of equitable remedies. 0.6.Compliance with Laws. MBC is in compliance in all material respects with all laws, rules, policies, and regulations including, but not limited to, federal, state and local and the FCC's rules and policies. 0.7.Licenses. The Company is the holder of the Licenses included in Schedule 2.2(a)(iii) to this Purchase Agreement, all of which are in full force and effect. The FCC Licenses constitute all of the licenses issued by the FCC under the Communications Act of 1934, as amended (the "Act"), and the current rules, regulations, and policies of the FCC for the operation of the Station as currently conducted. There is not pending or, to MBC's or the MBC Sellers' knowledge, threatened, any petition, complaint, objection (whether formal or informal), order to show cause, investigation, or other action by or before the FCC or any court to revoke, cancel, rescind, modify, or refuse to renew any of the FCC Licenses. Except as disclosed on Schedule 3.4 and other than proceedings of general applicability to the broadcasting industry, there is not now pending or, to MBC's or the MBC Sellers' knowledge, threatened, any other petition, complaint, objection (whether formal or informal), investigation, order to show cause, notice of violation, notice of apparent liability, or notice of forfeiture or other proceeding by or before the FCC or any court against the Company with respect to any matter affecting the Station which would have a materially adverse effect on the operation of the Station. 0.8.MBC Stock. As of the date hereof, no shares of the capital stock of MBC are held in the treasury. There are no outstanding options, conversion rights, warrants, or other present or future rights in existence to acquire or to vote any of MBC's shares of capital stock. The MBC Stock represents all the issued and outstanding shares of capital stock of MBC and all such shares have been duly and validly issued and are fully paid and nonassessable and are not subject to any preemptive rights. There are no voting trust agreements or other contracts, agreements, or arrangements restricting or affecting voting or dividend rights or transferability with respect to the MBC Stock. MBC has not violated any federal, foreign, state, or local law, ordinance, rule, or regulation in connection with the offer for sale or sale and issuance of its outstanding shares of capital stock or any other securities. The MBC Sellers own the MBC Stock free and clear of any mortgages, liens, claims, charges, encumbrances, assessments, or other security or adverse interests of any kind or nature whatsoever. 0.9.Company Stock. To MBC and the MBC Sellers' knowledge, (a) as of the date hereof, no shares of the capital stock of the Company are held in the treasury; (b) there are no outstanding options, conversion rights, warrants, or other present or future rights in existence to acquire or to vote any of the Company's shares of capital stock; (c) the Company Stock represents all the issued and outstanding shares of capital stock of the Company, and all such shares have been duly and validly issued and are fully paid and nonassessable and are not subject to any preemptive rights; (d) there are no voting trust agreements or other contracts, agreements, or arrangements restricting or affecting voting or dividend rights or transferability with respect to the Company Stock; (e) the Company has not violated any federal, foreign, state, or local law, ordinance, rule, or regulation in connection with the offer for sale or sale and issuance of its outstanding shares of capital stock or any other securities; and (f) MBC owns the Company Stock free and clear of any mortgages, liens, claims, charges, encumbrances, assessments, or other security or adverse interests of any kind or nature whatsoever. 0.10.Absence of Conflicting Agreements. The execution, delivery and performance by MBC and the MBC Sellers of this Purchase Agreement and the documents contemplated hereby (with or without the giving of notice, the lapse of time, or both): (a) subsequent to the receipt of the Consents, do not require the consent of any third party, (b) will not conflict with, result in a breach of, or constitute a default under any applicable law, judgment, order, ordinance, injunction, decree, rule, regulation, or ruling of any court or governmental instruments, and (c) will not conflict with, constitute grounds for termination of, result in a breach of, constitute a default under, or accelerate or permit the acceleration of any performance required by the terms of any Contract or other contract or agreement of MBC Sellers. 0.11.Consents. Except for the FCC Consent provided for in Section 6.1 and the HSR Filing provided for in Section 6.4, no consent, approval, permit, or authorization of, or declaration to, or filing with any governmental or regulatory authority or any other third party is required (a) to consummate this Purchase Agreement and the transactions contemplated hereby, or (b) to permit the MBC Sellers to assign or transfer the MBC Stock to Buyer. 0.12.Brokers. Neither MBC nor any of the MBC Sellers nor any person or entity acting on their behalf has incurred any liability for any finders' or brokers' fees or commissions in connection with the transactions contemplated by this Purchase Agreement. 0.13.MBC Balance Sheet. Annexed hereto as Schedule 3.10 is a balance sheet of MBC which is true and complete in all material respects and presents fairly the financial condition of MBC as of the date hereof (in the "Before Closing" column) and pro forma immediately following MBC's acquisition of the Company Stock (in the "After Closing" column). SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to MBC as follows: 0.14.Organization, Standing, and Authority. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland and has the requisite power and authority to execute, deliver, and perform this Purchase Agreement and the documents contemplated hereby according to their respective terms and to own the Stock. 0.15.Authorization and Binding Obligation. The execution, delivery and performance of this Purchase Agreement by Buyer have been duly authorized by all necessary action on the part of Buyer. This Purchase Agreement has been duly executed and delivered by Buyer and constitutes a legal, valid, and binding, obligation of Buyer, enforceable against Buyer in accordance with its terms except as the enforceability of this Purchase Agreement may be affected by bankruptcy or similar laws affecting creditors' rights generally and by judicial discretion in the enforcement of equitable remedies. 0.16.Absence of Conflicting Agreements and Required Consents. Subject to the receipt of the Consents, the execution, delivery and performance by Buyer of this Purchase Agreement and the documents contemplated hereby (with or without the giving of notice, the lapse of time, or both): (a) do not require the consent of any third party; (b) will not conflict with the articles of incorporation of Buyer; (c) will not conflict with, result in a breach of, or constitute a default under, any applicable law, judgment, order, ordinance, injunction, decree, rule, regulation, or ruling of any court or governmental instrumentality; and (d) will not conflict with, constitute grounds for termination of, result in a breach of, constitute a default under, or accelerate or permit the acceleration of any performance required by the terms of, any agreement, instrument, license or permit to which Buyer is a party or by which Buyer may be bound. 0.17.Qualification as a Broadcast Licensee. At the time the Application referred to in Section 6.1 hereof is filed, Buyer will be qualified under the Communications Act and all other applicable federal, state and local laws, rules, regulations, and policies to acquire the MBC Stock from Sellers. 0.18.Financial Qualifications. Buyer has on hand or access to the financial resources necessary to fulfill Buyer's obligations under this Purchase Agreement. 0.19.Brokers. Neither Buyer nor any person or entity acting on its behalf has incurred any liability for any finders' or brokers' fees or commissions in connection with the transactions contemplated by this Purchase Agreement SECTION 4. OPERATION OF STATION PRIOR TO CLOSING. MBC covenants and agrees that between the date hereof and the TBA Effective Date, or, in the event the TBA does not become effective, the Closing Date, MBC shall cause the Company to conduct its business in the ordinary course in accordance with its past practices (except where such conduct would conflict with the following covenants or with other obligations of MBC under this Purchase Agreement), and, except as contemplated by this Purchase Agreement or with the prior written consent of Buyer, MBC shall cause the Company to act in accordance with the following: 0.20.Contracts. Neither MBC nor the Company will renew, extend, amend, terminate, or waive any material right under any Material Contract or enter into any contract or commitment or incur any obligation (including obligations relating to the borrowing of money or the guaranteeing of indebtedness and obligations arising from the amendment of any existing Contract, regardless whether such Contract is a Material Contract) that will be binding on MBC or the Company after Closing except for (a) cash time sales agreements and production agreements made in the ordinary course of business consistent with the Company's past practices, (b) any Programming Contract or network affiliation agreement made with the consent of Buyer, (c) other Contracts entered into in the ordinary course of business consistent with the Company's past practices that do not involve consideration in excess of $25,000 for any individual Contract or, in the aggregate, $150,000 for all such Contracts, or (d) any Contract which can be terminated upon 30 days notice without penalty. Prior to the Closing Date, MBC shall cause the Company to deliver to Buyer a list of all Contracts entered into between the date of this Purchase Agreement and prior to the Closing Date and shall make available to Buyer copies of all such Contracts, except Contracts made by Buyer. 0.21.Encumbrances. MBC and the Company will not create, assume, or permit to exist any mortgage, pledge, lien, or other charge or encumbrance affecting any of the Assets, except for (a) those in existence on the date of this Purchase Agreement, (b) those created in connection with financing provided by the Lender which shall be paid on or before the Closing Date, (c) liens for current taxes not yet due and payable, or (d) those otherwise permitted under the Loan Agreement with respect to a capital facility: provided, that such capital facility must be approved by Buyer, which approval shall not be unreasonably withheld. 0.22.Employee Obligations. On the Closing Date, neither MBC nor the Company shall have any liability or obligation to any of their employees, including, without limitation, any accrued but unpaid vacation or leave or any severance obligation. 0.23.Dispositions. Neither MBC nor the Company will sell, assign, lease, or otherwise transfer or dispose of any of the Assets except in the ordinary course of business or in connection with the acquisition of replacement property of equivalent kind and value. Neither MBC nor the Company shall pay any dividend or make any similar distribution during the term of this Purchase Agreement. 0.24.Mergers. Neither MBC nor the Company will reorganize, liquidate or merge or consolidate with any other entity. 0.25.Insurance. MBC and the Company shall maintain in full force and effect policies of insurance of the same type, character, and coverage as the policies currently carried with respect to the business, operations, and Assets of the Company. 0.26.Indebtedness and Obligations. MBC and the Company shall not incur any indebtedness for borrowed money except pursuant to or permitted by the Loan Agreement. MBC and the Company shall pay all their obligations as they become due and satisfy any existing indebtedness so that, as of the Closing Date, MBC and the Company shall have no current or long-term liabilities relating to the period between the Consummation and the Closing Date except those liabilities incurred under or permitted by the Loan Agreement in accordance with the provisions of Section 5.2 hereof. The Loan shall be discharged at or prior to Closing. Notwithstanding anything herein to the contrary, neither MBC nor Company shall incur any long-term indebtedness (other than the Loan) without the prior consent of Buyer, which consent shall not be unreasonably withheld. 0.27.Amendments. Neither MBC nor the Company shall amend, change, or modify its Certificate of Incorporation or Bylaws, except with the written consent of Buyer. 0.28.Securities. Neither MBC nor the Company will (a) issue, sell, or otherwise dispose of any of its Stock; (b) acquire (through redemption or otherwise) any of its Stock; (c) grant any options, warrants, or other rights to acquire any of its Stock; or (d) issue, sell, or otherwise dispose of any stock options, bonds, notes, or other securities. 0.29.Licenses. Neither MBC nor the Company shall cause or permit, by any act or failure to act, any of the Licenses included in Schedule 2.2(a)(iii) to expire or to be revoked, suspended, or modified in a material adverse manner, or take any action that could reasonably be expected to cause the FCC or any other governmental authority to institute proceedings for the suspension, revocation, or material adverse modification of any of the Licenses: provided, that this covenant shall not apply to any act or omission of Buyer pursuant to or in performance of the TBA. MBC and the Company shall prosecute with due diligence any applications to any governmental authority necessary for the operation of the Station and pay any and all amounts owed to the FCC and every other government authority prior to Closing, other than any fees associated with the sale of the MBC Stock to the Buyer or any transfer fees required to be paid as a result of the sale to the Buyer, it being the understanding that the Buyer will pay said fees. 0.30.No Inconsistent Action. Neither MBC, the MBC Sellers nor the Company shall take any action that is inconsistent with its obligations under this Purchase Agreement in any material respect or that could reasonably be expected to hinder or delay the consummation of the transactions contemplated by this Purchase Agreement. MBC shall conduct and maintain the business and operation of the Station and the Company such that the representations and warranties set forth in Section 3 of the Koker Agreement shall not become any less accurate or complete in any material respect. MBC shall deliver to Buyer at the Closing revised schedules advising Buyer of any material change occurring after the Consummation with respect to the representations and warranties contained in Section 3 of the Koker Agreement. 0.31.Maintenance of Assets. The Company shall maintain all of the Assets in good condition (ordinary wear and tear excepted), consistent with their overall condition on the date of this Purchase Agreement, and use, operate and maintain all of the Assets in a reasonable manner, and the Company shall maintain inventories of spare parts and expendable supplies at levels consistent with past practices. If any insured or indemnified loss, damage, impairment, confiscation, or condemnation of or to any of the Assets occurs, the Company shall repair, replace, or restore the Assets to their prior condition as represented in this Purchase Agreement as soon thereafter as possible, and MBC shall use the proceeds of any claim under any property damage insurance policy or other recovery solely to repair, replace, or restore any of the Assets that are lost, damaged, impaired, or destroyed. 0.32.Consents. MBC and the Company shall cooperate with Buyer to obtain all Consents and estoppel certificates from private parties without any change in the terms or conditions of any Contract. MBC and the Company shall promptly advise Buyer of any difficulties experienced in obtaining any such Consents and of any conditions proposed, considered, or requested for any such Consents. 0.33.Books and Records. The Company shall maintain its books and records in accordance with past practices. 0.34.Notification. MBC and the Company shall promptly notify Buyer in writing of any unusual or material developments with respect to the business or operations of the Company and of any material change in any of the information contained in the representations and warranties contained in Section 3 of the Koker Agreement. 0.35.Restrictions on Conduct of Other Business. From the date on which the Purchase Agreement is executed, neither MBC nor the Company shall conduct any business other than the operation of the Station. 0.36.Compliance with Laws. MBC and the Company shall comply in all material respects with all laws, rules, policies, and regulations including, but not limited to, federal, state and local and the FCC's rules and policies. 0.37.Programming. From the date of execution of this Purchase Agreement until the TBA Effective Date, or the Closing Date, if the TBA does not become effective, the Company shall not (a) make any material changes in the Station's programming policies, except such changes as the Company deems to be required by the public interest or (b) enter into any Programming Contract without Buyer's written consent, . 0.38.Preservation of Business. From the date of execution of this Purchase Agreement until the TBA Effective Date, MBC and the Company shall use commercially reasonable efforts to preserve the business and organization of the Station and to preserve the audience of the Station and the Station's present relationships with suppliers, advertisers, and others having business relations with them, to the end that the business, operations, and prospects of the Station shall be preserved at the TBA Effective Date or the Closing Date, in the event that the TBA does not become effective. 0.39.Tax Matters. MBC, the MBC Sellers and the Company shall timely file (taking into account all applicable extensions) all federal, state, local, foreign and other Tax Returns required by law to be filed for which the due date is on or before the Closing Date. MBC, the MBC Sellers and the Company shall pay in full or establish adequate reserves for all Taxes and other charges incurred or due to federal, state or local, foreign or any other taxing authorities prior to the Closing Date. 0.40.Risk of Loss. The risk of any loss, damage, impairment, confiscation, or condemnation of any of the assets of MBC and the Company from any cause whatsoever shall be borne by MBC at all times prior to the Closing Date. 0.41.Control of the Station. Prior to Closing, Buyer shall not, directly or indirectly, control, supervise, or direct, or attempt to control, supervise or direct the operations of the Station; those operations, including complete control and supervision of all of the Station's programs, employees, and policies, shall be the sole responsibility of MBC and the Company. Buyer's operations of pursuant to the TBA shall not be deemed in any way to constitute control of the Station. 0.42.Related Party Transactions. Prior to Closing, neither MBC nor the Company shall enter into any agreement or other transaction with any party which is an Affiliate of MBC or the Company or in any way related to the MBC Sellers, except with the written consent of Buyer. SECTION 5. GOVERNMENTAL CONSENTS. 05.1.FCC Consent. (ag) Prior FCC Approval. The sale of the MBC Stock as contemplated by this Purchase Agreement is subject to the prior consent of the FCC. (ah) FCC Application. Within ten (10) business days after notice to MBC by Buyer that (i) Buyer has been advised by Buyer's FCC counsel that the transaction contemplated herein is reasonably likely to be approved upon application to the FCC for consent and approval thereof or (ii) Buyer has divested its existing television station in the Las Vegas, Nevada DMA, MBC and Buyer shall prepare and file with the FCC an appropriate application (the "Application") to secure FCC Consent. The parties shall thereafter prosecute the Application with all reasonable diligence and otherwise use commercially reasonable efforts to obtain a grant of the Application as expeditiously as practicable. Each party agrees to comply with any condition imposed on it by the FCC Consent, except that no party shall be required to comply with a condition if compliance with the condition would have a material adverse effect upon it, including divestiture of any broadcast station licensed to Buyer or its Affiliates. Buyer and MBC shall oppose any petitions to deny or other objections filed with respect to the Application and any requests for reconsideration or judicial review of the FCC Consent. Each party shall provide the other party with copies of any and all documents received or sent with respect to the Application. (ai) Extension of Time. If the Closing shall not have occurred for any reason within the original effective period of the FCC Consent, and neither party shall have terminated this Purchase Agreement under Section 9, the parties shall jointly request an extension of the effective period of the FCC Consent. No extension of the effective period of the FCC Consent shall limit the exercise by either party of its right to terminate the Purchase Agreement under Section 9. 05.12.Confidentiality. Except as necessary for the consummation of the transaction contemplated by this Purchase Agreement, including Buyer's obtaining of financing related hereto, and except as and to the extent required by law, each party will keep confidential any information obtained from the other party in connection with the transactions contemplated by this Purchase Agreement. The aforesaid shall apply from the date of this Purchase Agreement forward unless such information is or becomes publicly available without any breach by any party under this Section. If this Purchase Agreement is terminated, each party will return to the other party all information obtained by such party from the other party in connection with the transactions contemplated by this Purchase Agreement. 05.13.Cooperation. Buyer and MBC shall cooperate fully with each other and their respective counsel and accountants in connection with any actions required to be taken as part of their respective obligations under this Purchase Agreement, and Buyer and MBC shall execute such other documents as may be reasonably necessary to the implementation and consummation of this Purchase Agreement and otherwise use commercially reasonable efforts to consummate the transaction contemplated hereby and to fulfill their obligations under this Purchase Agreement. Notwithstanding the foregoing, and except as otherwise expressly provided in this Purchase Agreement, Buyer and MBC shall have no obligation (a) to expend funds to obtain any of the Consents except to pay any required filing or transfer fees; or (b) to agree to any adverse change in any License or Contract in order to obtain a Consent required with respect thereto. 05.14.HSR Act Filing. MBC and Buyer agree to (a) file, or cause to be filed, with the U.S. Department of Justice ("DOJ") and Federal Trade Commission ("FTC") all filings, if any, that are required in connection with the transactions contemplated hereby under the HSR Act within fifteen (15) business days of the date that the Application for FCC Consent has been filed with the FCC; (b) submit to the other party, prior to filing, their respective HSR Act filings to be made hereunder, and to discuss with the other any comments the reviewing party may have; (c) cooperate with each other in connection with such HSR Act filings, which cooperation shall include furnishing the other with any information or documents that may be reasonably required in connection with such filings; (d) promptly file, after any request by the FTC or DOJ, any information or documents requested by the FTC or DOJ; and (e) furnish each other with any correspondence from or to, and notify each other of any other communications with, the FTC or DOJ that relates to the transactions contemplated hereunder, and to the extent practicable, to permit each other to participate in any conferences with the FTC or DOJ. SECTION 6. CONDITIONS TO OBLIGATIONS OF BUYER AND MBC. 056.1.Conditions to Obligations of Buyer. All obligations of Buyer at the Closing hereunder are subject at Buyer's option to the fulfillment prior to or at the Closing Date of each of the following conditions: (aj) Representations and Warranties. All representations and warranties of MBC and the MBC Sellers contained in this Purchase Agreement shall be true and complete in all material respects at and as of the Closing Date as though made at and as of that time. (ak) Covenants and Conditions. MBC, the MBC Sellers and the Company shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Purchase Agreement to be performed or complied with by them prior to or on the Closing Date. The representations and warranties of the Company contained in the Koker Agreement shall be true and complete in all material respects as of the Closing Date of the transaction contemplated herein, unless such representation or warranty was not true and complete at the time of Consummation of the Koker Agreement. (al) Consents. All Consents shall have been obtained and delivered to Buyer (other than any Consent required under any Contract listed on Schedule 2.2(a)(iv) that is not a Material Contract) without any adverse change in the terms or conditions of any Contract or any License. (am) FCC Consent. The FCC Consent shall have been granted without the imposition on Buyer of any material adverse conditions, and the FCC Consent shall have become a Final Order: provided, that Buyer may waive the condition that the FCC Consent become a Final Order if no petition to deny or other challenge is filed to the FCC Application referenced in Section 6.1 of this Purchase Agreement. (an) Governmental Authorizations. The Company shall be the holder of all FCC Licenses and there shall not have been any modification, revocation, or non-renewal of any License that could have an adverse effect on the Station or the conduct of its business and operations. No proceeding shall be pending the effect of which could reasonably result in the revocation, cancellation, suspension, adverse modification or expiration of any FCC License material to the operation of the Station. (ao) HSR Act. The waiting period under the HSR Act shall have expired without action by the DOJ or the FTC to prevent the Closing. (ap) Tax, Lien and Judgment Searches. Buyer shall have obtained searches for tax, lien and judgment filings in the Secretary of State's records of the State of Nevada, and in the records of Clark County, Nevada, made no earlier than ten (10) days prior to the Closing Date showing the absence of any liens or encumbrances on the MBC Stock, the Company Stock or the Assets, except liens expressly permitted by this Purchase Agreement or the Loan Agreement. All liens or encumbrances arising under the Loan Agreement shall be terminated at the Closing of the transactions contemplated in this Purchase Agreement. (aq) Deliveries. MBC and the MBC Sellers shall have made or stand willing to make at the Closing all the deliveries to Buyer described in Section 8.2. (ar) Adverse Change. Between the date of this Purchase Agreement and the Closing Date, there shall have been no material adverse change in the business, Assets, properties, financial condition, or business prospects of the Station, unless such change is the result of Buyer's acts or omissions in performance of the TBA. 056.12.Conditions to Obligations of MBC. All obligations of MBC and the MBC Sellers at the Closing hereunder are subject at MBC's option to the satisfaction by Buyer prior to or at the Closing Date of each of the following conditions: (as) Representations and Warranties. All representations and warranties of Buyer contained in this Purchase Agreement shall be true and complete in all material respects on and as of the Closing Date as though made on and as of that time. (at) Covenants and Conditions. Buyer shall have performed and complied in all material respects with all covenants, agreements, and conditions required by this Purchase Agreement to be performed or complied with by it prior to or on the Closing Date. (au) Deliveries. Buyer shall have made or stand willing to make all the deliveries described in Section 8.3. (av) FCC Consent. The FCC Consent shall have been granted without the imposition on MBC of any conditions that need not be complied with by MBC under Section 6.1 hereof, and Buyer shall have complied with any conditions imposed on it by the FCC Consent. (aw) HSR Act. The waiting period under the HSR Act shall have expired without action by the DOJ or the FTC to prevent the Closing. SECTION 7. CLOSING AND CLOSING DELIVERIES. 056.7.1.Closing. (ax) Closing Date. (vii) Except as provided below in this Section 9.1(a) or as otherwise agreed to by Buyer and the MBC Sellers, the Closing shall take place after the FCC Consent has become a Final Order: provided, that if the requirement of a Final Order is waived by Buyer pursuant to Section 7. 1 (d) of this Agreement, the Closing shall take place at 10:00 a.m. within ten (10) days after the FCC Consent becomes effective. (viii) If there is in effect on the date on which the Closing would otherwise occur pursuant to this Section 8.1 (a) any judgment, decree, or order that would prevent or make unlawful the Closing on that date, the Closing shall be postponed until a date within the effective period of the FCC Consent (as it may be extended pursuant to Section 6.1), to be agreed upon by Buyer and the MBC Sellers, when such judgment, decree, or order no longer prevents or makes unlawful the Closing. If the Closing is postponed pursuant to this paragraph, the date of the Closing shall thereafter be mutually agreed to by the MBC Sellers and Buyer. (ay) Closing Place. The Closing shall be held at the offices of Dickstein Shapiro Morin & Oshinsky LLP in Washington, D.C., or any other place that is agreed upon by Buyer and the MBC Sellers. 056.7.1.2.Deliveries by MBC and MBC Sellers. On the Closing Date, MBC or the MBC Sellers shall deliver to Buyer the following items, in form and substance reasonably satisfactory to Buyer and its counsel: (az) Stock. Certificates representing all of the MBC Stock, which shall be either duly endorsed or accompanied by stock powers duly executed in favor of Buyer; (ba) Officer's Certificate. A certificate, dated as of the Closing Date, executed by a duly appointed officer of MBC certifying: (i) that the representations and warranties of MBC contained in Section 3 of this Purchase Agreement are true and complete in all material respects as of the Closing Date as though made on and as of that date; (ii) that MBC has in all material respects performed and complied with all of its obligations, covenants, and agreements in this Purchase Agreement to be performed and complied with by MBC on or prior to the Closing Date, and (iii) that the condition set forth in Section 7.1(b) is satisfied; (bb) Opinion. The opinions of MBC's and the Company's counsel substantially in the form of Exhibit A annexed hereto; (bc) Secretary's Certificate. A certificate, dated as of the Closing Date, executed by MBC's Secretary certifying to the authenticity of the resolutions, as attached to such certificate, duly adopted by MBC's Board of Directors authorizing and approving the execution of this Purchase Agreement and the consummation of the transactions contemplated thereby; (bd) Estoppel Certificates. Estoppel certificates of the lessors of the Studio Lease and the Tower Lease; (be) Performance of Company Obligations. Evidence reasonably satisfactory to Buyer that all MBC and Company obligations and liabilities due or payable by MBC prior to Closing (other than permitted liabilities described in Section 2.2(b)) including any order of the FCC, shall have been satisfied in full; (bf) Resignations. Written resignations, effective on the Closing Date, of officers and directors of MBC and the Company; (bg) Release. A release from each of the MBC Sellers stating that the Stock of such MBC Seller is free and clear of any and all liens and encumbrances, and that such MBC Seller has no further claim with respect to the MBC Stock except for payment hereunder; (bh) Corporate, Financial and Tax Records. All corporate records (including minute books and stock books and registers), and financial and tax records of MBC and the Company for a period of three years predating the Closing; (bi) Licenses, Contracts, Business Records, Etc.. Originals or, if not available, true copies of all (1) Licenses, including any modifications and amendments thereto, (2) all applications, reports, technical information and engineering studies relating to the Station, (3) all files required to be maintained by the FCC at the Station or in the Station's public inspection file, (4) all Contracts, and other operational data or other information maintained by the Company in the ordinary course, (5) all blueprints, schematics, working drawings, plans, projections, statistics, engineering records relating to the Station, and (6) all other business files and records in the possession of MBC relating to the Station; and 056.7.1.23.Deliveries by Buyer. On the Closing Date, Buyer shall deliver the following items in form and substance reasonably satisfactory to MBC and its counsel: (bj) Payment. The payment described in Section 2.3(a)(ii); (bk) Opinion. The opinion of Buyer's counsel substantially in the form set forth at Exhibit B; (bl) Secretary's Certificate. A certificate, dated as of the Closing Date, executed by Buyer's secretary, certifying to the authenticity of resolutions duly adopted by Buyer's Board of Directors authorizing and approving the execution of this Purchase Agreement and the consummation of the transactions contemplated thereby; and (bm) Officer's Certificate. A certificate, dated as of the Closing Date, executed by a duly appointed officer of Buyer certifying (i) that the representations and warranties of Buyer contained in Section 4 of this Purchase Agreement are true and complete in all material respects as of the Closing Date as though made on and as of that date; and (ii) that Buyer has in all material respects performed and complied with all of its obligations, covenants, and agreements in this Purchase Agreement to be performed and complied with by Buyer on or prior to the Closing Date. SECTION 8. TERMINATION. 8.1.Termination by MBC. This Purchase Agreement may be terminated by MBC, if MBC is not then in material breach of any of its obligations hereunder, upon ten (10) days written notice to Buyer, upon the occurrence of any one of the following: (bn) Conditions. If, on the date that would otherwise be the Closing Date, any of the conditions precedent to the obligations of MBC and the MBC Sellers set forth in Section 7.2 of this Purchase Agreement have not been satisfied or waived in writing by MBC; (bo) Judgments. If there shall be in effect on the date that would otherwise be the Closing Date any judgment, decree, or order that would prevent or make unlawful the Closing; (bp) TBA. In the event that the TBA has become effective and thereafter Buyer has breached any of its material obligations thereunder, and, upon notice specifying such breach, Buyer fails to cure such breach within forty (40) days of such notice; or (bq) Expiration. If the transaction contemplated herein has not closed within three (3) years from the date of the Purchase Agreement. 8.12.Termination by Buyer. This Purchase Agreement may be terminated by Buyer, if Buyer is not then in material breach of its obligations hereunder, upon ten (10) days written notice to MBC, upon the occurrence of any of the following: (br) Conditions. If on the date that would otherwise be the Closing Date any of the conditions precedent to the obligations of Buyer set forth in Section 7.1 of this Purchase Agreement has not been satisfied or waived in writing by Buyer: provided, that Buyer may not terminate because of any breach of a representation or warranty by MBC or the MBC Sellers if such breach is caused by the conduct of Buyer under the TBA; (bs) Judgments. If there shall be in effect on the date that would otherwise be the Closing Date any judgment, decree, or order that would prevent or make unlawful the Closing. (bt) TBA. In the event that the TBA has become effective and thereafter the Company, MBC or the MBC Sellers have breached any of their material obligations thereunder, and, upon notice specifying such breach, the Company or MBC or the MBC Sellers, as the case may be, fails to cure such breach within forty (40) days of such notice; or (bu) Time Limit. If the transaction contemplated herein has not closed within three (3) years from the date of this Purchase Agreement. 73.3.Right to Cure. Notwithstanding anything herein to the contrary, no material breach shall be deemed to have occurred until the party in breach has been notified in writing by the other party and provided twenty (20) days to cure such breach: provided, that, in the event a cure would reasonably require more than twenty (20) days, the party in breach shall be afforded an additional twenty (20) days if such party timely initiates reasonable efforts to effect a cure and provides the other party with satisfactory evidence that the cure will be effectuated during the extended period; and provided further, that a party in breach can pay the other party a sum certain if the payment of such sum will cure the breach prior to or at the Closing; provided further, that the Closing Date will be extended to allow a party in breach to effect a cure in accordance with this Section. This right to cure provided in this Section shall not be applicable to any payment due from the Buyer to MBC. 73.4.MBC's Rights on Buyer's Termination. If this Purchase Agreement is terminated by MBC because of Buyer's breach of a material obligation hereunder, MBC shall be entitled to payment from the Buyer of all sums then due and payable hereunder (not including the Purchase Price) plus any and all remedies available to MBC at law or equity: provided, that any payments made by Buyer under Section 2.3(a)(i)(B) hereof shall constitute a credit against any damages awarded to MBC. 73.5.Buyer's Rights on MBC's Termination. If this Purchase Agreement is terminated by Buyer because of the Company's, MBC's or the MBC Sellers' breach of a material obligation hereunder, Buyer shall have the right of specific performance as its exclusive remedy, except as otherwise set forth below. The parties recognize that this Purchase Agreement contemplates the sale of unique assets and that monetary damages would not be adequate to compensate Buyer for its injury. If any action is brought by Buyer to enforce this Purchase Agreement, MBC, the Company and the MBC Sellers shall each waive the defense that there is an adequate remedy at law. Notwithstanding the above, if specific performance is not available, or if a breach by MBC, the Company or the MBC Sellers of any of their obligations under this Purchase Agreement causes the FCC Licenses to be revoked, forfeited or materially impaired, Buyer shall be reimbursed all payments made by Buyer under Section 2.3(c) hereof and may also pursue any and all remedies available to it in law or equity against MBC. 73.6.Litigation Expenses. In the event either party files a lawsuit or other formal legal proceeding for any remedy available under this Purchase Agreement, the prevailing party shall be entitled to reimbursement from the other party of all reasonable legal fees and expenses incurred thereby. 73.7.Return of Deposits. In the event (i) the transaction contemplated by this Purchase Agreement has not closed within three (3) years of the date hereof and neither party is in material breach, or (ii) the parties mutually agree to terminate this Agreement, upon sale of the FCC Licenses and other Assets of the Station or the Stock of MBC or the Company, MBC shall, after payment of all sums due under the Loan, pay to Buyer from all monies retained the amount of all of Buyer's payments made pursuant to Section 2.3 hereof. 73.8.Condition of MBC. Notwithstanding any other provision of this Purchase Agreement or any related document described in Section 11.8 hereof, and except for the representations and warranties contained in Section 3 hereof, Buyer acknowledges (i) that the MBC Sellers have not and do not assume any individual liability hereunder, and (ii) Buyer is aware of the financial condition of MBC at the time of execution of this Purchase Agreement, including MBC's lack of significant capital other than the Loan and that, but for the provisions of Section 2.3 hereof, MBC may not have sufficient reserves to pay its debts in the ordinary course as they come due. In consideration of the foregoing and of MBC's and the MBC Sellers' willingness to enter into the transaction contemplated hereby, Buyer expressly waives against all or any one of the MBC Sellers, any demand, claim, action, suit, charge, proceeding, assessment or judgment, whether based in contract, tort, or any other common law or statutory cause of action, except to the extent that the MBC Sellers may be liable pursuant to Section 3 hereof for breach of the representations and warranties contained therein. SECTION 9. INDEMNIFICATION. 79.1.Survival. All representations and warranties of Buyer, MBC and the MBC Sellers herein and all covenants of Buyer and MBC herein with respect to periods prior to Closing shall be deemed continuing representations, warranties and covenants, and shall survive the Closing. Any investigations by or on behalf of any party hereto shall not constitute a waiver as to enforcement of any representation, warranty, or covenant contained in this Purchase Agreement. No notice or information delivered by either party shall affect the other party's right to rely on any representation, warranty, or covenant made by such party or relieve such party of any obligations under this Purchase Agreement as the result of a breach of any of its representations and warranties. 79.2.Indemnification by MBC Sellers. After the Closing, and regardless of any investigation made at any time by or on behalf of Buyer or any information Buyer may have, the MBC Sellers jointly and severally hereby agree to indemnify and hold Buyer harmless against and with respect to, and shall reimburse Buyer for any and all losses, liabilities, or damages resulting from any material breach of any warranty or representation of the MBC Sellers contained in Section 3 of this Purchase Agreement, and any and all out-of-pocket costs and expenses, including reasonable legal fees and expenses, incident to any action, suit, proceeding, claim, demand, assessment, or judgment incident to the foregoing or incurred in investigating or attempting to avoid the same or to oppose the imposition thereof, or in enforcing this indemnity. 79.3.Indemnification by Buyer. After the Closing, and regardless of any investigation made at any time by or on behalf of MBC or any information MBC may have, Buyer hereby agrees to indemnify and hold MBC harmless against and with respect to, and shall reimburse MBC for: (bv) any and all losses, liabilities, or damages resulting from any material breach of any warranty or representation or nonfulfillment of any covenant by Buyer contained herein or in any certificate, document, or instrument delivered to MBC hereunder; and (bw) any and all out-of-pocket costs and expenses, including reasonable legal fees and expenses, incident to any action, suit, proceeding, claim, demand, assessment, or judgment incident to the foregoing or incurred in investigating or attempting to avoid the same or to oppose the imposition thereof, or in enforcing this indemnity. 79.34.Procedure for Indemnification. The procedure for indemnification shall be as follows: (bx) Notice. The party claiming indemnification (the "Claimant") shall promptly give notice to the party from which indemnification is claimed (the "Indemnifying Party") of any claim, whether between the parties or brought by a third party, specifying in reasonable detail the factual basis for the claim. If the claim relates to an action, suit, or proceeding filed by a third party against Claimant, such notice shall be given by Claimant within five (5) business days after receipt of written notice of such action, suit, or proceeding was given to Claimant: provided, that no delay in providing such notice shall excuse any party's indemnification obligations hereunder, unless such delay prejudices the Indemnifying Party and then the Indemnifying Party's obligations shall be reduced only to the extent of such prejudice. (by) Investigation and Payment. With respect to claims solely between the parties, following receipt of notice from the Claimant of a claim, the Indemnifying Party shall have thirty (30) days to make such investigation of the claim as the Indemnifying Party deems necessary or desirable. For purposes of such investigation, the Claimant agrees to make available to the Indemnifying Party and its authorized representatives the information relied upon by the Claimant to substantiate the claim. If the Claimant and the Indemnifying Party agree at or prior to the expiration of the 30-day period (or any mutually agreed upon extension thereof) to the validity and amount of such claim, the Indemnifying Party shall immediately pay to the Claimant the full amount of the claim. If the Claimant and the Indemnifying Party do not agree within the 30-day period (or any mutually agreed upon extension thereof), the Claimant may seek appropriate remedy at law or equity. (bz) Third Party Claims. With respect to any claim by a third party as to which the Claimant is entitled to indemnification under this Purchase Agreement, the Indemnifying Party shall have the right at its own expense, to participate in or assume control of the defense of such claim, and the Claimant shall cooperate fully with the Indemnifying Party, subject to reimbursement for actual out-of-pocket expenses incurred by the Claimant as the result of any request by the Indemnifying Party. If the Indemnifying Party elects to assume control of the defense of any third-party claim, the Claimant shall have the right to participate in the defense of such claim at its own expense. If the Indemnifying Party fails to assume control or otherwise participate in the defense of any third-party claim within ten (10) business days of receiving notice under subsection (a) of this section (unless some action is required prior to such date), it shall be bound by the results obtained in good faith by the Claimant with respect to such claim. (ca) Expeditious Action. If a claim, whether between the parties or by a third party, requires immediate action, the parties will make every reasonable effort to reach a decision with respect thereto as expeditiously as possible. (cb) Coverage. The indemnification rights provided in Section 10.2 and Section 10.3 shall extend to the members, partners, shareholders, officers, directors, employees, representatives, and affiliated entities of any Claimant: provided, that for the purpose of the procedures set forth in this Section 10.4, any indemnification claims by such parties shall be made by and through the Claimant. 79.345.Special Indemnity with Respect to the Koker Agreement. In the event that either party hereto learns of a material breach of any representation or warranty contained in Section 3 of the Koker Agreement (such breach having occurred at or before the Consummation thereof), such party shall notify the other party, and MBC shall assert a claim against the Sellers for indemnity pursuant to the Koker Agreement. On or before the Closing Date, any proceeds derived therefrom shall be first allocated to remedy the material breach giving rise to such claim, with any remaining amount held in a segregated account for the benefit of the Lenders, or, at Closing, for Buyer. 79.346.Time Limits. Notwithstanding anything in this Purchase Agreement to the contrary, neither party shall indemnify or otherwise be liable to the other party with respect to any claim for any breach of a representation or warranty, or for the breach of any covenant contained in this Purchase Agreement, unless notice of the claim is received within three years after the Closing Date. SECTION 10. MISCELLANEOUS 79.10.1.Fees and Expenses. Buyer shall pay any and all filing fees, transfer taxes, document stamps, or other charges levied by any governmental entity on the fulfillment of the terms and conditions of this Purchase Agreement, including but not limited to (i) fees associated with the transfer of Stock from MBC to Buyer; (ii) fees charged by the FCC in connection with obtaining the FCC Consent; (iii) filing fees payable in connection with any HSR Act filing, to the extent required; and (iv) the costs and expenses of title reports, surveys, environmental surveys and tax, lien and judgment searches. 79.10.2.Notices. All notices, demands, and requests required or permitted to be given under the provisions of this Purchase Agreement shall be in writing and shall be addressed as follows: _______If to MBC or Thomas Allen MBC Sellers: Montecito Broadcasting Corporation 2101 East Fourth Street Suite 200A Santa Ana, CA 92705 with copies (which shall not constitute notice) to: Lewis J. Paper, Esq. Dickstein Shapiro Morin & Oshinsky, LLP 2101 L Street, NW Washington, DC 20037-1526 If to Buyer: Robert Quicksilver, Esq. Sinclair Communications, Inc. 2000 W. 41st Street Baltimore, MD 21211 with a copy (which shall not constitute notice) to: Steve Thomas, Esq. Thomas & Libowitz 100 Light Street Suite 1100 Baltimore, MD 21202 or to any other or additional persons and addresses as the parties may from time to time designate in a writing delivered in accordance with this Section 11.2. Notices shall be sent by registered or certified mail, postage prepaid and return receipt requested, by overnight courier service, charges prepaid, or by hand, and shall be deemed to have been received on the date of hand-delivery or the date receipt shown on the return receipt. 0.3.Assignment. MBC shall not assign its rights and obligations under this Purchase Agreement without the express written consent of Buyer, which consent shall not be unreasonably withheld. Buyer may assign its rights and obligations under this Purchase Agreement to any other party: provided, that Buyer shall remain liable for the performance of all of Buyer's obligations hereunder. Notwithstanding the above, either party may assign their rights hereunder to the Lender in connection with the Loan Agreement. 0.4.Benefit and Binding Effect. This Purchase Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and permitted assigns. 0.5.Further Assurances. The parties shall take any actions and execute any other documents that may be necessary or desirable to the implementation and consummation of this Purchase Agreement. 0.6.GOVERNING LAW. THIS PURCHASE AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND (WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF). 0.7.Headings. The headings herein are included for ease of reference only and shall not control or affect the meaning or construction of the provisions of this Purchase Agreement. 0.8.Entire Agreement. This Purchase Agreement, the schedules exhibits hereto, all documents, certificates, and other instruments to be delivered by the parties pursuant hereto, the Letter Agreement, the Option Agreement and the TBA collectively represent the entire understanding and agreement between Buyer, MBC and the MBC Sellers with respect to the subject matter of this Purchase Agreement. In the event of a conflict between the provisions of this Purchase Agreement and any other agreement between the parties, the provisions of this Purchase Agreement shall prevail. This Purchase Agreement supersedes all prior and contemporaneous negotiations between the parties and cannot be amended, supplemented, or changed except by an agreement in writing that makes specific reference to this Purchase Agreement and that is signed by the party against which enforcement of any such amendment, supplement, or modification is sought. 0.9.Waivers. Except as otherwise provided in this Purchase Agreement, any failure of any of the parties to comply with any obligation, representation, warranty, covenant, agreement, or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, representation, warranty, covenant, agreement, or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Purchase Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Purchase Agreement. 0.10.Construction Agreement. Although this Purchase Agreement has been prepared by or on behalf of one Party, it shall not be more strictly construed against that Party. 0.11.Counterparts. This Purchase Agreement may be signed in counterparts, and all such counterparts shall collectively be deemed to be one and the same document. IN WITNESS WHEREOF, this Purchase Agreement has been duly executed by Buyer and MBC as of the date written below as to each. SINCLAIR COMMUNICATIONS, INC. By:____________________________________ MONTECITO BROADCASTING CORPORATION By:______________________________________ Thomas Allen, Executive Vice President SELLING STOCKHOLDERS ________________________________________ Jamie Kellner ________________________________________ Douglas Gealy ________________________________________ Thomas Allen Schedule 2.2(a)(i) Tangible Personal Property See List Attached Schedule 2.2(a)(ii) Leases See Attached Schedule 2.2(a)(iii) Licenses See Attached Schedule 2.2(a)(iv) Contracts See Attached List Schedule 2.2(a)(v) Intangibles None EX-10.59 5 EXHIBIT 10.59 STOCK PURCHASE AGREEMENT BY AND BETWEEN SINCLAIR COMMUNICATIONS, INC. AND THE STOCKHOLDERS OF MAX INVESTORS, INC. , MAX INVESTORS, INC. AND MAX MEDIA PROPERTIES LLC TABLE OF CONTENTS 1. DEFINITIONS................................................................3 2. SALE OF SHARES/EXCLUDED ASSETS.............................................3 2.1 Sale of Shares.................................................3 2.2 Excluded Assets................................................4 3. PURCHASE PRICE.............................................................6 3.1 Payment........................................................6 3.2. Disbursing Agent...............................................6 4. CLOSING....................................................................7 5. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................7 5.1. Representations as to Shares, Etc..............................7 c.No Conflicts...............................................8 5.2. Representations and Warranties as to the Company...............8 a.Organization and Good Standing.............................8 b.Capitalization.............................................9 c.No Conflicts...............................................9 d.Financial Statements.......................................9 e.Employee Benefit Plans....................................11 f.Labor 11 g.Insurance.................................................11 h. Material Contracts.......................................11 i.Compliance with Laws......................................12 j.Litigation................................................12 k.No Brokers................................................12 l.Consents..................................................12 m.Tax Matters...............................................12 n.Dividends.................................................15 o.Accounts Receivable.......................................15 p.Company Assets............................................15 q.Representations as to the Company Interests...............15 5.3. Representations and Warranties as to the MMP and the FCC Licensee Entities.............................................15 a.Organization and Good Standing............................16 b.Capitalization of MMP.....................................16 c.Organization and Capitalization of the FCC License Entities..................................................16 d.No Conflicts..............................................17 e.Real Property.............................................17 f.Personal Property.........................................18 i g.Financial Statements......................................19 h.FCC.......................................................21 i.Intellectual Property.....................................21 j.Employee Benefit Plans....................................22 k.Labor.....................................................24 l.Insurance.................................................25 m. Material Contracts.......................................25 n.Compliance with Laws......................................25 o.Litigation................................................25 p.Consents..................................................26 q.Environmental.............................................26 r.Tax Matters...............................................27 s.Accounts Receivable.......................................29 t.Representations as to MMP Interests.......................29 5.4. Representations and Warranties as to MTR......................30 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................30 6.1. Organization and Good Standing................................30 6.2. Execution and Effect of Agreement.............................30 6.3. No Conflicts..................................................30 6.4. Consents......................................................31 6.5. Litigation....................................................31 6.6. No Brokers....................................................31 6.7. Purchaser Qualifications......................................31 7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES............32 7.1. Limitation; Survival..........................................32 8. TAX MATTERS...............................................................32 8.1. Section 338 Election..........................................32 8.2. Tax Returns...................................................32 8.3. Apportionment.................................................33 8.4. Cooperation in Tax Matters....................................33 8.5. Certain Taxes.................................................34 8.6. FIRPTA........................................................34 8.7. Section 754 Election..........................................34 8.8. Closing Date Actions..........................................34 ii 9. ADDITIONAL COVENANTS AND UNDERTAKINGS.....................................34 9.1. Further Assurances and Assistance.............................34 9.2. Access to Information.........................................34 9.3. Conduct of Business Prior to Closing..........................35 9.4. H-S-R Act.....................................................38 9.5. FCC Application...............................................38 (c)FCC Applications to Transfer Certain FCC Licenses.....39 9.6. Books and Records.............................................39 9.7. Employees and Employee Benefits...............................40 9.8. Interruption of Broadcast Transmission........................40 9.9. Interpretation of Certain Provisions..........................41 9.10. Collection of Accounts Receivable.............................41 9.11. Other Acquisitions............................................43 9.12. Payment of Certain Liabilities Prior to Closing...............43 10. INDEMNIFICATION..........................................................44 10.1. Indemnification of Purchaser by Sellers.......................44 10.2. Indemnification of Sellers by Purchaser.......................45 10.3. Limitations and Other Provisions Regarding Indemnification Obligations...................................................45 10.4. Notice of Claim Defense of Action.............................47 10.5 Tax Contests..................................................49 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE..............50 11.1. Conditions Precedent to the Obligation of Purchaser...........50 11.2. Conditions Precedent to the Obligation of Sellers.............51 12. DELIVERIES AT THE CLOSING................................................52 12.1. Deliveries by Sellers.........................................52 12.2. Deliveries by Purchaser.......................................54 13. EXPENSES.................................................................54 14. TERMINATION..............................................................55 14.1 Termination...................................................55 14.2 Procedure and Effect of Termination...........................55 15. NOTICES..................................................................56 16. SELLERS' AGENTS..........................................................58 iii 16.1. Sellers' Agents...............................................58 17. MISCELLANEOUS............................................................59 17.1. Headings......................................................59 17.2. Schedules and Exhibits........................................59 17.3. Execution in Counterparts.....................................59 17.4. Entire Agreement..............................................59 17.5. Governing Law.................................................59 17.6. Modification..................................................59 17.7. Successors and Assigns........................................60 17.8. Waiver........................................................60 17.9. Severability..................................................60 17.10. Announcements.................................................60 17.11. Specific Performance..........................................61 17.12. Fees and Expenses.............................................61 17.13. Third Party Beneficiaries.....................................61 17.14. Interpretation................................................61 ANNEX 1 - DEFINITIONS ANNEX 2 - SELLERS EXHIBITS Exhibit A - Deposit Escrow Agreement Exhibit B - Indemnification Escrow Agreement Exhibit C - MMP II Assignment and Assumption Agreement Exhibit D - Time Brokerage Agreements Exhibit E - Opinion of Counsel, Clark & Stant, P.A. Exhibit F - Opinion of Sellers' FCC Counsel Exhibit G - Opinion of Counsel, Thomas & Libowitz, P.A. iv SCHEDULES 5.1a(ii) Encumbrances of Stock 5.1a(vi) Options and Agreements 5.1b Share Brokers 5.1c No Conflicts 5.2b Capitalization 5.2c Conflicts 5.2d Financial Statements 5.2e Employee Benefit Plans 5.2f Labor 5.2g Insurance 5.2h Material Contracts 5.2i Compliance with Laws 5.2j Litigation 5.2k Brokers 5.2l Consents 5.2m(a) Tax Matters 5.2m(c) Tax Basis and Tax Elections 5.2q Company Interest 5.3b Capitalization 5.3d Conflicts 5.3e Real Property 5.3f Personal Property 5.3g Financial Statements 5.3h FCC Licenses 5.3i Intellectual Property 5.3j Employee Benefit Plans 5.3k Labor 5.3k(d) Employee Terminations or Demands 5.3l Insurance 5.3m Material Contracts 5.3n Compliance with Laws 5.3o Litigation 5.3p Consents 5.3q Environmental Matters 5.3r(a) Tax Matters 5.3r(c) Tax Basis and Tax Elections 5.3t Representations as to MMP Interests 5.4b Capitalization 5.4d Financial Matters 5.4h Material Contracts 5.4l(a) Tax Matters 5.4l(c) Tax Basis and Tax Elections 5.4o Representations as to MTR Interests v 6.3 Conflicts 6.4 Consents 6.5 Litigation 6.7 Purchaser Qualifications 9.3(c) Planned Asset Dispositions vi STOCK PURCHASE AGREEMENT ------------------------ THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of this _____ day of December, 1997, is entered into by and among Sinclair Communications, Inc., a Maryland corporation ("Purchaser"), Catherine M. Daniels, Terrence D. Daniels, Charles P. Daniels, Christopher C. Daniels, Courtnay P. Daniels, Edward T. Harvey, R. Ted Weschler, Anthony R. Ignaczak, Stephen M. Burns, J. Hunter Reichert, Jeffrey J. Teschke, Anthony F. Apollaro, Matthew T. Goodwin, Catherine J. Rotolo, John T. Herzog WFS Roll Over IRA, John T. Herzog Custodian - Paul Brandon Herzog, John T. Herzog Custodian - Karen Chelsea Herzog, Allen B. Rider III, Allen B. Rider III SEP IRA, Allen B. Rider III Custodian - Edward Whitcomb Rider, Allen B. Rider III Custodian - Virginia Ticknor Rider, James C. Wheat III, James C. Wheat IRA, Jasper L.L.C., Blandfield Associates, L.L.C., Brenton S. Halsey, James E. Rogers, Wallace Stettinius, Edward Villanueva, Alexandra D. Hunley, Carolyn E. Underwood IRA, Karon I. Wagner IRA, Commax Partners, L.P., a Virginia limited partnership, Quad-C Partners III, L.P., a Virginia limited partnership, Quad-C Partners IV, L.P., a Virginia limited partnership, and Commonwealth Investors II, L.P., a Virginia limited partnership. (each a "Seller" and, collectively, "Sellers"), Max Investors, Inc., a Virginia corporation (the "Company"), and Max Media Properties LLC, a Virginia limited liability company ("MMP"). RECITALS: --------- WHEREAS, Sellers own collectively all of the issued and outstanding shares of capital stock, [par value $1.00] (the "Stock") of the Company; and WHEREAS, the Company is owner of 3,133,897 Class C Membership Units (out of a total of 11,631,431 Membership Units) of MMP; and WHEREAS, Purchaser has simultaneously with the execution of this Agreement, entered into a Stock Purchase Agreement (the " MRI Agreement") to acquire from the stockholders of Max Radio Inc. ("MRI") all of the issued and outstanding stock of MRI, which owns 31% of the equity of MTR Holding Corp., a Virginia corporation ("MTR"); 3,069,000 Class A Membership Units (out of a total 11,631,431 Membership Units) of MMP, and a 2% limited partnership interest in Radio License L.P., a Virginia limited partnership ("RLLP"), the owner holder of the FCC Licenses of the Radio Stations (as defined below); and WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into an Asset Purchase Agreement (the "MTC Agreement") to acquire from Max Television Company, a Virginia corporation ("MTC"), 5,140,500 Class B Membership Units (out of a total 11,631,431 Membership Units) of MMP, 69% of the 1 equity of MTR and a 2% limited partnership interests in the Television Licensees (as defined below); and WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into an Asset Purchase Agreement (the "Management Agreement") to acquire from Max Management LLC, a Virginia corporation limited liability company ("Management"), 188,034 Class AC Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, MMP is the owner of the assets (other than the FCC Licenses) and operator of television stations WSYT-TV in the Syracuse, New York market, WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio market, WEMT-TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri and KETK-TV in the Tyler, Texas market (each a "Television Station" and collectively, the "Television Stations"); and WHEREAS, MMP is the owner of the assets (other than the FCC Licenses) and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina ("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro, North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG"; together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM, in Virginia Beach, Virginia ("WPTE"), and WFOG-FM, in Suffolk, Virginia ("WFOG"; together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio Station" and collectively, the "Radio Stations"); and WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky, pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA Stations" and for purposes of this Agreement, the LMA Stations, the Radio Stations and the Television Stations shall be collectively referred to as the "Stations"); and WHEREAS, MMP owns a 98% general partnership interest in RLLP; and WHEREAS, MMP owns a 98% general partnership interest in each of Max Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities LP"), Max 2 Television of Charleston L.P. and Max Television of Tyler L.P. (each a "Television Licensee" and collectively, the "Television Licensees" and together with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a Television Station as indicated on Annex A hereto; and WHEREAS, the parties desire that, before the Closing and after receipt of any required approval of the FCC, MMP transfer all partnership interests it holds in Dayton LP and Tri-Cities LP to Max Media Properties II LLC, a newly-created Virginia limited liability company ("MMP II"), (the "MMP II Transfers"); and WHEREAS, the parties desire that, after the MMP II Transfers, but before the Closing, MMP distribute to MTC all of the membership interests in MMP II; and WHEREAS, on the consummation of this Agreement, the MTC Agreement, the MRI Agreement and the Management Agreement (collectively, the "Purchase Agreements"), Purchaser will own, directly or indirectly, all of the 11,631,431 Membership Units of MMP and all general and limited partnership interests in the FCC Licensee Entities, other than in Dayton LP, Tri-Cities LP, (the "MMP II Licenses); and WHEREAS, MMP holds certain assets more fully described below (the "Excluded Assets") that will not be acquired by Purchaser; and WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to purchase from Sellers, all of the issued and outstanding shares of Stock. SECTION 1 DEFINITIONS ----------- As used in this Agreement, capitalized terms shall have the meanings specified in the text hereof or on Annex 1 hereto (which is incorporated herein by reference), which meanings shall be applicable to both the singular and plural forms of the terms defined. SECTION 2 SALE OF SHARES/EXCLUDED ASSETS ------------------------------ 2.1 SALE OF SHARES. At the Closing, each Seller shall sell, assign, transfer and deliver to Purchaser, and Purchaser shall purchase from each Seller, that number and class of shares of Stock as is set forth opposite the name of each Seller in Annex 2 hereto. Each Seller consents to the sale of stock by each other Seller pursuant to this Agreement. 3 2.2 EXCLUDED ASSETS. (a) The following assets (collectively, the "Excluded Assets") may be distributed by MMP to the holders of Membership Units in MMP, and may be distributed by the Company to their shareholders or their designee prior to the Closing: (i) all cash, cash equivalents and cash items of any kind whatsoever, certificates of deposit, money market instruments, bank balances and rights in and to bank accounts, and Treasury Bills; (ii) all furniture, fixtures and equipment located at the principal place of business of MMP, the address of which is 900 Laskin Road, Virginia Beach, Virginia 23451 and the leasehold interests therein; (iii) the Option Agreement with Gary and Susan Clarke, WWBI TV, Inc. dated as of July 11, 1997, as amended and all promissory notes and agreements related thereto and all related collateral and other documents; (iv) all notes payable and other amounts due from MCC Air Inc. and all assets, including real property, promissory notes and agreements relating solely to the sale and lease of WMQX-AM, Greensboro, NC to Winston-Salem Radio Corporation and Willis Broadcasting Corporation; (v) subject to the terms and conditions of the Indemnification Escrow Agreement (as defined below), the accounts receivable of the Company and of MMP; (vi) the names "Max Media," "Max Television," "Max Radio" and "Max Media Properties. Any distribution of Excluded Assets by MMP will be made pro rata to the holders of Membership Units in MMP unless otherwise agreed to by Purchaser. (b) Notwithstanding anything to the contrary in Section 2.2(a) above, the Company, MTR and MMP shall each retain an amount of cash, cash equivalents and other cash items that are sufficient to cover and pay their respective Closing Date Liabilities. For purposes of this Agreement, the term "Closing Date Liabilities" shall mean the liabilities of the Company, MTR and MMP (other than for Funded Debt, liabilities with respect to program contract liabilities accruing after the Closing Date and liabilities with respect to trade and barter obligations arising after the Closing Date) whether or not disclosed on any Schedule hereto (A) as of the Closing Date; (B) for operations prior to the Closing Date; and (C) for all liabilities of any kind whatsoever 4 under that certain Mutual Release dated as of January 1, 1997 and that certain Settlement Agreement dated as of January 17, 1997 (collectively the "Shareholder Settlement Agreements"). Except as otherwise provided in this Section 2.2(b), the Closing Date Liabilities shall be determined in accordance with GAAP consistently applied with prior periods, and shall be consistent with the books and records of the Company, MTR and MMP. The amount of cash, cash equivalents and cash items retained to cover the Closing Date Liabilities shall not be considered Excluded Assets. (i) MMP shall deliver to Purchaser at the Closing a certificate (the "Estimate Certificate") setting forth its good faith estimate of the Closing Date Liabilities, which shall be used to determine the amount of cash, cash equivalents and other cash items required to be retained by the Company and MMP pursuant to this Section 2.2(b). (ii) Within one hundred twenty (120) days of the Closing, Purchaser shall cause its accountant to prepare and deliver to Sellers a certificate setting forth its calculation of the Closing Date Liabilities (the "Accountant's Certificate"). The amount of the Closing Date Liabilities as set forth on the Accountant's Certificate shall be final unless Sellers' Agents notify Purchaser within thirty (30) days from their receipt of the Accountant's Certificate that they dispute the Accountant's Certificate. If Sellers' Agents and Purchaser are unable to agree on the amount of the Closing Date Liabilities within fifteen (15) days after Sellers' Agents' notice, the parties shall jointly appoint and engage an independent accountant of national or regional repute (the "Independent Accountant") to perform an independent evaluation of the Closing Date Liabilities. The findings of the Independent Accountant as to the amount of the Closing Date Liabilities shall be final and binding on the parties hereto. (iii) Upon the determination of the Closing Date Liabilities becoming final which is different from the Estimate Certificate either (A) Purchaser shall be entitled to a payment from the Indemnification Escrow equal to the amount by which the aggregate amount of the Closing Date Liabilities exceeds the Closing Date Liabilities shown on the Estimate Certificate, taking into account any amounts paid from the Indemnification Escrow under provisions similar to this provision in the MTC Agreement, the Management Agreement and the MRI Agreement, or (B) Purchaser shall pay to Disbursing Agent an amount by which the aggregate amount of Closing Date Liabilities shown on the Estimate Certificate exceeds the Closing Date Liabilities as finally determined. (iv) For purposes of determining the amount of the Tax liabilities of the Company to be included in the Closing Date Liabilities (the "Closing Date Tax Liabilities"), such Tax liabilities shall include all Tax liabilities of the Company that are attributable to items of income, gain, loss, deduction and credit of MMP and the FCC Licensee Entities accruing through and including the Closing Date, notwithstanding that such items may be reported by the Company, Purchaser, or Purchaser's Affiliates in Taxable 5 Periods ending after the Closing Date. The amount of the Tax liabilities attributable to the Tax items of MMP and the FCC Licensee Entities shall be determined by assuming that the taxable years of MMP and the FCC Licensee Entities, as well as the taxable years of the Company, end as of the close of business on the Closing Date and by assuming Purchaser's compliance with Section 8.8. The Closing Date Tax Liabilities shall not include, and Purchaser shall have no rights of Indemnification rights under Section 10 with respect to, any Tax Liabilities arising from the MMP II Distribution (v) Notwithstanding anything to the contrary contained in this Section 2.2, the final determination of the Closing Date Liabilities hereunder shall not affect Purchaser's indemnification rights pursuant to Section 10 to the extent the actual Closing Date Liabilities exceed the final determination thereunder. SECTION 3 PURCHASE PRICE -------------- 3.1 Payment. In consideration for the sale of the Stock, Purchaser shall pay to Sellers the aggregate amount of the "Purchase Price", payable as follows: (1) Purchaser has deposited with First Union National Bank, as Escrow Agent pursuant to the Deposit Escrow Agreement, the Escrow Deposit which shall be distributed in accordance with the Deposit Escrow Agreement in the form attached hereto as Exhibit A. (2) At the Closing, the "Initial Deposit" which shall be held in Escrow (the "Indemnification Escrow") by Citibank, N.A. as Escrow Agent pursuant to the Indemnification Escrow Agreement in the form of Exhibit B hereto (the "Indemnification Escrow Agreement"); and (3) the balance of the Purchase Price at the Closing, by wire transfer of federal or other immediately available funds to the accounts specified by Disbursing Agent pursuant to wire instructions delivered in writing to Purchaser not later than two (2) Business Days prior to the Closing. 3.2. DISBURSING AGENT. The Disbursing Agent shall disburse the Purchase Price to Sellers in accordance with the Disbursement Agreement. 6 SECTION 4 CLOSING ------- The closing of the transaction contemplated by this Agreement (the "Closing"), subject to fulfillment or waiver of the conditions set forth in Section 11 hereof, shall be held at the offices of Clark & Stant, P.C., One Columbus Center, Suite 900, Virginia Beach, Virginia 23462, at 10:00 A.M. local time (but shall be deemed to have occurred at the close of business on such day), on the later to occur of (a) five Business Days after all applicable waiting periods under the H-S-R Act shall have expired or terminated, or (b) five Business Days after the Final Order (the date of Closing being the "Closing Date"), unless (i) Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser shall give Sellers reasonable notice of the Closing, or (ii) the parties shall mutually agree upon a different date or location; provided, however, that in no event shall the Closing be held prior to March 18, 1998; and provided, further, that in the event the Closing is postponed past July 15, 1998, due to a postponement of the Closing under Section 9.8(b) or otherwise, Sellers, in their sole discretion, may postpone the Closing to September 1, 1998. In no event shall Closing occur later than the Termination Date. SECTION 5 REPRESENTATIONS AND WARRANTIES OF SELLERS ----------------------------------------- 5.1. REPRESENTATIONS AS TO SHARES, ETC. Each Seller hereby represents and warrants to Purchaser that: a. (i) such Seller is the record and the beneficial owner of all the shares of the Stock set forth opposite such Seller's name in Annex 2 hereto; (ii) such Seller holds of record and owns beneficially all of the shares of the Stock set forth opposite such Seller's name in Annex 2 hereto free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.1a(ii) hereof, all of which will be released at or before the Closing; (iii) except for any lien, security interest, pledge or encumbrance created by Purchaser on or subsequent to the Closing Date, upon transfer of the Stock set forth opposite such Seller's name in Annex 2 hereto to Purchaser at the Closing, Purchaser will have legal and equitable title to such Stock, free and clear of any lien, security interest, pledge or encumbrance; (iv) such Seller has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of such Seller, and if such Seller is an entity that such entity is duly and validly organized, existing and in good standing in the jurisdiction of its formation; (v) this Agreement has been duly executed and delivered by such Seller and constitutes a legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, subject to applicable bankruptcy, 7 insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (vi) except as described on Schedule 5.1a(vi), the shares are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights (other than that contemplated by Section 16 hereof). b. Except as described on Schedule 5.1b, no Seller nor anyone acting on behalf of any Seller, has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the sale of the Stock and the transactions contemplated by this Agreement. The payment of such brokerage fees, commissions, or finders fees, if any, shall remain the sole obligation of Sellers. c. NO CONFLICTS. Except as described on Schedule 5.1(c), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, as to any Seller (a) violate any provision of the articles of incorporation, by-laws, general or limited partnership agreement or limited liability company operating agreement with respect to any Seller that is an entity, (b) violate any provision of applicable law, rule and regulation, which violation would prevent or interfere with any Seller's ability to perform hereunder, or (c) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument, to which any Seller is a party or to which their property is subject, or constitutes to default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with any Seller's ability to perform hereunder. 5.2. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY. Sellers and the Company, jointly and severally, hereby represent and warrant to Purchaser as to the Company as follows: a. ORGANIZATION AND GOOD STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia hereto and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. The Company is qualified as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. The Company does not own any direct or indirect subsidiary corporation. b. CAPITALIZATION. The designations of each class of the capital stock of the Company and the number of authorized and issued and outstanding shares thereof is as 8 described on Schedule 5.2b. All the shares of the Stock have been validly issued and are fully paid and nonassessable and are held of record by the respective Sellers as set forth on Annex 2 hereto. Except as described on Schedule 5.2b, (i) no shares of capital stock of the Company is held in treasury, (ii) there are no other issued or outstanding equity securities of the Company, (iii) there are no stock appreciation rights, phantom stock rights, profit participation rights, or other similar rights with respect to shares outstanding; and (iv) there are no other issued or outstanding securities of the Company convertible or exchangeable at any time into equity securities of the Company. The Company is not subject to any commitment or obligation that would require the issuance or sale of additional shares of capital stock of the Company at any time under options, subscriptions, warrants, rights or any other obligations. Schedule 5.2b sets forth the equity interests in any corporation, partnership, limited liability company, joint venture or other entity owned by the Company. c. NO CONFLICTS. Except as described on Schedule 5.2c, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of incorporation or by-laws of the Company, (ii) violate any provision of applicable law, rule and regulation, which violation would prevent or materially interfere with Sellers' ability to perform hereunder or have a Material Adverse Effect, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which the Company is a party or to which its property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with the Company's ability to perform hereunder or have a Material Adverse Effect; provided, however, that clause (iii) above shall be limited to Sellers' Knowledge. d. FINANCIAL STATEMENTS. As of the date of this Agreement, the Company has not issued financial statements. Except as set forth on Schedule 5.2.d hereto, since February 14, 1997, the date the Company first held assets,, there has not been any Material Adverse Effect on the business, financial condition, operations or results of operations of the Company taken as a whole. Without limiting the generality of the foregoing, since February 14, 1997, except as set forth on Schedule 5.2d: (i) the Company has not sold, leased, transferred, or assigned any material assets, tangible or intangible; 9 (ii) the Company has not entered into any material agreement, contract, lease, or license; (iii) the Company has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which the Company is a party or by which the Company is bound; (iv) the Company has not imposed any security interest upon any of its assets, tangible or intangible; (v) the Company has not made any material capital expenditures; (vi) the Company has not made any material capital investment in, or any material loan to, any Person; (vii) the Company has not directly created, incurred, assumed, or guaranteed any indebtedness for borrowed money and capitalized lease obligations; (viii) the Company has not granted any license or sublicense of any material rights under or with respect to any Intellectual Property; (ix) there has been no change made or authorized in the charter or bylaws of the Company; (x) the Company has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; (xi) the Company has not declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; (xii) the Company has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (xiii) the Company has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees; (xiv) the Company has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; 10 (xv) the Company has not granted any increase in the base compensation of any of its directors, officers, and employees outside the ordinary course of business; (xvi) the Company has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Company Plan or Company Benefit Arrangement); (xvii) the Company has not made any other material change in employment terms for any of its directors, officers, and employees; (xviii) the Company has not made or changed any material Tax election or taken any other action with respect to Taxes inconsistent with past practices; (xix) the Company has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and (xx) except as set forth in this Agreement, the Company has not committed to any of the foregoing. e. EMPLOYEE BENEFIT PLANS. The Company does not, and has not in the past, instituted or maintained any Benefit Arrangement or Benefit Plan. Neither the Company nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan Subject to Title IV of ERISA. Neither the Company nor any ERISA Affiliate has ever made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37). The Company has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement. f. LABOR. The Company has not employed any employees. g. INSURANCE. The Company maintains no insurance policies. h. MATERIAL CONTRACTS. Schedule 5.2h hereto contains a list of all the Material Contracts and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts listed on Schedule 5.2h are legal, valid and binding obligations of the Company enforceable in accordance with their terms and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the right of creditors generally and to 11 the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). There exists no default or event which, with notice or lapse of time, or both, would constitute a default by the Company or to the Company's Knowledge any other party to any such Material Contract or which would permit termination, modification or acceleration. Neither Sellers nor the Company has received notice (or otherwise has knowledge) that any party to any Material Contract intends to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. i. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2i, the Company is in material compliance with all material applicable Federal, state and local laws, rules and regulations, and to the Company's knowledge, there are no actions threatened or pending alleging noncompliance therewith. j. LITIGATION. Except as set forth on Schedule 5.2j hereto, there is no suit, claim, action, proceeding or arbitration pending or, to the Company's Knowledge, threatened against (i) any of Sellers that seeks to enjoin or obtain damages in respect of the transactions contemplated hereby, or (ii) the Company. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency specifically against or specifically affecting the Business or the Company, except as disclosed on Schedule 5.2j. k. NO BROKERS. Except as described on Schedule 5.2k, the Company has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the sale of the Stock and the transactions contemplated by this Agreement. l. CONSENTS. Except (a) as set forth on Schedule 5.2l hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC Applications, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of any Seller or the Company is required in connection with the execution and delivery of this Agreement by Sellers or the consummation of the transactions contemplated hereby (including any consents required under any Company Material Contract as a result of the change in control contemplated hereby). m. TAX MATTERS. (a) Except as set forth on Schedule 5.2m(a) hereto: 12 (i) All Tax Returns required to be filed by or with respect to the Company have been filed when due in a timely fashion, and all Tax Returns required to be filed by or with respect to the Company for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. Such Tax Returns are or will be true, correct and complete in all material respects. All Tax Returns filed by or with respect to the Company are true, correct and complete in all material respects. (ii) The Company has paid in full on a timely basis all Taxes owed by the Company, whether or not shown on any Tax Return, and the Company will have paid prior to the Closing Date all Taxes owed with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) The Company has no liability for unpaid income Taxes other than its Tax liability attributable to the Company's allocable share of MMP's items of income, gain, loss, deduction and credit accruing through the date hereof. The Company's actual liability for unpaid Taxes (determined consistently with Section 2.2(b)(iv)) will not as of the Closing Date exceed its liability for such Taxes reflected in the Closing Date Tax Liabilities (as finally determined pursuant to Section 2.2(b)(ii). (iv) The Company has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to the Company and the Company has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is currently in effect with respect to the assessment, collection or payment of Taxes of the Company or for which the Company is liable. (vii) No extension of the time within which to file any Tax Return of the Company is currently in effect. 13 (viii) No deficiency for Taxes has been proposed, asserted, or assessed against the Company. (ix) There are no liens on the assets of the Company relating or attributable to Taxes (except liens for Taxes not yet due). (x) The Company is not and has not been at any time during the preceding five years a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (xi) There is no agreement or consent made under Section 341(f) of the Code affecting the Company. (xii) The Company has not agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. (xiii) The Company is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and the Company has not assumed the Tax liability of any other entity or person under contract. (xiv) The Company is not and has not at any time been a member of an affiliated group filing a consolidated federal income tax return and does not have any liability for the Taxes of another entity or person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise. (xv) Except for MMP, the Company is not a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xvi) None of the Company's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (b) Sellers have furnished or otherwise made available to Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to the Company since January 1, 1994; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to the Company relating to Taxes. 14 (c) Schedule 5.2m(c) contains complete and accurate descriptions of (i) the Company's tax capital account in MMP, (ii) the amount of any net operating loss, net capital loss and any other Tax carryovers of the Company and (iii) material Tax elections made by or with respect to the Company. The Company has no net operating losses or other Tax attributes presently subject to limitation under Code Sections 382, 383 or 384, or the federal consolidated return regulations. n. DIVIDENDS. Since February 14, 1997, no dividends have been declared, issued or otherwise approved by the Board of Directors of the Company in respect of the Stock. o. ACCOUNTS RECEIVABLE. The Company has no accounts receivable. p. COMPANY ASSETS. The Company owns no other assets other than cash or cash equivalents and 3,133,897 Class A Membership Units of MMP. q. REPRESENTATIONS AS TO THE COMPANY INTERESTS. (i) The Company is the record and the beneficial owner of 3,133,897 Class A Membership Units (out of a total 11,631,431 Membership Units) of MMP, (the "Company Interests"); (ii) the Company holds of record and owns beneficially the Company Interests free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.2q hereof, all of which will be released at or before the Closing; (iii) the Company has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of the Company; (iv) this Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (v) except as described on Schedule 5.2q, the Company Interests are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. 5.3. REPRESENTATIONS AND WARRANTIES AS TO THE MMP AND THE FCC LICENSEE ENTITIES. Sellers, MMP and the Company, jointly and severally, hereby represent and warrant to Purchaser as to MMP and the FCC Licensee Entities as follows: 15 a. MMP ORGANIZATION AND GOOD STANDING. MMP is a limited liability company duly organized and validly existing under the laws of Virginia and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. To the extent required by law, MMP is qualified as a foreign limited liability company and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification. MMP owns 98% of the outstanding partnership interests in the FCC Licensee Entities. b. CAPITALIZATION OF MMP. The designations of each class of the membership units of MMP and the number of authorized and issued and outstanding membership units thereof is as described on Schedule 5.3b to the MRI Agreement. All membership units have been validly issued and are fully paid and nonassessable and are held of record by the respective members of MMP as set forth on Schedule 5.3b to the MRI Agreement. Except as described on Schedule 5.3b, (i) there are no other issued or outstanding equity securities of MMP; (ii) there are no membership or value appreciation rights, phantom membership rights, profit participation rights, or other similar rights with respect to membership units outstanding; and (iii) there are no other issued or outstanding membership interests or other securities of MMP convertible or exchangeable at any time into equity securities of MMP. Except as set forth in the Operating Agreement of MMP as amended, MMP is not subject to any commitment or obligation that would require the issuance or sale of additional membership interests or membership units of MMP at any time under options, subscriptions, warrants, rights or any other obligations. Schedule 5.3b to the MRI Agreement sets forth the equity interests in any corporation, partnership, limited liability company, joint venture or other entity owned by MMP. c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE ENTITIES. Each FCC License Entity is a limited partnership duly organized and validly existing under the laws of the Commonwealth of Virginia and has full partnership power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. Each FCC License Entity is qualified as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. No FCC License Entity owns any direct or indirect subsidiaries. MMP is the sole general partner and owns ninety-eight percent (98%) of the partnership interests of each of the FCC License Entities. MTC is the sole limited partner and owns two percent (2%) of the partnership interests of each of the FCC License Entities other than RLLP. MRI is the sole limited partner and owns two percent (2%) of the partnership interests of RLLP. All such partnership interests have been validly issued and are fully paid and nonassessable and are held of record by the respective partners as set forth above. There are no (i) other issued or outstanding equity securities of any FCC License Entity, (ii) partnership or value appreciation rights, phantom partnership 16 rights, profit participation rights, or other similar rights with respect to partnership interests outstanding and (iii) other issued or outstanding partnership interests or other securities of any FCC License Entity convertible or exchangeable at any time into equity securities of such FCC License Entity. No FCC License Entity is subject to any commitment or obligation that would require the issuance or sale of additional partnership interests of any FCC License Entity at any time under options, subscriptions, warrants, rights or any other obligations. No FCC License Entity holds any equity interest in any corporation, partnership, limited liability company, joint venture or other entity. d. NO CONFLICTS. Except as described on Schedule 5.3d to the MRI Agreement, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of organization or operating agreement of MMP or the limited partnership agreements of the FCC Licensee Entities, (ii) violate any provision of applicable material law, rule and regulation, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any material agreement, indenture, mortgage or instrument to which either MMP or any FCC Licensee Entity is a party or to which any of their property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would have a MMP Material Adverse Effect. e. REAL PROPERTY. The MMP Real Property owned and all leaseholds and other interests in MMP Real Property used or useful in the Business and all buildings, structures, towers, and improvements thereon used or useful in the business and operations of the Stations are listed on Schedule 5.3e to the MRI Agreement and, except for Permitted Encumbrances and as disclosed in Schedule 5.3e to the MRI Agreement, MMP has good and marketable fee simple title (insurable at standard rates by a reputable national title insurer) to all fee estates included in the Real Property, and good title to all other MMP Real Property, in each case clear of all liens. The FCC Licensee Entities own no real property, leaseholds or other interests in real property. No portion of the MMP Real Property or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or, to MMP's Knowledge, threatened. MMP has a valid leasehold interest in all leased property and subleases to which it is a party, and MMP is the owner and holder of all the leased property purported to be granted by such leases and subleases. The MMP Real Property and the leases and subleases listed on Schedule 5.3e to the MRI Agreement constitute all of the real property owned, leased or used by MMP in the business and operations of the Stations, which is material to the business and operations of the Stations. The Sellers have delivered or caused to be delivered to the Purchaser correct and complete copies of the deeds, leases and subleases listed in Schedule 5.3e to the MRI Agreement. With respect to each lease 17 and sublease listed in Schedule 5.3e to the MRI Agreement: (a) the lease or sublease is legal, valid, binding, enforceable, and in full force and effect in all material respects subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with several principles of equity (whether applied by a court of law or equity); (b) MMP and, to MMP's knowledge, no other party to the lease or sublease is in material breach or default, and no event has occurred which, with notice or lapse of time, would constitute a material breach or default or permit termination, modification, or acceleration thereunder; (c) MMP and, to MMP's knowledge, no other party to the lease or sublease has repudiated any material provision thereof; (d) MMP is not a party to and, to MMP's knowledge, there are no material disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; (e) except as set forth on Schedule 5.3e to the MRI Agreement, MMP has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold; and (f) all facilities leased or subleased thereunder material to the operation of the Stations have received all approvals of governmental authorities (including material licenses and permits) required in connection with the operation thereof, and have been operated and maintained in accordance with applicable laws, rules, and regulations in all material respects. f. PERSONAL PROPERTY. Schedule 5.3f lists as of the date hereof all items of Personal Property having a fair market value in excess of $5,000.00. Except as set forth on Schedule 5.3f to the MRI Agreement, MMP has good and marketable title to all of its material items of tangible personal property and assets used or useful by MMP located on its premises or shown on the MMP Financial Statements are free and clear of all liens, security interests and encumbrances other than those that would not materially affect Purchaser's use or ownership of such personal property after the Closing. The tangible personal property of MMP has been maintained in accordance with normal industry practice and is in good condition and repair given the age and use of such property (subject to normal wear and tear) and is adequate for its present use by MMP. g. FINANCIAL STATEMENTS. MMP has provided or made available to 18 Purchaser copies of the MMP Financial Statements. The MMP Financial Statements have been prepared in accordance with GAAP consistently applied with prior periods except in the case of the unaudited MMP Financial Statements, the absence of year-end audit adjustments and notes. The MMP Financial Statements present fairly the financial position of MMP as at and for the periods indicated therein, and are consistent with the books and records of MMP. Except as set forth on Schedule 5.3g to the MRI Agreement, since December 31, 1996, there has not been any Material Adverse Effect on the business, financial condition, operations, or results of operations of MMP taken as a whole. Without limiting the generality of the foregoing, since that date, except as described on Schedule 5.3g to the MRI Agreement: (i) MMP has not sold, leased, transferred, or assigned any material assets, tangible or intangible, outside the ordinary course of business; (ii) MMP has not entered into any material agreement, contract, lease, or license outside the ordinary course of business; (iii) MMP has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which MMP is a party or by which MMP is bound; (iv) MMP has not imposed any security interest upon any of its assets, tangible or intangible; (v) MMP has not made any material capital expenditures outside the ordinary course of business; (vi) MMP has not made any material capital investment in, or any material loan to, any other Person outside the ordinary course of business; (vii) MMP has not created, incurred, assumed, or guaranteed more than $45 million in aggregate indebtedness for borrowed money and capitalized lease obligations; (viii) MMP has not granted any license or sublicense of any material rights under or with respect to any Intellectual Property; 19 (ix) there has been no change made or authorized in the operating agreement of MMP; (x) MMP has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (xi) MMP has not made any loan to, or entered into any other transaction with, any of its managers, officers, and employees outside the ordinary course of business; (xii) MMP has not entered into any employment contract outside the ordinary course of business or collective bargaining agreement, written or oral, or modified the terms of any such existing contract or agreement; (xiii) MMP has not granted any increase in the base compensation of any of its members outside the ordinary course of business; (xiv) MMP has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its managers, officers, and employees (or taken any such action with respect to any other MMP Plan or MMP Benefit Arrangement); (xv) MMP has not made any other material change in employment terms for any of its members or employees outside the ordinary course of business; (xvi) MMP has not made or changed any material Tax election or taken any other action with respect to Taxes not in the ordinary course of business and consistent with past practice; (xvii) MMP has not made any distributions other than in the ordinary course of business, and has not made any non-pro rata distributions; (xviii) MMP has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and (xix) except as contemplated by this Agreement, the MRI Agreement, the Management Agreement, the MTC Agreement, and Assignment and Assumption Agreement by and between MMP and the Max Media LLC II Distribution Agreement, MMP has not committed to any of the foregoing. h. FCC. MMP and the FCC Licensee Entities have been and currently 20 are operated in material compliance with the terms of the FCC Licenses, the Communications Act of 1934, as amended, and applicable rules, regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC Licenses, a true and complete list of which is set forth on Schedule 5.3h to the MRI Agreement, and true and complete copies of each of which have been delivered to Purchaser, are valid and in full force and effect. Except as set forth on Schedule 5.3h to the MRI Agreement, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses and, to Sellers' and MMP's Knowledge, there is not now before the FCC any investigation or complaint against MMP or the FCC Licensee Entities relating to the Stations, the unfavorable resolution of which would impair the qualifications of the FCC Licensee Entities to hold any FCC Licenses. Except as set forth on Schedule 5.3h to the MRI Agreement, there is no proceeding pending before the FCC, and there is no outstanding notice of violation from the FCC with respect to the Stations. Except as set forth on Schedule 5.3h to the MRI Agreement, no order or notice of violation has been issued by any governmental entity which permits, revocation, adverse modification or termination of any FCC License. Except as set forth on Schedule 5.3h to the MRI Agreement and except for those conditions or restrictions appearing on the face of the FCC Licenses, or other licenses, none of the FCC Licenses or other licenses is subject to any restriction or condition which would limit the operation of the Stations as currently operated. The FCC Licenses listed in Schedule 5.3h to the MRI Agreement are currently in effect and are not subject to any liens, or other encumbrances. No license renewal applications are pending with respect to any of the FCC Licenses. As of the date hereof, Sellers, the Company, MMP, and the FCC License Entities have no reason to believe that the FCC would not renew the FCC Licenses in the ordinary course for a full license term without any adverse conditions, upon the timely filing of appropriate applications and payment of the required filing fee. As of the date hereof, Sellers, the Company, MMP and the FCC Licensee Entities have no reason to believe that the FCC would not grant the FCC Application in the ordinary course without any adverse conditions. All documents required by 47 C.F.R. Section 73.3526 to be kept in each Station's public inspection files are in such file, and such file will be maintained in proper order and complete up to and through the Closing Date. i. INTELLECTUAL PROPERTY. Set forth on Schedule 5.3i to the MRI Agreement is a complete list of all Intellectual Property owned by or licensed to MMP on the date hereof material to the operations of the Stations. To MMP's Knowledge, except as otherwise set forth on Schedule 5.3i to the MRI Agreement, MMP owns such Intellectual Property free and clear of any royalty, lien, encumbrance or charge and does not interfere with the rights of others. Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not received any written notice or written claim that any such Intellectual Property is not valid or enforceable, or of any infringement upon or conflict with any patent, trademark, service mark, copyright or trade name of any third party by MMP. Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not given any notice of infringement to any third party with respect to any of the Intellectual Property and to MMP's Knowledge no 21 such infringement exists. There is no Intellectual Property owned by or licensed to the FCC Licensee Entities. j. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit Plans and Benefit Arrangements: (a) Schedule 5.3j to the MRI Agreement completely and accurately lists all MMP Plans and MMP Benefit Arrangements currently in existence and specifically identifies any that are Qualified Plans. Since January 1, 1996 (the date of formation of MMP), MMP has maintained or contributed solely to the Qualified Plans listed on Schedule 5.3j to the MRI Agreement. The Qualified Plans listed on Schedule 5.3j to the MRI Agreement have always qualified in form and operation under Code Section 401(a) and have a currently applicable determination letter from the Internal Revenue Service, and its trust has always been exempt under Code Section 501, and nothing has occurred with respect to such plan and trust that could cause the loss of such qualification or exemption or the imposition of any liability, lien, penalty, or tax under ERISA or the Code. (b) Each MMP Plan and each MMP Benefit Arrangement has been maintained in accordance with its constituent documents and with all applicable provisions of the Code, ERISA and other domestic and foreign laws, including federal, state, and foreign securities laws and all laws respecting reporting and disclosure. No MMP Plan holds employer securities. (c) Neither MMP nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV of ERISA. Neither MMP nor any ERISA Affiliate has never made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37)). MMP has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement that is not a MMP Benefit Arrangement or with respect to any Benefit Plan sponsored or maintained (or that has been or should have been sponsored or maintained) by any ERISA Affiliate; and no facts exist that could reasonably be expected to result in such liability, as a result of termination, withdrawal or funding waiver with respect to any such plan, program, or arrangements. (d) There are no pending claims or lawsuits by, against, or relating to any non-MMP Benefit Plans or non-MMP Benefit Arrangements that would, if successful, result in liability for MMP, and no claims or lawsuits (other than routine benefit claims) have been asserted, instituted or, to the knowledge of Sellers and the Company after due inquiry of MMP, threatened by, against, or relating to any MMP Plan or MMP Benefit Arrangement, and MMP has advised Sellers and the Company that MMP does not have knowledge of any fact that could form the basis for any such claim or lawsuit. MMP Plans 22 and MMP Benefit Arrangements are not presently under audit or examination (and have not received notice of a potential audit or examination) by any governmental authority, and no matters are pending with respect to the Qualified Plan under any governmental compliance programs. (e) No MMP Plan or MMP Benefit Arrangement contains any provision or is subject to any law that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions this Agreement contemplates, and MMP has not declared or paid any bonus or other incentive compensation or established any severance plan, program, or arrangement in contemplation of the transactions contemplated by this Agreement, the MRI Agreement, the Management Agreement or the MTC Agreement. (f) With respect to each MMP Plan, there have been no violations of Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims would result in any liability for MMP or any Person required to be indemnified by it. (g) MMP has made all required contributions to each MMP Plan as of the last day of each plan's most recent fiscal year, all benefits accrued under any unfunded MMP Plan or MMP Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with generally accepted accounting principles; and all monies withheld from employee paychecks with respect to MMP Plans have been transferred to the appropriate plan within the timing required by governmental regulations. (h) MMP and its ERISA Affiliates have complied with the health continuation rules of Code Sections 4980B (and its predecessor) and with Code Section 5000. No employee or former employee of MMP nor beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits subject to reporting under Statement of Financial Accounting Standards No. 106, other than as required by Code Section 4980B or other applicable law. (i) There are no contracts, agreements, plans or arrangements, including but not limited to the provisions of this Agreement, covering any employee or former employee of MMP that, individually or collectively, could give rise to the payment of any amount (or portion thereof) that would not be deductible pursuant to Code Sections 280G, 404 or 162. (j) The FCC Licensee Entities employ no employees and do not and have not in the past maintained or contributed to any Benefit Plans or Benefit Arrangements. 23 k. LABOR. Except as set forth on Schedule 5.3k to the MRI Agreement, with respect to employees of and service providers to MMP and the FCC Licensee Entities: (a) MMP has been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice. (b) The employees of MMP are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against, or currently being negotiated by, MMP or, to MMP's Knowledge, no labor representation organization effort exists nor has there been any such activity within the past three years. (c) All Persons classified by MMP and the FCC Licensee Entities as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and MMP has fully and accurately reported their compensation on IRS Forms 1099 when required to do so. (d) Since December 31, 1996, except as described on Schedule 5.3k(d) to the MRI Agreement, no employee of or group of employees, the loss of whom would have significant adverse effect on the business of MMP or the FCC Licensee Entities, has notified MMP of his or their intent to (A) terminate his or their relationship with MMP or the FCC Licensee Entities, or (B) make any demand for material payments or modifications of his or their arrangements with MMP. (e) There is no charge or compliance proceeding actually pending or, to the knowledge of MMP, threatened against MMP or the FCC Licensee Entities before the Equal Employment Opportunity Commission or any state, local, or foreign agency responsible for the prevention of unlawful employment practices. 24 (f) The FCC Licensee Entities do not employ, and have not in the past, employed employees. l. INSURANCE. Schedule 5.3l to the MRI Agreement contains a list of all insurance policies concerning the Business and describes coverage (including whether occurrence or claims made), other than employee-benefit related insurance policies. All such policies are legal, valid, binding, enforceable and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by court of law or equity). There are no existing breaches or defaults with respect to such policies, and no notice of cancellation or termination has been received. m. MATERIAL CONTRACTS. Schedule 5.3m to the MRI Agreement contains a list of all the Material Contracts of MMP and the FCC Licensee Entities (other than cash agreements for the sale of advertising time and retransmission consent agreements) and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts are legal, valid and binding obligations of MMP or the FCC Licensee Entities, as the case may be, enforceable in accordance with their terms and in full force and effect. There exists no default or event which, with notice or lapse of time, or both, would constitute a default by any party to any such Material Contract or which would permit termination, modification or acceleration. Neither MMP nor the FCC Licensee Entities have received notice, nor to MMP's Knowledge, does any party to any Material Contract intend to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. n. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.3n to the MRI Agreement, MMP and the FCC Licensee Entities are in material compliance with all material applicable Federal, state and local laws, rules and regulations, and there are no actions threatened or pending alleging noncompliance therewith. o. LITIGATION. Except as set forth on Schedule 5.3o to the MRI Agreement, there is no suit, claim, action, proceeding or arbitration pending or, to MMP's Knowledge, threatened against MMP or the FCC Licensee Entities that seeks to enjoin or obtain damages in respect of MMP's conduct of the Business or operation of the Stations, or the transactions contemplated hereby. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency against or affecting the Business, MMP or the FCC Licensee Entities, except as disclosed on Schedule 5.3o to the MRI Agreement. p. CONSENTS. Except (a) as set forth on Schedule 5.3p to the MRI 25 Agreement, (b) for filings pursuant to the H-S-R Act, or (c) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of MMP or the FCC Licensee Entities is required in connection with the execution and delivery of this Agreement by Sellers or the consummation of any of the transactions contemplated hereby (including any consents required under any MMP or FCC Licensee Entities contract as a result of the change in control contemplated hereby). q. ENVIRONMENTAL. Except as set forth on Schedule 5.3q to the MRI Agreement: (a) All of the operations of MMP at or from any MMP Real Property comply in all material respects with applicable Environmental Laws. MMP has not engaged in or permitted any operations or activities upon any of the MMP Real Property for the purpose of or involving the treatment, storage, use, generation, release, discharge, emission, or disposal of any Hazardous Substances at the MMP Real Property, except in substantial compliance with applicable Environmental Laws. (b) None of the MMP Real Property is listed or, to MMP's Knowledge, proposed for listing on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification of sites requiring investigation or remediation maintained by any state or other governmental authority. MMP has not received any notice from any governmental entity or third party of any actual or threatened Environmental Liabilities with respect to the MMP Real Property or the conduct of the Business. (c) To MMP's Knowledge, after due inquiry, there are no conditions existing at the MMP Real Property that require, or which with the giving of notice or the passage of time or both would likely require remedial or corrective action, removal or closure pursuant to the Environmental Laws. (d) To MMP's Knowledge, after due inquiry, MMP has all the material permits, authorizations, licenses, consents and approvals necessary for the current conduct of the Business and for the operations on, in or at the MMP Real Property which are required under applicable Environmental Laws and are in substantial compliance with the terms and conditions of all such permits, authorizations, licenses, consents and approvals. (e) To MMP's Knowledge, after due inquiry, there are no Hazardous Substances present on or in the MMP Real Property or at any geologically or hydrologically adjoining property, including any Hazardous Substances contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment 26 (whether movable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the MMP Real Property or such adjoining property, or incorporated into any structure therein or thereon. Neither MMP or any other Person for whose conduct it is or may be held responsible, nor to MMP's Knowledge after due inquiry or any other Person, has permitted or conducted, or was aware of, any Hazardous Substances, or any illegal activity conducted with respect to the MMP Real Property or any other properties or assets (whether real, personal, or mixed) in which MMP has or had an interest. r. TAX MATTERS. (a) Except as set forth on Schedule 5.3r(a) to the MRI Agreement: (i) All Tax Returns required to be filed by or with respect to MMP have been filed when due in a timely fashion, and all Tax Returns required to be filed by or with respect to MMP for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to MMP are correct and complete in all material respects. (ii) MMP has paid in full on a timely basis all Taxes owed by it, whether or not shown on any Tax Return, and MMP will have paid prior to the Closing Date all Taxes payable with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) MMP's liability for unpaid Taxes (including any liability of MMP for unpaid Taxes of any other Entity or Person), (a) did not, as of the date of the MMP Financial Statements, exceed the current liability accruals for such Taxes (excluding reserves for deferred Taxes) set forth on the MMP Financial Statements, (b) does not exceed such accruals as adjusted on the books of MMP for transactions and events through the date hereof in accordance with the past custom and practice of MMP, and (c) will not, as of the Closing Date, exceed its liability for such Taxes as reflected in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii). (iv) MMP has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to 27 MMP and MMP has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is currently in effect or has been requested with respect to the assessment, collection or payment of Taxes of MMP or for which MMP is liable. (vii) No extension of the time within which to file any Tax Return of MMP is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted or assessed against MMP. (ix) There are no liens on the assets of MMP relating or attributable to Taxes (except liens for Taxes not yet due). (x) MMP is and has since its formation been classified as a partnership for U.S. federal income tax purposes and has in effect a valid election under Section 754 of the Code. (xi) MMP has not agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. (xii) MMP is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and MMP has not assumed the Tax liability of any other entity or person under contract. (xiii) MMP does not have any liability for the Taxes of another entity or person as a transferee or successor, or otherwise. (xiv) Except for itself and the FCC Licensee Entities, MMP is not and has not at any time been a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xv) None of MMP's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. 28 (xvi) The FCC Licensee Entities' sole asset is the FCC Licenses, and the FCC Licensee Entities are not and have not been required to file Tax Returns or pay Taxes. (b) Sellers have furnished or otherwise caused to be made available to Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to MMP since January 1, 1996; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to MMP relating to Taxes. (c) Schedule 5.3r(c) to the MRI Agreement contains complete and accurate descriptions of (i) MMP's basis in its assets, and (ii) material Tax elections made by or with respect to MMP. s. ACCOUNTS RECEIVABLE. All accounts receivable of MMP that are reflected on the MMP Financial Statements or on the accounting records of MMP as of the Closing Date (collectively, the "MMP Accounts Receivable") represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. Unless paid prior to the Closing Date, the MMP Accounts Receivable are or will be as of the Closing Date current and collectable net of the respective reserve shown on the MMP Financial Statements or on the accounting records of MMP as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the MMP Accounts Receivable as of the Closing Date than the reserve reflected in the MMP Financial Statements represented of the MMP Accounts Receivable reflected therein and will not represent a MMP Material Adverse Effect in the composition of such MMP Accounts Receivable in terms of aging). Subject to such reserves, each of the MMP Accounts Receivable either has been or will be collected in full, without any setoff, within ninety (90) days after the day on which it first becomes due and payable. There is no contest, claim, or right of setoff, other than returns in the ordinary course of business, under any contract with any obligor of an MMP Accounts Receivable relating to the amount or validity of such MMP Accounts Receivable. MMP shall deliver on the Closing Date a complete and accurate list of all MMP Accounts Receivable as of the Closing Date. t. REPRESENTATIONS AS TO MMP INTERESTS. (i) MMP is the record and the beneficial owner of a 98% general partnership interest in each of the Television Licensees; (ii) MMP holds of record and owns beneficially these interests free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.3t to the MRI Agreement, all of which will be released at or before the Closing; (iii) MMP has full power and authority to enter into this Agreement, and the consummation of the 29 transactions contemplated hereby has been duly authorized by all necessary action on the part of MMP; (iv) this Agreement has been duly executed and delivered by MMP and constitutes a legal, valid and binding obligation of MMP, enforceable against MMP in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (v) except as described on Schedule 5.3t to the MRI Agreement, MMP's interests in the Television Licensees are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. 5.4. [RESERVED.] SECTION 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER ------------------------------------------- Purchaser hereby represents and warrants to Sellers, the Company and MMP that: 6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland. Purchaser has full corporate power and authority to carry on its business as it is now being conducted. 6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate power and authority to enter into this Agreement. The consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). 6.3. NO CONFLICTS. Except as described on Schedule 6.3 to the MRI Agreement, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any of the provisions of the articles of incorporation or by-laws of Purchaser, (ii) violate any provision of applicable law, rule or regulation, which violation would prevent or interfere with Purchaser's ability to perform hereunder, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Purchaser is 30 a party or to which its property is subject, or constitute a default thereunder, except where such conflict, breach, right of termination, acceleration or default would not have a material adverse effect on the business or financial condition of Purchaser or prevent or materially interfere with Purchaser's ability to perform hereunder. 6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 to the MRI Agreement, (ii) for filings pursuant to the H-S-R Act, or (iii) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of Purchaser is required in connection with the execution and delivery of this Agreement by Purchaser or the consummation of any of the transactions contemplated hereby. 6.5. LITIGATION. Except as set forth on Schedule 6.5 to the MRI Agreement, there is no suit, claim, action, proceeding or arbitration pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks to enjoin or obtain damages in respect of the transactions contemplated hereby. 6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the purchase of the Stock and the transactions contemplated by this Agreement. 6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on Schedule 6.7 to the MRI Agreement, Purchaser is legally and financially qualified to be the Licensee of, acquire, own and operate the Stations under the Communications Act and the rules, regulations and policies of the FCC. Purchaser knows of no fact that would, under existing law and the existing rules, regulations, policies and procedures of the FCC, (a) disqualify Purchaser as an assignee of the FCC Licenses or as the owner and operator of the Stations, or (b) cause the FCC to fail to approve in a timely fashion the application for the FCC Consent. Except as described on Schedule 6.7 to the MRI Agreement, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Purchaser, nor will processing pursuant to any exception or rule or general applicability be requested or required in connection with the consummation of the transactions contemplated by this Agreement Purchaser will have on hand at the Closing, adequate financial resources to consummate the transactions contemplated by this Agreement, the MRI Agreement, the Management Agreement and the MTC Agreement. 31 SECTION 7 ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES ---------- 7.1. LIMITATION; SURVIVAL. Except as otherwise provided in Section 3.2 of the Indemnification Escrow Agreement, and subject to the provisions of Section 10.3, the representations and warranties herein and the obligations of the parties shall survive the Closing for a period ending on the earlier to occur of (i) 15 calendar months after the Closing Date and (ii) October 31, 1999, but in no event shall the period be less than 12 calendar months after the Closing Date; and provided further, however, that representations and warranties relating to any claims as to which notice shall have been given pursuant to Section 10.4 on or before such date shall survive until the final resolution of such claims. SECTION 8 TAX MATTERS ----------- 8.1. SECTION 338 ELECTION. Purchaser shall not make an election under Section 338 of the Code (or any comparable provision of state, local or foreign law) with respect to the purchase of stock in the Company as provided herein. 8.2. TAX RETURNS. (a) Sellers shall prepare or cause to be prepared and file or cause to be filed, within the time (including extensions) and manner provided by law, all Tax Returns of the Company, MMP, and the FCC Licensee Entities that are required to be filed on or before the Closing Date. In addition, Sellers shall prepare or cause to be prepared and file or cause to be filed prior to the Closing Date all Tax Returns for Taxable Periods of the Company, MMP, and the FCC Licensee Entities for Taxable Periods ending on or before December 31, 1997, even if such Tax Returns are not yet due. Each of the Company, MMP and the FCC Licensee Entities shall pay or cause to be paid all Taxes shown as due on its Tax Returns. Purchaser shall have an opportunity to review and consent to the filing of all such Tax Returns, which consent shall not be unreasonably withheld or delayed. (b) Purchaser shall prepare or cause to be prepared and file or cause to be filed, within the time and manner provided by law, all Tax Returns of the Company, MMP, and the FCC Licensee Entities (i) for Taxable Periods ending on or before the Closing Date that are due after the Closing Date, except as otherwise provided in Section 8.2(a), and (ii) for Taxable Periods beginning before and ending after the Closing Date ("Straddle Periods"). Purchaser shall pay or cause to be paid all Taxes shown as due on 32 such Tax Returns; provided that this sentence shall not in any way limit or affect Purchaser's rights to indemnification under other provisions of this Agreement. Purchaser shall provide Sellers a reasonable opportunity to review and consent to the filing of such Tax Returns, which consent shall not be unreasonably withheld or delayed. Purchaser shall not file amended Tax Returns with respect to Taxable Periods ending on or before the Closing Date or Straddle Periods without Sellers' consent; provided, however, that Purchaser may file amended Tax Returns for such Taxable Periods without Sellers' consent if (i) such amended Tax Returns are filed to correct errors or omissions in previously filed Tax Returns that either constitute or are related to a breach of any representation or warranty set forth in Sections 5.2m or 5.3r (determined without regard to the limitation on the survival of such representations and warranties set forth in Section 7.1), or (ii) the filing of such amended Tax Return would not increase the Taxes of Sellers or Taxes for which Sellers have indemnification responsibility hereunder by more than $25,000. (c) All Tax Returns prepared and filed pursuant to this Section 8.2 shall be prepared and filed in accordance with applicable law and in a manner consistent with past practices of the Company, and MMP (to the extent consistent with applicable law). 8.3. APPORTIONMENT. The parties agree to cause the Company, MMP, and the FCC Licensee Entities to file all Tax Returns for any Taxable Period that would otherwise be a Straddle Period on the basis that the relevant Taxable Period consists of two periods, one ending as of the close of business on the Closing Date and one beginning the day after the Closing Date, unless the relevant Tax Authority will not accept a Tax Return filed on that basis. For purposes of apportioning any Tax to the portion of any Straddle Period that ends on the Closing Date, the determination shall be made assuming that there was a closing of the books as of the close of business on the Closing Date and that the taxable years of the Company, MMP and the FCC Licensee Entities ended on that date, except that real, personal and intangible property Taxes shall be apportioned ratably on a daily basis between the portions of the Straddle Period in question. 8.4. COOPERATION IN TAX MATTERS. Sellers and Purchaser shall (a) cooperate fully, as reasonably requested, in connection with the preparation and filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make available to the other, as reasonably requested, all information, records or documents with respect to Tax matters pertinent to the Company, MMP and the FCC Licensee Entities for all Taxable Periods ending on or before the Closing Date and Straddle Periods; and (c) preserve information, records or documents relating to Tax matters pertinent to the Company, MMP and the FCC Licensee Entities that is in their possession or under their control until the expiration of any applicable statute of limitations. 8.5. CERTAIN TAXES. Sellers shall timely pay all transfer, documentary, sales, 33 use, stamp, registration and other similar Taxes and fees arising from or relating to the sale and transfer of the Stock, and Sellers shall at their own expense file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees. If required by applicable law, Purchaser will join in the execution of any such Tax Returns and other documentation. 8.6. FIRPTA. Sellers shall deliver to Purchaser at the Closing a certificate or certificates in form and substance satisfactory to Purchaser, duly executed and acknowledged, certifying all facts necessary to exempt the transactions contemplated hereunder from withholding under Section 1445 of the Code. 8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing Date, in its sole and absolute discretion, cause MMP and any of the FCC Licensee Entities to make a Code Section 754 Election with respect to the Taxable Period in which the Closing occurs or later Taxable Periods. 8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not cause the Company, MMP or the FCC Licensee Entities to take any actions on the Closing Date other than in the ordinary course of their business, except (i) such actions as are expressly contemplated by this Agreement, including the repayment of MMP's Funded Debt, and (ii) such actions as would not increase Taxes for which Sellers have indemnification responsibility hereunder. SECTION 9 ADDITIONAL COVENANTS AND UNDERTAKINGS 9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchasers, Sellers, the Company and MMP (and MMP shall cause the FCC Licensee Entities) to agree that each will execute and deliver to the other any and all documents, in addition to those expressly provided for herein, that may be necessary or appropriate to implement the provisions of this Agreement, whether before, at, or after the Closing. The parties agree to cooperate with each other to any extent reasonably required in order to accomplish fully the transactions herein contemplated. 9.2. ACCESS TO INFORMATION. The Company and MMP, from and after the date of this Agreement and until the Closing Date or termination pursuant to Section 14.1, shall give Purchaser and Purchaser's employees and counsel full and complete access upon reasonable notice during normal business hours, to all officers, employees, offices, properties, agreements, records and affairs of the Company, MMP, the FCC Licensee Entities or otherwise relating to the Business, shall provide Purchaser with all financial statements of the Company, the FCC Licensee Entities and MMP which are currently 34 prepared in the ordinary course of business, which shall be prepared and delivered to Purchaser each month between the date hereof and the Closing Date, and shall provide copies of such information concerning the Company, MMP, the FCC Licensees and the Business as Purchaser may reasonably request; provided, however, that the foregoing shall not permit Purchaser or any agent thereof to (i) disrupt the Business, or (ii) contact any employee of the Company or MMP without providing reasonable prior notice to Sellers and allowing a representative of the Company or MMP to be present. The Company and Sellers will use their commercially reasonable efforts to obtain the consent of its auditors to permit inclusion of the Financial Statements and the MMP Financial Statements in applicable securities filings of Sinclair Broadcast Group, Inc. ("SBGI"). If Purchaser requests, it shall have the immediate right, without causing unreasonable disruption to the Business, to have the access provided for in the first sentence hereof to conduct an audit of each Station's financial information, and, subject to the foregoing, the Company, MMP and Sellers shall cooperate with Purchaser's reasonable requests in connection with such audit, including, without limitation, giving all reasonable consents thereto as long as any expenses thereof are borne by Purchaser. 9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by this Agreement, from and after the date hereof, Sellers, the Company and MMP shall cause the Business to be conducted in the ordinary course. Except as contemplated by this Agreement or as consented to by Purchaser (which consent shall not unreasonably be withheld), from and after the date hereof, Sellers, the Company, and MMP shall act and cause the FCC Licensee Entities to act, as follows: (a) The Company and MMP will not adopt or cause the FCC Licensee Entities to adopt any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; (b) The Company shall not change or amend its charter or by-laws and MMP shall not change or amend the operating agreement dated as of January 1, 1996, as amended February 14, 1997 or cause or allow any of the FCC Licensee Entities to change or amend any limited partnership agreement; (c) Except (i) for the disposition of obsolete equipment in the ordinary course of business, (ii) the transfer of the Excluded Assets, (iii) the transfers of the MMP II Licenses to MMP II and the distribution of MMP II to MTC or (iv) as set forth on Schedule 9.3(c) to the MRI Agreement, neither Company nor MMP shall sell, mortgage, pledge or otherwise dispose of any assets or properties owned, leased or used in the operation of the Business; (d) Neither the Company nor MMP or the FCC Licensee Entities will merge or consolidate with, agree to merge or consolidate with, or purchase or agree to 35 purchase all or substantially all of the assets of, or otherwise acquire, any other business entity; (e) MMP will not merge or consolidate with, or agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity or cause the FCC Licensee Entities to do likewise; (f) Neither the Company nor MMP or the FCC Licensee Entities will authorize for issuance, issue or sell any additional shares of its capital stock or any securities or obligations convertible or exchangeable into shares of its capital stock or issue or grant any option, warrant or other right to purchase any shares of its capital stock; (g) Neither the Company nor MMP or the FCC Licensee Entities will incur, or agree to incur, any debt for borrowed money other than draws under the Company's or MMP's, as the case may be, existing revolving credit agreements; (h) Neither the Company nor MMP or the FCC Licensee Entities will change its historical practices concerning the payment of accounts payable; and (i) Neither the Company nor MMP or the FCC Licensee Entities will declare, issue, or otherwise approve the payment of dividends or distributions of any kind in respect of the Stock or redeem, purchase or otherwise acquire any of its stock. (j) The Company and MMP shall maintain the existing insurance coverages on the assets of the Stations or other policies providing substantially similar coverages. (k) The Company and MMP will not permit any increases in the compensation of any of the employees of the Company or MMP except as required by law or existing contract or agreement or enter into or amend any Company Plan, MMP Plan, Company Benefit Arrangement, or MMP Benefit Arrangement other than as contemplated by MMP's operating budgets and in accordance with the past practice. (l) Neither the Company nor MMP or the FCC Licensee Entities shall enter into or renew any contract or commitment relating to the Stations or the assets of the Company or MMP, or incur any obligation that will be binding on Purchaser after Closing, except in the ordinary course of business, and MMP shall not enter into, modify, amend, renew, or change any contract with respect to programming for the Station for any period after the Closing Date without the prior approval of Purchaser. (m) Neither the Company nor MMP or the FCC Licensee Entities shall 36 enter into any transactions with any Affiliate of the Company or any Seller that will be binding upon Purchaser, or the Station following the Closing Date. (n) The Company and MMP shall use all commercially reasonable efforts to maintain the assets of the Stations or replacements thereof in good operating condition and adequate repair, normal wear and tear excepted. (o) The Company and MMP shall, in connection with the operation of the Stations, make expenditures materially consistent with the estimates of expenses set forth in MMP's operating budgets of the Stations and, including, without limitation, expenditures in respect of promotional, programming and engineering activities for the Station (and any employee expenditures related to such activities) for any period covered by the current operating budgets of the Stations. (p) Neither the Company nor MMP shall make or allow the FCC Licensee Entities to make or change any material Tax election, amend any Tax Return, or take or omit to take any other action not in the ordinary course of business and consistent with past practice that would have the effect of increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of the Company or MMP for any Post-Closing Tax Period. (q) Except as provided by Section 2.2 hereof and the MMP II Distribution, the Company, MMP and the FCC Licensee Entities shall not make distributions other than in the ordinary course of business and consistent with past practice, and shall not make non-pro rata distributions. (r) MMP shall not enter into or renew any Tradeout Agreement that would be binding on Purchaser after the Closing Date, except in the ordinary course of business, as contemplated by MMP's operating budgets and in accordance with past practice. (s) Except as provided in Section 9.3(r) above, MMP shall not enter into or renew any Time Sales Agreement except in the ordinary course of business and which are for cash at prevailing rates for a term not exceeding twelve (12) months. (t) MMP shall not acquire or enter into or renew any Local Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network Affiliation Agreement, without the prior approval of Purchaser other than as contemplated by this Agreement, the Management Agreement, the MTC Agreement, and the MRI Agreement. (u) Neither the Company nor MMP shall enter into or become subject to any employment, labor, union or professional service contract not terminable at will, or any bonus, pension, insurance, profit sharing, incentive, deferred compensation, severance pay, retirement, hospitalization, employee benefit, or other similar plans, or 37 increase the compensation payable or to become payable to any employee, except in the ordinary course of business, other than any value appreciation rights agreement with current employees of MMP, all of which liabilities shall be paid by MMP at or prior to Closing. (v) Neither the Company nor MMP or the FCC Licensee Entities shall take any action which may jeopardize the validity or enforceability of or rights under the FCC Licenses. (w) Before Closing, MMP shall pay all one-time fees under Section 3.1 of the Time Brokerage Agreements ("LMAs") with the LMA Stations aggregating $1,430,000.00 and MMP shall amend the LMAs with the LMA Stations to reflect the payment by MMP before the Closing of the fees set forth in Section 3.1 of the LMAs and the reduction of continuing fees as a result of such payments. 9.4. H-S-R ACT. Each of Purchaser and Sellers shall, within ten Business Days following the date hereof, file duly completed and executed Pre-Merger Notification and Report Forms as required under the H-S-R Act and shall otherwise use their respective best efforts to comply promptly with any requests made by the Federal Trade Commission ("FTC") or the Department of Justice ("DOJ") pursuant to the H-S-R Act or the regulations promulgated thereunder. Sellers shall cause MMP, to the extent required by law, to join in or provide information in connection with such filing, including, but not limited to, any response to any request by the FTC or DOJ. All filing fees and other similar payments in connection with the H-S-R Act shall be split equally by Purchaser and the Sellers. 9.5. FCC APPLICATION. (a) Each of Purchaser, MMP and Sellers shall, within seven Business Days following the date hereof, file with the FCC the FCC Application; provided that the parties shall cooperate with each other in the preparation of the FCC Application and shall in good faith and with due diligence take all reasonable steps necessary to expedite the processing of the FCC Application and to secure such consents or approvals as expeditiously as practicable; and provided further that MMP shall cause the FCC Licensee Entities, to the extent deemed reasonably necessary by counsel to Purchaser to join in and provide information in connection with the FCC Application and comply with the immediately preceding provisions and 9.5(b) below. If the Closing shall not have occurred for any reason within the initial effective periods of the granting of FCC approval of the FCC Application, and no party shall have terminated this Agreement under Section 14, the parties shall jointly request and use their respective best efforts to obtain one or more extensions of the effective periods of such grants. No party shall knowingly take, or fail to take, any action the intent or reasonably anticipated consequence of which would be to cause the FCC not to grant approval of the FCC Application. 38 (b) Sellers, the Company and MMP, as the case may be, shall publish (and cause the FCC Licensee Entities to publish) the notices required by the FCC Rules and Regulations relative to the filing of the FCC Application. Copies of all applications, documents and papers filed after the date hereof and prior to the Closing, or filed after the Closing with respect to the transaction under this Agreement, by Purchaser , Sellers, MMP, or the FCC Licensee Entities with the FCC shall be mailed to the other simultaneously with the filing of the same with the FCC. Each party shall bear its own costs and expenses (including the fees and disbursements of its counsel) in connection with the preparation of the portion of the application to be prepared by it and in connection with the processing of that application. All filing and grant fees, if any, paid to the FCC, shall be split equally by Purchaser and the Sellers. None of the information contained in any filing made by Purchaser or Sellers with the FCC with respect to the transaction contemplated by this Agreement shall contain any untrue statement of a material fact. (c) FCC APPLICATIONS TO TRANSFER CERTAIN FCC LICENSES. Sellers, the Company and MMP shall cause the FCC Licensee Entities holding the FCC Licenses for Television Stations WKEF-TV in Dayton, Ohio, WEMT-TV in Greeneville, Tennessee within five (5) Business Days following the date hereof, to file with the FCC the MMP II FCC Applications and take all reasonable steps necessary to expedite the processing of the MMP II FCC Applications to secure the Consent of the FCC to the transfer of control of the FCC Licenses from MMP to MTC. 9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit each Seller (a) to have reasonable access to the books and records of Purchaser and those retained or maintained by the Company relating to the operation of the Business prior to the Closing or after the Closing to the extent related to transactions or events occurring prior to the Closing, and (b) to have reasonable access to employees of the Company and Purchaser to obtain information relating to such matters. Purchaser shall maintain such books and records for a period of four (4) years following the Closing. 9.7. EMPLOYEES AND EMPLOYEE BENEFITS. Purchaser is not planning or contemplating, and has not made or taken, any decisions or actions concerning the employees of the Stations after the Closing Date that would require the service of notice under the Worker Adjustment and Retraining Notification Act of 1988, as amended, (the so-called WARN Act) or any other similar law. 9.8. INTERRUPTION OF BROADCAST TRANSMISSION. (a) In the event of any loss, damage or impairment, confiscation or condemnation of any of the assets of the Stations prior to the completion of the Closing that interferes with the normal operation of the Stations, MMP shall notify Purchaser of 39 same in writing immediately, specifying with particularity the loss, damage or impairment, confiscation or condemnation incurred, the cause thereof, if known or reasonably ascertainable, and the insurance coverage. MMP shall apply the proceeds of any insurance policy, judgment or award with respect thereto and take such other commercially reasonable actions, as determined in its sole discretion, as are necessary to repair, replace or restore such assets of any Station so damaged to their prior condition as soon as possible after such loss, damages or impairment, confiscation or condemnation. (b) If before the Closing Date, due to damage or destruction of the assets of any Station (other than WMMP-TV in the Charleston, South Carolina market), the regular broadcast transmission of one (1) or more Television Stations or two (2) or more Radio Stations in the normal and usual manner is interrupted for a period of twelve (12) continuous hours or more, MMP shall give prompt written notice thereof to Purchaser. If on the Closing Date, due to damages or destruction of the assets of one (1) or more Television Stations (other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more Radio Stations the regular broadcast transmission of one (1) or more Television Stations (other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more Radio Stations in the normal and usual manner is interrupted such that the regular broadcast signal of any such Station (including its effective radiated power) is diminished in any material respect, then (i) MMP shall immediately give written notice thereof to Purchaser; and (ii) Purchaser shall have the right, by giving prompt written notice to the other, to postpone the Closing Date for a period of up to sixty (60) days provided, however, that the Closing shall occur no later than ten (10) Business Days after regular broadcast transmission has been restored. (c) In the event any one (1) or more Television Stations (other than WMMP-TV in Charleston, South Carolina market) or two (2) or more Radio Stations normal and usual transmission has not been resumed by the Closing Date as postponed pursuant to section (b) above, Purchaser may, pursuant to Section 14.1(e), terminate this Agreement by written notice to the Sellers' Agent. Notwithstanding the foregoing, however, Purchaser may, at its option, proceed to close this Agreement and complete the restoration and replacement of any damaged assets of the Station in question after the Closing Date, MMP shall deliver or assign to Purchaser all insurance or other proceeds received in connection therewith to the extent such proceeds are received by or payable to the Company or MMP and have not therefore been used in or committed to the restoration or replacement of the assets. (d) If before the Closing Date, due to damage or destruction of the assets the regular broadcast transmission of any Station (other than WMMP-TV in the Charleston, South Carolina market) in the normal and usual manner is interrupted for a period of seven (7) continuous days or more, MMP shall give prompt written notice thereof (the "Interruption Notice") to Purchaser. Upon receipt of the Interruption Notice, 40 Purchaser shall have the right, in its sole and absolute discretion, by giving prompt written notice thereof to Sellers and MMP within two (2) Business Days of the date of the Interruption Notice, to terminate this Agreement with the effect specified in Section 14.2(b) hereof. (e) Until the Closing Date, the Company and MMP will maintain and cause MMP to maintain the existing insurance coverages listed on Schedule 5.3l to the MRI Agreement on the Stations and each Station's assets. 9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and is not relying on the specification of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agrees not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. 9.10. COLLECTION OF ACCOUNTS RECEIVABLE. (a) At the Closing, Sellers' Agents shall designate Purchaser as its agent solely for the purposes of collecting the MMP Accounts Receivable. Purchaser will collect the MMP Accounts Receivable during the period beginning on the Closing Date and ending on the 180th day after the Closing Date (the "Collection Period") with the same care and diligence Purchaser uses with respect to its own accounts receivable and hold all such MMP Accounts Receivable in trust for Sellers until remitted by Purchaser to the Indemnification Escrow Agent or the Collections Account pursuant hereto. Purchaser shall not make any referral or compromise of any of the MMP Accounts Receivable to a collection agency or attorney for collection and shall not settle or adjust the amount of any of the MMP Accounts Receivable without the written approval of Sellers' Agent. If, during the Collection Period, Purchaser receives monies from an account debtor of Purchaser that is also an account debtor of MMP with respect to any MMP Accounts Receivable, Purchaser shall credit the sums received to the oldest account due, except where an account is disputed by the account debtor as properly due, and the account debtor has so notified Purchaser in writing, in which case, payments received shall be applied in accordance with the account debtor's instructions; provided that upon resolution of such dispute if any amounts in dispute are received by Purchaser, Purchaser shall remit such amounts to the Indemnification Escrow Agent in accordance with the Indemnification Escrow Agreement up to the amount of the Additional Indemnification Amount Deposit and, thereafter, to the Collections Account. (b) On the ninetieth (90th) day after the Closing Date and on or before the fifth Business Day after the end of each full fifteen (15) day period thereafter during 41 the Collection Period, Purchaser shall deliver to Sellers' Agents a list of the amounts collected by Purchaser before the end of such period with respect to the Accounts Receivable. On or before the fifth Business Day after the end of the Collection Period, Purchaser shall deliver to Sellers' Agents a list of all of the Accounts Receivable that remain uncollected. (c) Sellers' Agents shall establish and maintain during the Collection Period (and for as long after the Collection Period as Sellers deem appropriate) a bank account (the "Collections Account") at a commercial bank in Norfolk, Virginia, as notified in writing by Sellers' Agents to Purchaser for the deposit of collections of the MMP Accounts Receivable in accordance with this Section 9.10. Sellers' Agents shall have sole disbursement authority over the Collections Account. On the ninetieth (90th) day after the Closing Date (or if such day is not a Business Day, on the next succeeding Business Day), Purchaser shall (i) deposit with the Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement all amounts collected with respect to any MMP Accounts Receivable, not to exceed the excess of $12,750,000 over the Initial Deposit (the "Additional Indemnification Amount Deposit"), and (ii) deposit in the Collections Account any other MMP Accounts Receivable collected by Purchaser as of such date. On and after the ninetieth (90th) day after the Closing Date until the expiration of the Collections Period, within five (5) Business Days of the end of each full fifteen (15) day period, Purchaser shall deposit all amounts collected with respect to the Accounts Receivable with the Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement until the total of all amounts deposited pursuant to the previous sentence and this sentence equals the Additional Indemnification Amount Deposit and, thereafter, in the Collections Account. Sellers' Agents shall be entitled to dispose of all amounts deposited in the Collections Account from time to time as it chooses, in its sole discretion, and Purchaser and the Indemnification Escrow Agent shall have no rights therein; provided, however, that Purchasers shall have no liability whatsoever to Sellers with respect to Sellers' Agents disposition of any amounts disbursed by Sellers' Agent from the Collections Account. (d) After the expiration of the Collection Period, Purchaser shall have no further obligation hereunder other than (1) so long as Sellers' Agents continue to maintain the Collections Account, to deposit in such account any payments with respect to any of the MMP Accounts Receivable that Purchaser subsequently receives, and (2) thereafter, to remit directly to Sellers' Agents any payments with respect to any of the MMP Accounts Receivable that Purchaser subsequently receives. (e) Any MMP Accounts Receivable remaining uncollected 180 days after the Closing Date shall be transferred to Sellers' Agents, together with all files concerning the collection or attempt to collect such MMP Accounts Receivable hereunder, and Purchaser shall thereafter have no further responsibility with respect 42 thereto. (f) Purchaser shall have no right to setoff any amounts collected for MMP Accounts Receivable against any amounts owed to Purchaser by Sellers; provided that this Section 9.10 shall not be deemed to limit the right of Purchaser to make claims against the Indemnification Amount in accordance with, and subject to, the terms and conditions of this Agreement and the Indemnification Escrow Agreement. 9.11. OTHER ACQUISITIONS. Without limiting any other provisions of this Agreement, prior to the Closing, without the prior written consent of Sellers' Agents, neither Purchaser nor any of its subsidiaries or any party acting directly or indirectly by or on behalf of any of them shall acquire or enter into any agreement to acquire a television station or radio station in any markets in which any Television Station or Radio Station currently broadcasts, if such acquisition would materially delay the granting of the FCC Application; provided, however, that nothing in this Section 9.11 shall be construed to preclude Purchaser proceeding to closing with respect to any transaction pending as of the date hereof. 9.12. PAYMENT OF CERTAIN LIABILITIES PRIOR TO CLOSING. Sellers, the Company, and MMP shall comply in all respects with their obligations under Section 2.2(b) of this Agreement. 9.13. [RESERVED] 9.14. VALUE APPRECIATION RIGHTS AND INCENTIVE FEES. Before Closing, MMP shall make all payments, discharge all obligations and terminate any and all Value Appreciation Rights Agreements ("VARS"), and the Management Incentive Agreements ("Incentive Agreements"), including, but not limited to, the VARS and Incentive Agreements listed on Schedules 5.3j and 5.3m to the MRI Agreement. SECTION 10 INDEMNIFICATION --------------- 10.1. INDEMNIFICATION OF PURCHASER BY SELLERS. (a) Subject to Section 10.3 hereof after the Closing Date, each Seller, jointly and severally, shall indemnify and hold Purchaser harmless from and against any and all Losses, however incurred, which arise out of or result from any breach by such Seller of any representation or warranty of such Seller as to itself, himself or herself, in Section 5.1 of this Agreement. 43 (b) Subject to Section 10.3 hereof after the Closing Date, Sellers shall jointly and severally indemnify and hold Purchaser harmless from and against any and all Losses, howsoever incurred, which arise out of or result from: (i) any breach of any representation or warranty of Sellers set forth in Sections 5.2 or 5.3 of this Agreement other than any representation or warranty of any Seller set forth in Section 5.1 of this Agreement; provided, however, for purposes of this Section 10.1(b)(i), the representation set forth in Sections 5.2c and 5.3d will be deemed not to include the requirement of a MMP Material Adverse Effect; (ii) the material failure by Sellers to perform any covenant of Sellers contained herein; (iii) breaches by Seller, the Company, MMP, or any of the FCC License Entities of any other agreements and certificates specifically contemplated hereby; (iv) any and all Taxes of the Company, MMP and the FCC Licensee Entities (including any liability of the Company, MMP or the FCC Licensee Entities for Taxes of any other entity or person) for any Pre-Closing Tax Period except to the extent that such Taxes are specifically identified in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii) (excluding reserves for deferred Taxes); (v) [Reserved] 44 (vi) any liabilities under the Shareholder Settlement Agreements; or (vii) the Closing Date Liabilities, to the extent the Closing Date Liabilities exceed (A) the aggregate cash, cash equivalents and other cash items retained as provided by Section 2.2(b), and (B) payments made from the Indemnification Escrow as provided by Section 2.2(b)(iii); (c) For purposes of Section 10.1(b)(iv), Taxes of the Company for Pre-Closing Tax Periods shall be deemed to include Taxes payable by the Company, Purchaser, or Purchaser's Affiliates that are attributable to items of income, gain, loss, deduction, and credit of MMP and the FCC Licensee Entities accruing through the Closing Date, determined on the basis of a closing of the books of MMP and the FCC Licensee Entities as of that date, notwithstanding that such items may be reported in Taxable Periods ending after the Closing Date. 10.2. INDEMNIFICATION OF SELLERS BY PURCHASER. Subject to Section 10.3 hereof after the Closing, Purchaser shall indemnify and hold Sellers harmless from and against any and all Losses, howsoever incurred, which arises out of or results from: (a) any breach by Purchaser of any representation or warranty of Purchaser set forth in Section 6 of this Agreement; or (b) the material failure by Purchaser to perform any covenant of Purchaser contained herein. (c) any and all Taxes of the Company, MMP and the FCC Licensee Entities (including any liability of the Company, MMP or the FCC Licensee Entities for Taxes of any other persons) for any Post-Closing Tax Period except to the extent that (i) such Taxes should have been but were not specifically identified in the Closing Date Liabilities or are described in Section 10.1(c), or (ii) such Taxes arise out of, result from or are attributable to a breach of any representation, warranty or covenant of Sellers set forth in this Agreement. 10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION OBLIGATIONS. Sellers' obligation to indemnify Purchaser pursuant to Section 10.1 shall be subject to all of the following limitations: (a) Notwithstanding anything contained in this Agreement or applicable law to the contrary, Purchaser agrees that the payment of any claim (whether such claim 45 is framed in tort, contract, or otherwise) made by Purchaser for indemnification hereunder subsequent to the Closing Date, for whatever reason, shall be limited to, and shall only be made from, the Indemnification Amount in accordance with the Indemnification Fund Agreement and, except for claims against the Indemnification Amount, Purchaser waives and releases, and shall have no recourse against, Sellers as a result of the breach of any representation, warranty, covenant or agreement of Sellers contained herein, or otherwise arising out of or in connection with the transactions contemplated hereby or the operation of the Stations, and such indemnification shall be the sole and exclusive remedy for Purchaser with respect to any such claim for indemnification after the Closing Date; provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Sellers' fraud. The Indemnification Fund shall be disbursed in accordance with the Indemnification Escrow Agreement. (b) Anything in this Agreement or any applicable law to the contrary notwithstanding, it is understood and agreed by Purchaser that, other than with respect to Sellers (but not including any partner, director, officer, employee, agent or Affiliate Sellers (including any shareholder, director, officer, employee, agent or Affiliate of the Sellers)) as expressly provided for in Section 10.1, no partner, director, officer, employee, agent or Affiliate of Sellers (including any shareholder, director, officer, employee, agent or Affiliate of Sellers) shall have (i) any personal liability to Purchaser as a result of the breach of any representation, warranty, covenant or agreement of Sellers contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Stations, or (ii) any personal obligation to indemnify Purchaser for any of Purchaser's claims pursuant to Section 10.1 and Purchaser waives and releases and shall have no recourse against any of such parties described in this Section 10.3(c) as a result of the breach of any representation, warranty, covenant or agreement of Sellers contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Stations; provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Sellers' fraud. (c) Notwithstanding any other provision of this Agreement to the contrary, Sellers shall not be liable to Purchaser in respect of any indemnification hereunder until the aggregate amount of Losses of Purchaser under this Agreement, the Management Agreement, the MRI Agreement and the Investors Agreement exceeds Two Hundred Fifty Thousand Dollars ($250,000.00) (the "Basket Amount"), and then only to the extent of the excess of Losses over the amount of One Hundred Twenty-Five Thousand Dollars ($125,000.00); provided, however, that this paragraph shall not apply to (i) payments pursuant to Section 2.2(b)(iii), (ii) indemnification pursuant to Section 10.1(b)(iv), 10.1(b)(vi) and 10.1(b)(vii) (to the extent indemnification pursuant to Section 10.1b(vii) relates to an item either disclosed on a Schedule and/or set forth on the Estimate Certificate or the Accountant's Certificate), or (iii) indemnification pursuant to Sections 10.1(b)(i) for breaches of the representations and warranties set forth in Sections 5.2m, 5.3r, and 5.41. 46 (d) In determining the amount of any Tax or other Loss for which indemnification is provided under this Agreement, such Loss shall be (i) net of any insurance recovery made by the indemnified party, (ii) reduced to take into account any net Tax benefit realized by the indemnified party arising from the deductibility of such Tax or Loss, and (iii) increased to take account of any net Tax cost incurred by the indemnified party arising from the receipt of indemnification payments hereunder. Any indemnification payment hereunder shall initially be made without regard to this paragraph and shall be reduced to reflect any net Tax benefit or increased to reflect any net Tax cost only after the indemnified party has actually realized such benefit or cost. For purposes of this Agreement, an indemnified party shall be deemed to have "actually realized" a net Tax benefit or net Tax cost to the extent that, and at such time as, the amount of Taxes payable by such indemnified party is (x) reduced below the amount of Taxes that such indemnified party would have been required to pay but for the deductibility of such Tax or Losses, and (y) increased above the amount of Taxes that such indemnified party would have been required to pay but for the receipt of such indemnification payments. The amount of any reduction hereunder shall be adjusted to reflect any final determination (which shall include the execution of Form 870-AD or successor form) with respect to the indemnified party's liability for Taxes. Any indemnity payments under this Agreement shall be treated as an adjustment to the Purchase Price for Tax purposes, unless a final determination with respect to the indemnified party or any of its affiliates causes any such payment not to be treated as an adjustment to the Purchase Price. (e) No claim for indemnification for Losses shall be made after expiration of the applicable period set forth in Section 7.1 hereof. (f) Anything to the contrary in this Section 10.3 notwithstanding, the terms, conditions and limitations set forth in this Section 10.3 do not apply to or limit Purchaser's rights under Section 14.2. 10.4. NOTICE OF CLAIM; DEFENSE OF ACTION. (a) An indemnified party shall promptly give the Sellers' Agent notice of any matter which an indemnified party has determined has given or could give rise to a right of indemnification under this Agreement, stating the nature and, if known, the amount of the Losses, and method of computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right to indemnification is claimed or arises; provided that the failure of any party to give notice promptly as required in this Section 10.4 shall not relieve any indemnifying party of its indemnification obligations except to the extent that such failure materially prejudices the rights of such indemnifying party. The indemnified party shall give continuing notice 47 promptly thereafter of all developments coming to Sellers' Agent's attention materially affecting any matter relating to any indemnification claims. (b) Except as otherwise provided in Section 10.5, the obligations and liabilities of an indemnifying party under this Section 10 with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Section 10, shall be governed by and contingent upon the following additional terms and conditions: (i) With respect to third party claims, promptly after receipt by an indemnified party of notice of the commencement of any action or the presentation or other assertion of any claim which could result in any indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified party shall give prompt notice thereof to Sellers' Agent and the indemnifying part(ies) shall be entitled to participate therein or, to the extent that it desires, assume the defense thereof with its own counsel. (ii) If the indemnifying part(ies) elects to assume the defense of any such action or claim, the indemnifying part(ies) shall not be liable to the indemnified party for any fees of other counsel or any other expenses, in each case incurred by such indemnified party in connection with the defense thereof. (iii) The indemnifying part(ies) shall be authorized, without consent of the indemnified party being required, to settle or compromise any such action or claim, provided that such settlement or compromise includes an unconditional release of the indemnified party from all liability arising out of such action or claim. (iv) Whether or not an indemnifying part(ies) elects to assume the defense of any action or claim, the indemnifying part(ies) shall not be liable for any compromise or settlement of any such action or claim effected without its consent, such consent not to be unreasonably withheld. (v) The parties agree to cooperate to the fullest extent possible in connection with any claim for which indemnification is or may be sought under this Agreement, including, without limitation, making available all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably requested by the other party. 48 10.5 TAX CONTESTS. (a) If any party receives written notice from any Taxing Authority of any Tax Proceeding with respect to any Tax for which the other party is obligated to provide indemnification under this Agreement, such party shall give prompt written notice thereof to the other party; provided, however, that the failure to give such notice shall not affect the indemnification provided hereunder except to the extent that the failure to give such notice materially prejudices the indemnifying party. (b) Sellers, acting through Sellers' Agents, shall have the right, at their own expense, to control and make all decisions with respect to any Tax Proceeding relating solely to Taxes of the Company for Taxable Periods ending on or before the Closing Date; provided, that Purchaser and counsel of its own choosing shall have the right, at Purchaser's own expense, to participate fully in all aspects of the prosecution or defense of such Tax Proceeding; and provided further that Sellers shall not settle any such Tax Proceeding without the prior written consent of Purchaser if such settlements could increase the past, present or future Tax liability of Purchaser or any of its Affiliates, or any Tax liability of the Company for any Post-Closing Tax Period by an amount greater than $25,000. (c) Sellers, acting through Sellers' Agents, shall have the right, at their own expense, to jointly control and participate with Purchaser in all Tax Proceedings relating to Taxes of the Company for a Straddle Period. If Sellers exercise such right, neither party shall settle any such Tax Proceeding without the prior written consent of the other. (d) If Sellers, acting through Sellers' Agents, do not exercise their right to assume control of or participate in any Tax Proceeding as provided under this Section 10.5, Purchaser may, without waiving any rights to indemnification hereunder, defend or settle the same in such manner as it may deem appropriate in its sole and absolute discretion. (e) Purchaser shall control all Tax Proceedings relating to Taxes or Tax Returns of MMP and the FCC Licensee Entities. In the case of Tax Proceedings relating solely to Taxable Periods of MMP ending on or before the Closing Date and Straddle Periods of MMP, Purchaser shall keep Sellers' Agents fully informed as to the status of any such Tax Proceeding and shall not settle such a Tax Proceeding without the prior written consent of Sellers' Agents, which consent shall not be unreasonably withheld; provided that Sellers' Agents' consent to a settlement shall only be required if such settlements could increase Sellers' Taxes or Taxes for which Sellers have indemnification responsibility hereunder by an amount greater than $25,000. 49 (f) In the event that the provisions of this Section 10.5 and the provisions of Section 10.4(b) conflict or otherwise each apply by the terms, this Section 10.5 shall exclusively govern all matters concerning Taxes. SECTION 11 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE ----------------------------------------------------------- 11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The obligation of Purchaser to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Sellers shall have complied in all material respects with their agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Sellers contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Purchaser shall have received a certificate of one of Sellers' Agents, dated as of the Closing Date and signed by Sellers Agent, certifying as to the fulfillment of the condition set forth in this Section 11.1(a) ("Sellers' Bring-Down Certificate"). (b) No statute, rule or regulation, or order of any court or administrative agency shall be in effect which restrains or prohibits Purchaser from consummating the transactions contemplated hereby and no action or proceeding shall be pending wherein an unfavorable ruling would affect any right to own the Stock or the assets of the Station. (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) All consents identified on Schedules 5.2h, 5.3e and 5.3m to the MRI Agreement as required consents shall have been received. (e) The Final Order approving the applications for transfer of control of the FCC Licenses (other than the MMP II Licenses) shall have been obtained. All the material conditions contained in the Final Order required to be satisfied on or prior to the Closing Date shall have been duly satisfied and performed. Notwithstanding the foregoing, other than conditions relating the broadcast industry generally, if the consent of the FCC is conditional or qualified in any manner that has a material adverse effect on Purchaser or requires Purchaser or any of its subsidiaries to divest any television or radio station owned, operated or programmed by Purchaser or any of its subsidiaries. Purchaser may, nevertheless, in its sole discretion, require the consummation of the transactions 50 contemplated by this Agreement, but shall not be required to do so. (f) Sellers shall have delivered to Purchaser at the Closing each document required by Section 12.1 hereof. (g) Since the date of this Agreement through the Closing Date, there shall not have been either a Material Adverse Effect with respect to the Company or a MMP Material Adverse Effect with respect to the business, operations, properties, assets, or condition of MMP, and no event shall have occurred or circumstance exist that reasonably could be expected to result in either a Material Adverse Effect or an MMP Material Adverse Effect. (h) The transfer of the FCC Licenses for Television Stations WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, Tennessee to MMP II and the distribution of MMP II to MTC shall have occurred pursuant to the Assignment and Assumption Agreement and the Distribution Agreement substantially in the form attached hereto as Exhibit C, and MMP and MMP II shall have entered into one or more Time Brokerage Agreements generally in the form (subject to such revisions, additions and deletions as determined by counsel to MMP II and Purchaser prior to the Closing) attached hereto as Exhibit D. (i) The closings under the MRI Agreement, the MTC Agreement and the Management Agreement shall have occurred or will occur simultaneously with the Closing. (j) Sellers, the Company or MMP, as the case may be, shall have complied with their obligations under Section 9.12. 11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS. The obligation of Sellers to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Purchaser shall have complied in all material respects with its agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Purchaser contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Seller shall have received a certificate of Purchaser, dated as of the Closing Date and signed by an officer of Purchaser, certifying as to the fulfillment of the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down Certificate"). 51 (b) No statute, rule or regulation or order of any court or administrative agency shall be in effect which restrains or prohibits Sellers from consummating the transactions contemplated hereby. (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) The issuance by the FCC of a Final Order approving the applications for transfer of control of the FCC Licenses contemplated by this Agreement shall have occurred, and there shall have been duly satisfied and performed on or prior to the Closing Date all the material conditions contained in the Final Order required to be so satisfied; provided, however, Purchaser, in its sole discretion, may waive the necessity of a "Final Grant" by the FCC and close following an "Initial Grant". (e) Purchaser shall have delivered to Sellers at the Closing the Purchase Price and each document required by Section 12.2 hereof. (f) The closings under the MRI Agreement, the MTC Agreement and the Management Agreement shall have occurred or occur simultaneously with the Closing. SECTION 12 DELIVERIES AT THE CLOSING ------------------------- 12.1. DELIVERIES BY SELLERS. At the Closing, Sellers will deliver or cause to be delivered at the Closing to Purchaser: (a) Sellers' Bring-Down Certificate; (b) a legal opinion of Clark & Stant, P.C., counsel to Sellers', the Company and MMP substantially in the form attached as Exhibit E hereto; (c) a legal opinion of counsel to the FCC Licensee Entities in the form attached hereto as Exhibit F; (d) stock certificates evidencing the Stock, together with stock powers, dated as of the Closing Date and executed by the respective Sellers, transferring the Stock to Purchaser; (e) the original corporate minute books, stock registry and seal of the Company; 52 (f) a certificate as to the existence of the Company issued by the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; (g) a certificate as to the existence and good standing of MMP issued by the Secretary of the State Corporation Commission of the Commonwealth of Virginia not more than five (5) Business Days before the Closing Date and certificates issued by the appropriate governmental authorities in each jurisdiction in which MMP is qualified to do business and a certificate as to the existence for each of the FCC Licensee Entities of the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; (h) receipt for Purchase Price; (i) resignations of each of the officers and directors of the Company effective as of the Closing Date; (j) the certificate(s) required by Section 8.6; (k) a copy of any instrument evidencing any consents received; (l) the Indemnification Escrow Agreement duly executed by Sellers and Sellers' Agent; (m) a copy of any instrument evidencing any consent received, including, but not limited to, estoppel certificates from MMP's landlords with respect to the Real Property; (n) [RESERVED] (o) the Estimate Certificate; (p) the employee releases with respect to the VARS and Incentive Agreements duly executed by each employee to such Agreements; (q) the amendments to the LMAs in a form reasonably satisfactory to Purchaser duly executed by the necessary parties thereto as contemplated by Section 9.3(w); (r) evidence reasonably satisfactory to Purchaser that the Limited Partnership Agreements of the FCC Licensee Entities have been amended, and that sufficient actions have been taken by or with respect to MMP, to require allocation of items of income, gain, loss, deduction and credit with respect to transferred interests in the FCC 53 Licensee Entities and MMP based on the interim closing of the books method authorized by Code Section 706 and the regulations promulgated thereunder; and (s) such other documents as Purchaser shall reasonably request. 12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be delivered at the Closing to Sellers, the Disbursing Agent or the Indemnification Escrow Agent, as the case may be: (a) Purchaser's Bring-Down Certificate; (b) a legal opinion of Thomas & Libowitz, P.A., counsel to Purchaser, substantially in the form attached as Exhibit G hereto; (c) the Purchase Price as required pursuant to Section 3.1 hereof; (d) the Indemnification Escrow Agreement duly executed by Purchaser; (e) a certificate as to the existence and good standing of the Purchaser issued by the Maryland Department of Assessments and Taxation of the State of Maryland dated as of the Closing Date; (f) one or more fully executed Time Brokerage Agreements as negotiated pursuant to Section 11.1(h) hereof; and (g) such other documents as the Company shall reasonably request. SECTION 13 EXPENSES -------- Except as provided in Sections 9.4 and 9.5, each party will pay its own fees, expenses, and disbursements and those of its counsel in connection with the subject matter of this Agreement (including the negotiations with respect hereto and the preparation of any documents) and all other costs and expenses incurred by it in the performance and compliance with all conditions and obligations to be performed by it pursuant to this Agreement or as contemplated hereby. SECTION 14 TERMINATION ----------- 54 14.1 TERMINATION. This Agreement may be terminated: (a) At any time by mutual written consent of Purchaser and Sellers; (b) By either Purchaser or Sellers, if the terminating party is not in default or breach in any material respect of its obligations under this Agreement, if the Closing hereunder has not taken place on or before October 31, 1998, except where the Closing has been postponed pursuant to the provisions of Section 9.8, in which case the applicable date shall be upon the expiration of the period referred to in Section 9.8(b) (the "Termination Date"); (c) by Sellers, if Sellers are not in default or breach in any respect of their obligations under this Agreement, if all of the conditions in Section 11.2 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.8); (d) by Purchaser, if Purchaser is not in default or breach in any material respect of its obligations under this Agreement, if all of the conditions set forth in Section 11.1 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.8); (e) by Purchaser, pursuant to Section 9.8. 14.2 PROCEDURE AND EFFECT OF TERMINATION. (a) In the event of termination of this Agreement by either or both Purchaser and/or Sellers pursuant to Sections 9.8 or 14.1 hereof, prompt written notice thereof shall forthwith be given to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any of the parties hereto, but subject to and without limiting any other rights of the parties specified herein in the event a party is in default or breach in any material respect of its obligations under this Agreement. If this Agreement is terminated as provided herein, all filings, applications and other submissions relating to the transactions contemplated hereby as to which termination has occurred shall, to the extent practicable, be withdrawn from the agency or other Person to which such filing is made. 55 (b) If this Agreement is terminated pursuant to Section 14.1(d), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser and Purchaser shall have the right to pursue all remedies available hereunder at law or in equity, including, without limitation, the right to seek specific performance and/or actual monetary damages, but excluding consequential and incidental damages. In recognition of the unique character of the property to be sold hereunder, and the damages which Purchaser will suffer in the event of a termination pursuant to the foregoing Sections of this Agreement, Sellers hereby waive any defense that Purchaser has an adequate remedy at law for the breach of this Agreement by Sellers. (c) If this Agreement is terminated pursuant to Section 14.1(c) and Purchaser shall be in breach in any material respect of its representations, warranties, covenants, agreements, or obligations set forth in this Agreement, then and in that event, Sellers shall have the right to retain the amount delivered by Purchaser pursuant to Section 3.1(1) as liquidated damages, and as the sole and exclusive remedy of Sellers as a consequence of Purchaser's default (which aggregate amount the parties agree is a reasonable estimate of the damages that will be suffered by Sellers as a result of the default by Purchaser and does not constitute a penalty), the parties hereby acknowledging the inconvenience and nonfeasability of otherwise obtaining inadequate remedy. (d) If this Agreement is terminated pursuant to Sections 14.1(a), 14.1(b) and 14.1(e), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser. (e) A notice of termination made under any provision of Section 14.1 of this Agreement shall be deemed to be a notice of termination under the termination provisions of the MRI Agreement, the Management Agreement and the MTC Agreement. (f) In the event of a default by either party that results in a lawsuit or other proceeding for any remedy available under this Agreement, the prevailing party, to the extent it is the prevailing party, shall be entitled to reimbursement from the other party of its reasonable legal fees and expenses, whether incurred in arbitration, at trial, or on appeal. SECTION 15 NOTICES ------- All notices, requests, consents, payments, demands, and other communications required or contemplated under this Agreement shall be in writing and (a) personally delivered or sent via telecopy (receipt confirmed), or (b) sent by Federal Express or other reputable overnight delivery service (for next Business Day delivery), shipping prepaid, as 56 follows: To Purchaser: SINCLAIR COMMUNICATIONS, INC. ------------ 2000 W. 41st Street Baltimore, Maryland 21211 Attention: David D. Smith Telecopy: (410) 467-5043 Telephone: (410) 662-1008 with copies Sinclair Communications, Inc. (which shall not 2000 W. 41st Street constitute notice) to: Baltimore, Maryland 21211 Attention: General Counsel Telecopy: (410) 662-4707 Telephone: (410) 662-1422 and Thomas & Libowitz, P.A. Suite 1100 100 Light Street Baltimore, Maryland 21202 Attention: Steven A. Thomas Telecopy: (410) 752-2046 Telephone: (410) 752-2468 To Sellers' Agents: Anthony R. Ignaczak ------------------ Quad-C, Inc. 230 East High Street Charlottesville, Virginia 22902 Telecopy: (804) 979-1145 Telephone: (804) 979-9227 57 Allen B. Rider, III Colonnade Capital, L.L.C. 13th Floor 901 East Byrd Richmond, Virginia 23219 Telecopy: (804) 782-6606 Telephone: (804) 782-3512 Stephen W. Burke Clark & Stant, P.C. Suite 900 One Columbus Center Virginia Beach, Virginia 23462 Telecopy: (757) 473-0395 Telephone: (757) 499-8800 or to such other Persons or addresses as any Person may request by notice given as aforesaid. Notices shall be deemed given and received at the time of personal delivery or completed telecopying, or, if sent by Federal Express or such other overnight delivery service one Business Day after such sending. SECTION 16 SELLERS' AGENTS --------------- 16.1. SELLERS' AGENTS. Each of the Sellers hereby irrevocably appoints Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called the "Sellers' Agents") as his, her or its agent and attorney-in-fact to take any action required or permitted to be taken by such Seller under the terms of this Agreement, including, without limiting, the generality of the foregoing, the payment of expenses relating to the transactions contemplated by the Agreement, and the right to waive, modify or amend any of the terms of this Agreement in any respect, whether or not material, and agrees to be bound by any and all actions taken by the Sellers' Agents on his or its behalf. Any action to be taken by the Sellers' Agents shall be unanimous. In the event of the death, incapacity or liquidation of any of Sellers' Agents, such person or entity shall not be replaced, and the remaining Sellers' Agents shall continue in that capacity. The Sellers agree jointly and severally to indemnify the Sellers' Agents from and against and in respect of any and all liabilities, damages, claims, costs, and expenses, including, but not limited to attorneys' fees, arising out of or due to any action by them as the Sellers' Agents and any and all actions, proceedings, demands, assessments, or judgments, costs, and expenses incidental thereto, except to the extent that the same result from bad faith or gross negligence on the part of the 58 Sellers' Agents. Purchaser shall be entitled to rely exclusively upon any communications given by the Sellers' Agents on behalf of any Seller, and shall not be liable for any action taken or not taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to disregard any notices or communications given or made by Sellers unless given or made through the Sellers' Agents. SECTION 17 MISCELLANEOUS ------------- 17.1. HEADINGS. The headings contained in this Agreement (including, but not limited to, the titles of the Schedules and Exhibits hereto) have been inserted for the convenience of reference only, and neither such headings nor the placement of any term hereof under any particular heading shall in any way restrict or modify any of the terms or provisions hereof. Terms used in the singular shall be read in the plural, and vice versa, and terms used in the masculine gender shall be read in the feminine or neuter gender when the context so requires. 17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits attached to this Agreement constitute an integral part of this Agreement as if fully rewritten herein. 17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. 17.4. ENTIRE AGREEMENT. This Agreement, the MRI Agreement, the Management Agreement, the MTC Agreement and the FCC Licensee Transfer Agreement, the Annexes, Schedules and Exhibits and the documents to be delivered hereunder and thereunder constitute the entire understanding and agreement between the parties hereto concerning the subject matter hereof. All negotiations and writings between the parties hereto are merged into this Agreement, the MRI Agreement, the Management Agreement, the MTC Agreement, the FCC Licensee Transfer Agreement, and there are no representations, warranties, covenants, understandings, or agreements, oral or otherwise, in relation thereto between the parties other than those incorporated herein or to be delivered hereunder. 17.5. GOVERNING LAW. This Agreement is to be delivered in and should be construed in accordance with and governed by the laws of the Commonwealth of Virginia without giving effect to conflict of laws principles. 17.6. MODIFICATION. This Agreement cannot be modified or amended except in writing signed by each of the Purchaser and Sellers' Agent. 59 17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights and obligations hereunder shall be assigned, delegated, sold, transferred, sublicensed, or otherwise disposed of by operation of law or otherwise, without the prior written consent of each of the other parties hereto; provided, however, that Purchaser may assign its rights and obligations hereunder to one or more subsidiaries so long as Purchaser is not relieved of its obligations hereunder; and provided further that any change of control in respect of Purchaser's parent, SBGI, shall not require the consent of Sellers. In the event of such permitted assignment or other transfer, all of the rights, obligations, liabilities, and other terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against, the respective successors and assigns of the parties hereto, whether so expressed or not. 17.8. WAIVER. Any waiver of any provision hereof (or in any related document or instrument) shall not be effective unless made expressly and in a writing executed in the name of the party sought to be charged. The failure of any party to insist, in any one or more instances, on performance of any of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or of the future performance of any such term, covenant, or condition, but the obligations of the parties with respect hereto shall continue in full force and effect. 17.9. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and if any part of any provision is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, such provision may be changed, consistent with the intent of the parties hereto, to the extent reasonably necessary to make the provision, as so changed, legal, valid, binding, and enforceable. If any provision of this Agreement is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, and if such provision cannot be changed consistent with the intent of the parties hereto to make it fully legal, valid, binding and enforceable, then such provisions shall be stricken from this Agreement, and the remaining provisions of this Agreement shall not in any way be affected or impaired, but shall remain in full force and effect. 17.10. ANNOUNCEMENTS. From the date of this Agreement, all further public announcements relating to this Agreement or the transactions contemplated hereby will be made only as agreed upon jointly by the parties hereto, except that nothing herein shall prevent any Seller or any Affiliate thereof or Purchaser from making any disclosure in connection with the transactions contemplated by this Agreement if required by applicable law or otherwise as a result of its, or its Affiliate's, being a public company, provided that prior notice of such disclosure is given to the other party hereto. 60 17.11. SPECIFIC PERFORMANCE. Sellers acknowledge that Purchaser will have no adequate remedy at law if Sellers fail to perform their obligation to consummate the sale of Stock contemplated under this Agreement. In such event, Purchaser shall have the right, in addition to any other rights or remedies it may have, to specific performance of this Agreement. 17.12 FEES AND EXPENSES. Except as otherwise provided in this Agreement, each party shall pay their own expenses incurred in connection with the authorization, preparation, execution, and performance of this Agreement and the exhibits, Schedules, and other documentation, including all fees and expenses of counsel, accountants, and each party shall be responsible for all fees and commissions payable to any finder, broker, adviser, or other similar Person retained by or on behalf of such party; provided, however, that all transfer taxes, recordation taxes, sales taxes, and document stamps in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Sellers and all other filing fees (including all FCC and H-S-R Act filing fees), and other charges levied by any governmental entity in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Sellers. Purchaser hereby waives compliance with the provisions of any applicable bulk transfer law. 17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 17.14 INTERPRETATION. The Purchaser and Sellers acknowledge and agree that the preparation and drafting of this Agreement and the Exhibits hereto are the result of the efforts of all parties to this Agreement and every covenant, term, and provision of this Agreement shall be construed according to its fair meaning and shall not be construed against any particular party as the drafter of such covenant, term, and/or provision. The Purchaser and Sellers agree that this Agreement is to be construed in a manner consistent with the terms of the MRI Agreement, the Management Agreement and the MTC Agreement. [SIGNATURE PAGES TO FOLLOW --REST OF PAGE LEFT INTENTIONALLY BLANK] 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date and year first written above. SINCLAIR COMMUNICATIONS, INC., a Maryland corporation By --------------------------------------------- its --------------------------------------- Shareholders of Max Investors, Inc. --------------------------------------- Catherine M. Daniels --------------------------------------- Terrence D. Daniels --------------------------------------- Charles P. Daniels --------------------------------------- Christopher C. Daniels --------------------------------------- Courtnay P. Daniels --------------------------------------- Edward T. Harvey 62 --------------------------------------- R. Ted Weschler --------------------------------------- Anthony R. Ignaczak --------------------------------------- Stephen M. Burns --------------------------------------- J. Hunter Reichert --------------------------------------- Jeffrey J. Teschke --------------------------------------- Anthony F. Apollaro --------------------------------------- Matthew T. Goodwin --------------------------------------- Catherine J. Rotolo JOHN T. HERZOG WFS ROLL 63 OVER IRA --------------------------------------- John T. Herzog Custodian PAUL BRANDON HERZOG --------------------------------------- John T. Herzog Custodian --------------------------------------- Karon Chelsea Herzog --------------------------------------- Allen B. Rider III ALLEN B. RIDER III SEP IRA --------------------------------------- Allen B. Rider III Custodian EDWARD WHITCOMB RIDER --------------------------------------- Allen B. Rider III Custodian --------------------------------------- Virginia Ticknor Rider 64 James C. Wheat III --------------------------------------- James C. Wheat IRA JASPER L.L.C. By: ------------------------------------ Its: ----------------------------------- BLANDFIELD ASSOCIATES, L.L.C. By: ------------------------------------ Its: ----------------------------------- --------------------------------------- Brenton S. Halsey --------------------------------------- James E. Rogers --------------------------------------- Wallace Stettinius --------------------------------------- Edward Villanueva 65 --------------------------------------- Alexandra D. Henley --------------------------------------- Carolyn E. Underwood IRA --------------------------------------- Karin I. Wagner IRA COMMAX PARTNERS, L.P., a Virginia limited partnership By: ------------------------------------ Its: ----------------------------------- QUAD-C PARTNERS III, L.P., a Virginia limited partnership By: ------------------------------------ Its: ----------------------------------- QUAD-C PARTNERS IV, L.P., a Virginia limited partnership By: ------------------------------------ Its: ----------------------------------- 66 COMMONWEALTH INVESTORS II, L.P., a Virginia limited partnership By: ------------------------------------ Its: ----------------------------------- MAX INVESTORS, INC. By: ------------------------------------ Its: ----------------------------------- 67 ANNEX 1 DEFINITIONS ----------- As used in the attached Stock Purchase Agreement, the following terms shall have the corresponding meaning set forth below: "Affiliate" of, or a Person "Affiliated" with, a specified Person, means a Person who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. "Agreement" has the meaning set forth in the preamble. "Allocable Portion" shall mean 0% in the case of the Company and MRI, 96.470% in the case of MCT and 3.530% in the case of Management. "Basket Amount" has the meaning set forth in Section 10.3(c). "Benefit Arrangement" shall mean any benefit arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Benefit Plan, including without limitation, employment agreements, severance agreements, executive compensation arrangements, including but not limited to stock options, restricted stock rights and performance unit awards, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discounts, employee loans, employee banking privileges, any plans subject to Section 125 of the code, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. "Benefit Plan" shall have the meaning given in Section 3(3) of ERISA. "Broadcast Time Sales Agreement" shall mean all contracts and agreements pursuant to which MMP has sold commercial air time on the Stations for cash. 68 "Business" means the business of owning and operating the Stations. "Business Day" means any day on which banks in New York City are open for business. "Cash Price" shall mean the excess of $252 million over the Funded Debt immediately prior to the Closing. "CERCLA" has the meaning set forth in Section 5.3q of the Agreement. "Closing" has the meaning set forth in Section 4 of the Agreement. "Closing Date Liabilities" has the meaning set forth in Section 2.2(b) of the Agreement. "Closing Date Tax Liabilities" shall have the meaning set forth in Section 2.2(b)(iv) of this Agreement. "Closing Date" has the meaning set forth in Section 4 of the Agreement. "Closing Date Estimated Accounts Receivable" has the meaning of an amount equal to the Sellers' good faith estimate of Accounts Receivable of MMP as of the Closing Date, which have been outstanding for no more than 120 days, as set forth in the Certificate of Sellers' Agent delivered to Purchaser five (5) days before the Closing Date. "Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time. "Company" has the meaning set forth in the recitals to the Agreement. "Company Benefit Arrangement" shall mean any Benefit Arrangement sponsored or maintained by the Company or with respect to which the Company has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former directors, employees, or agents of the Company. "Company Interests" shall have the meaning set forth in Section 5.2q. "Company Plan" shall mean, as of the Closing Date, any Benefit Plan for which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Benefit Plan maintained by the Company or to which the Company is obligated to make payments, 69 in each case with respect to any present or former employees of the Company. Company Plan shall include any Qualified Plan terminated within the preceding six years. "Consents" means the consents, permits, or approvals of government authorities and other third parties necessary to lawfully and validly transfer the Stock and the Station assets to Purchaser to maintain the validity and effectiveness (any default or violation of the terms thereof) of any Material Contract and any licenses (including, without limitation, the FCC Licenses) to be transferred to Purchaser, or otherwise to consummate the transactions contemplated by this Agreement. "Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. "Disbursing Agent" means Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke. "Disbursement Agreement" means that certain Disbursement Agreement dated not later thirty (30) days prior to the Closing, among the Disbursing Agent and the Sellers. "Environment" means any surface or subsurface physical medium or natural resource, including air, land, soil (surface or subsurface), surface waters, ground waters, wetlands, stream and river sediments, rock and biota. "Environmental Laws" means any federal, state, or local law, legislation, rule, regulation, ordinance or code of the United States or any subdivision thereof relating to the injury to, or the pollution or protection of, human health and safety or the Environment. "Environmental Liability" means any loss, liability, damage, cost or expense arising under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean any Person that together with the Company or MMP, as applicable, would be or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any general partnership of which the Company or MMP, as applicable, is or has been a general partner. "Estimate Certificate" shall have the meaning set forth in Section 2.2(b)(i). "Excluded Assets" shall have the meaning set forth in Section 2.2. 70 "FCC" has the meaning set forth in the recitals to the Agreement. "FCC Application" means the applications requesting the approval and consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP II Transfers, and (ii) the transfer of control of the FCC Licenses to Purchaser or its assignee for those Television Stations and Radio Stations not included in the MMP II Transfers. "FCC Licenses" means those licenses, permits and authorizations issued by the FCC to the FCC Licensee Entities in connection with the business and operations of the Stations (together with any renewals, extensions, modifications or additions thereto between the date of this Agreement and the Closing Date. "FCC Licensee Entities" shall have the meaning set forth in the Recitals. "FCC Rules and Regulations" has the meaning set forth in Section 5.3h of the Agreement. "Final Order" means action by the FCC as to which no further steps (including those of appeal or certiorari) can be taken in any action or proceeding to review, modify or set the determination aside, whether under Section 402 or 405 of the Communications Act, or otherwise. "GAAP" means generally accepted accounting principles. "Funded Debt" means indebtedness of MMP for borrowed money (including pursuant to capitalized lease obligations), including any and all fees, costs or other payments associated with its payoff or retirement, other than (i) any indebtedness due after the Closing Date with respect to program contract liabilities, and (ii) Closing Date Liabilities. "Hazardous Substances" means petroleum, petroleum products, petroleum-derived substances, radioactive materials, hazardous wastes, polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any materials containing asbestos, and any materials or substances regulated or defined as or included in the definition of "hazardous substances, "hazardous materials," "hazardous constituents," "toxic substances," "pollutants, "pollutants," "contaminants" or any similar denomination intended to classify substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or reactivity under any Environmental Laws. "H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 71 "Initial Deposit" means $12,750,000 less an amount equal to the lesser of $6,375,000 or ninety percent (90%) of the Closing Date Estimated Accounts Receivable. "Initial Grant" means the date of the publication of the FCC "Public Notice" announcing the grant of the "Assignment Applications" for the FCC License to be transferred hereunder which contain no conditions materially adverse to Purchaser. The term "Public Notice" and "Assignment Applications" have the same meaning herein as are generally given the same under existing FCC rules, regulation and procedures. "Intellectual Property" means the patents, patent applications, trademark registrations and applications therefor, service mark registrations and applications therefor, copyright registrations and applications therefor and trade names that are (i) owned by the Company and (ii) material to the continued operation of the Business. "IRS" means the Internal Revenue Service. "Incentive Agreements" has the meaning set forth in Section 9.14. "Indemnification Amount" means $12,750,000.00 deposited or collected pursuant to the Indemnification Escrow Agreement. "Indemnification Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. "Indemnification Escrow" has the meaning set forth in Section 3.1 of the Agreement. "Knowledge or knowledge" shall mean with respect to the Company, MMP, MTR and the FCC Licensee Entities the actual knowledge (without any requirement of inquiry except as otherwise provided in the Agreement) of A. E. Loving, Jr., John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb, David J. Wilhelm and Jacquelyn D. Smullen, the general managers of the Stations, the managers and officers of MMP, and the officers and directors of the Company. "LMA Stations" shall have the meaning set forth in the Recitals. "Losses" means any loss, liability, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) but exclusive of incidental or consequential damages. "MMP Accounts Receivable" has the meaning given in Section 5.3s. "MMP's Benefit Arrangements" means any Benefit arrangement sponsored or 72 maintained by MMP or by the FCC Licensee Entities or with respect to which MMP or the FCC Licensee Entities has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former director, employees, or agent of MMP or the FCC Licensee Entities. "MMP's Benefit Plan" means, as of the Closing Date, any Benefit Plan for which MMP or the FCC Licensee Entities is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Benefit Plan maintained by MMP or the FCC Licensee Entities or which MMP or the FCC Licensee Entities is obligated to make payments, in each case with respect to any present or former employees of MMP or the FCC Licensee Entities. MMP's Benefit Plan shall include any Qualified Plan terminated within the preceding six (6) years. "MMP II FCC Applications" means the application requesting the approval and consent of the FCC to the transfer of control of Television Stations WKEF-TV and WEMT-TV from MMP to MTC. "MMP Financial Statements" means the balanced sheet of MMP at December 31, 1996, the audited consolidated statements of operations and cash flows for the year then ended, all notes thereto and the independent auditor's audit report thereon, together with the unaudited balance sheet of MMP at September 30, 1997 and the unaudited statement of operations for the nine (9) months then ended. "MMP Material Adverse Effect" shall mean a material adverse effect on the business, or financial condition of any Television Station with the exception of WMMP-TV in the Charleston, South Carolina market or the Radio Stations taken as a whole. "MMP Real Property" means all real property owned or leased by MMP. "MRI" shall have the meaning set forth in the Recitals. "MRI Agreement" shall have the meaning set forth in the Recitals. "MTC" shall have the meaning set forth in the Recitals. "MTC Agreement" shall have the meaning set forth in the Recitals. "MTR" has the meaning set forth in the Recitals. "Management Agreement" shall have the meaning set forth in the Recitals. "Material Adverse Effect" shall mean a material adverse effect on the business, or financial condition of the Company taken as a whole. 73 "Material Contract" means all agreements to which the Company or MMP is a party or by or to which it or its assets or properties are bound, except: (i) agreements for the cash sale of advertising time with a term of less than six months, (ii) agreements cancelable on no more than 90 days' notice without material penalty, or (iii) agreements which are otherwise immaterial to the Business and the Station. "Permitted Encumbrances" shall mean liens for taxes not yet due and payable; landlord's liens; liens for property taxes not delinquent; statutory liens that were created in the ordinary course of business; restrictions or rights required to be granted to governmental authorities or otherwise imposed by governmental authorities under applicable law; zoning, building or similar restrictions relating to or effecting property, including leasehold interests; all liens of record as of the date of this Agreement, but only if such liens do not materially effect the ownership or use of the MMP Real Property or leasehold interests and real property owned by others and operating leases for personal property and leased interests in property leased to others; liens and encumbrances on the MMP Real Property, currently of record as of the date hereof, and other liens or encumbrances on the MMP Real Property, in any case that individually or in the aggregate do not materially effect the current use and enjoyment thereof in the operation of any Station. "Person" means a natural person, a governmental entity, agency or representative (at any level of government), a corporation, partnership, joint venture or other entity or association, as the context requires. "Post-Closing Tax Period" means any Taxable Period or portion thereof beginning after the Closing Date. "Pre-Closing Tax Period" means any Taxable Period or portion thereof that ends on or before the Closing Date. "Pro Rata Share" shall mean 26.9433% in the case of the Company, 1.6167% in the case of Management, 26.6519% in the case of MRI, and 44.7881% in the case of MTC. "Purchase Price" shall mean the sum of (a) the Pro Rata Share of the excess of the Cash Price over 40% of the Step-Up plus (b) the Allocable Portion of 40% of the Step-Up. "Purchaser" has the meaning set forth in the preamble to the Agreement. "Purchaser's Bring-Down Certificate" has the meaning set forth in Section 11.2(a) of the Agreement. "Purchaser's Knowledge" means the actual knowledge of the officers of Purchaser. 74 "Qualified Plan" shall mean any Company Plan or MMP Plan that meets, purports to meet, or is intended to meet the requirements of Section 401(a) of the Code. "RLLP" shall have the meaning set forth in the Recitals. "Radio Stations" shall have the meaning set forth in the Recitals. "Real Property" means any real property owned or leased by the Company. "Related Agreement" means any document delivered at the Closing and any contract which is to be entered into at the Closing or otherwise pursuant to this Agreement, including the Escrow Agreement. "Sellers" has the meaning set forth in the preamble to the Agreement. "Sellers' Bring-Down Certificate" has the meaning set forth in Section 11.1(a) of this Agreement. "Shareholder Settlement Agreements" shall have the meaning set forth in Section 2.2(b). "Stations" has the meaning set forth in the recitals to the Agreement. "Step-Up" shall mean the amount of Code Section 754 basis step-up, calculated as the present value (determined using an 8.0% discount rate over a 15-year period assuming straight line amortization) of 45.812% of the Cash Price minus (or plus in the case of a negative) the aggregate tax basis capital accounts of MTR and Management in MMP immediately prior to the Closing. "Stock" has the meaning set forth in the recitals to the Agreement. "Straddle Period" shall have the meaning set forth in Section 8.2 of this Agreement. "Tax" or "Taxes" means all taxes, including, but not limited to, income (whether net or gross), excise, property, sales, transfer, gains, gross receipts, occupation, privilege, payroll, wage, unemployment, workers' compensation, social security, occupation, use, value added, franchise, license, severance, stamp, premium, windfall profits, environmental (including taxes under Code Sec. 59A), capital stock, withholding, disability, registration, alternative or add-on minimum, estimated or other tax of any kind whatsoever (whether disputed or not) imposed by any Tax Authority, including any related charges, fees, interest, penalties, additions to tax or other assessments. 75 "Tax Authority" means any federal, national, foreign, state, municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body or other authority exercising any taxing or tax regulatory authority. "Tax Liability" means any liability for a Tax. "Taxable Period" means any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any applicable statute, rule or regulation. "Tax Proceeding" means any audit, examination, claim or other administrative or judicial proceeding relating to Taxes or Tax Returns. "Tax Returns" means all returns, reports, forms, estimates, information returns and statements (including any related or supporting information) filed or to be filed with any Tax Authority in connection with the determination, assessment, collection or administration of any Taxes. "Television Licensee" shall have the meaning set forth in the Recitals. "Television Stations" shall have the meaning set forth in the Recitals. "Termination Date" shall have the meaning set forth in Section 14.1(b). "Trade-out Agreements" shall mean all contracts and agreements (excluding program contracts) pursuant to which MMP has sold, traded or bartered commercial air time on the Stations in consideration for any property or services in lieu of or in addition to cash. "VARS" has the meaning set forth in Section 9.14. EX-10.60 6 EXHIBIT 10.60 ASSET PURCHASE AGREEMENT BY AND BETWEEN SINCLAIR COMMUNICATIONS, INC. AND MAX MANAGEMENT LLC AND MAX MEDIA PROPERTIES LLC TABLE OF CONTENTS ----------------- 1. DEFINITIONS................................................................3 2. SALE OF ASSETS/EXCLUDED ASSETS.............................................3 2.1. Sale of Assets..................................................3 2.2. Excluded Assets.................................................3 3. PURCHASE PRICE.............................................................6 3.1. Payment.........................................................6 3.2. Disbursing Agent................................................6 4. CLOSING....................................................................7 5. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................7 5.1. RESERVED........................................................7 5.2. Representations and Warranties as to the Company................7 a. Organization and Good Standing..........................7 b. RESERVED................................................7 c. No Conflicts............................................8 d. Financial Statements....................................8 e. Employee Benefit Plans..................................9 f. Labor...................................................9 g. Insurance...............................................9 h. Material Contracts......................................9 i. Compliance with Laws...................................10 j. Litigation.............................................10 k. No Brokers.............................................10 l. Consents...............................................10 m. Tax Matters............................................10 n. RESERVED...............................................12 o. Accounts Receivable....................................12 p. RESERVED...............................................12 q. Representations as to the Company Interests............12 5.3. Representations and Warranties as to the MMP and the FCC Licensee Entities.............................................13 a. Organization and Good Standing.........................13 b. Capitalization of MMP..................................13 c. Organization and Capitalization of the FCC License Entities..............................................14 d. No Conflicts...........................................14 e. Real Property..........................................15 f. Personal Property......................................16 g. Financial Statements...................................16 i h. FCC....................................................18 i. Intellectual Property..................................19 j. Employee Benefit Plans.................................19 k. Labor..................................................21 l. Insurance..............................................22 m. Material Contracts....................................23 n. Compliance with Laws...................................23 o. Litigation.............................................23 p. Consents...............................................23 q. Environmental..........................................23 r. Tax Matters............................................25 s. Accounts Receivable....................................27 t. Representations as to MMP Interests....................27 5.4. RESERVED.......................................................28 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................28 6.1. Organization and Good Standing.................................28 6.2. Execution and Effect of Agreement..............................28 6.3. No Conflicts...................................................28 6.4. Consents.......................................................28 6.5. Litigation.....................................................29 6.6. No Brokers.....................................................29 6.7. Purchaser Qualifications.......................................29 7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES............29 7.1. Limitation; Survival...........................................29 8. TAX MATTERS...............................................................30 8.1. RESERVED.......................................................30 8.2. Tax Returns....................................................30 8.3. Apportionment..................................................31 8.4. Cooperation in Tax Matters.....................................31 8.5. Certain Taxes..................................................31 8.6. FIRPTA.........................................................31 8.7. Section 754 Election...........................................32 8.8. Closing Date Actions...........................................32 9. ADDITIONAL COVENANTS AND UNDERTAKINGS......................................32 9.1. Further Assurances and Assistance..............................32 9.2. Access to Information..........................................32 9.3. Conduct of Business Prior to Closing...........................33 ii 9.4. H-S-R Act......................................................36 9.5. FCC Application................................................36 (c)FCC Applications to Transfer Certain FCC Licenses......37 9.6. Books and Records..............................................37 9.7. Employees and Employee Benefits................................37 9.8. Interruption of Broadcast Transmission.........................37 9.9. Interpretation of Certain Provisions...........................39 9.10. Collection of Accounts Receivable..............................39 9.11. Other Acquisitions.............................................41 9.12. Payment of Certain Liabilities Prior to Closing................41 9.13. RESERVED.......................................................41 9.14. Value Appreciation Rights and Incentive Fees...................41 10. INDEMNIFICATION..........................................................42 10.1. Indemnification of Purchaser by Sellers........................42 10.2. Indemnification of Sellers by Purchaser........................43 10.3. Limitations and Other Provisions Regarding Indemnification Obligations...................................................43 10.4. Notice of Claim Defense of Action..............................45 10.5 Tax Contests...................................................46 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE..............48 11.1. Conditions Precedent to the Obligation of Purchaser............48 11.2. Conditions Precedent to the Obligation of Sellers..............49 12. DELIVERIES AT THE CLOSING................................................50 12.1. Deliveries by Sellers..........................................50 12.2. Deliveries by Purchaser........................................52 13. EXPENSES.................................................................52 14. TERMINATION..............................................................53 14.1 Termination....................................................53 14.2 Procedure and Effect of Termination............................53 15. NOTICES..................................................................54 iii 16. SELLERS' AGENTS..........................................................56 16.1. Sellers' Agents...............................................56 17. MISCELLANEOUS............................................................57 17.1. Headings......................................................57 17.2. Schedules and Exhibits........................................57 17.3. Execution in Counterparts.....................................57 17.4. Entire Agreement..............................................57 17.5. Governing Law.................................................57 17.6. Modification..................................................57 17.7. Successors and Assigns........................................57 17.8. Waiver........................................................58 17.9. Severability..................................................58 17.10. Announcements.................................................58 17.11. Specific Performance..........................................58 17.12. Fees and Expenses.............................................59 17.13. Third Party Beneficiaries.....................................59 17.14. Interpretation................................................59 ANNEX 1 - DEFINITIONS ANNEX 2 - SELLERS EXHIBITS Exhibit A - Deposit Escrow Agreement Exhibit B - Indemnification Escrow Agreement Exhibit C - MMP II Assignment and Assumption Agreement Exhibit D - Time Brokerage Agreements Exhibit E - Opinion of Counsel, Clark & Stant, P.A. Exhibit F - Opinion of Sellers' FCC Counsel Exhibit G - Opinion of Counsel, Thomas & Libowitz, P.A. iv SCHEDULES 5.1a(ii) Encumbrances of Stock 5.1a(vi) Options and Agreements 5.1b Share Brokers 5.1c No Conflicts 5.2b Capitalization 5.2c Conflicts 5.2d Financial Statements 5.2e Employee Benefit Plans 5.2f Labor 5.2g Insurance 5.2h Material Contracts 5.2i Compliance with Laws 5.2j Litigation 5.2k Brokers 5.2l Consents 5.2m(a) Tax Matters 5.2m(c) Tax Basis and Tax Elections 5.2q Company Interest 5.3b Capitalization 5.3d Conflicts 5.3e Real Property 5.3f Personal Property 5.3g Financial Statements 5.3h FCC Licenses 5.3i Intellectual Property 5.3j Employee Benefit Plans 5.3k Labor 5.3k(d) Employee Terminations or Demands 5.3l Insurance 5.3m Material Contracts 5.3n Compliance with Laws 5.3o Litigation 5.3p Consents 5.3q Environmental Matters 5.3r(a) Tax Matters 5.3r(c) Tax Basis and Tax Elections 5.3t Representations as to MMP Interests 5.4b Capitalization 5.4d Financial Matters 5.4h Material Contracts v 5.4l(a) Tax Matters 5.4l(c) Tax Basis and Tax Elections 5.4o Representations as to MTR Interests 6.3 Conflicts 6.4 Consents 6.5 Litigation 6.7 Purchaser Qualifications 9.3(c) Planned Asset Dispositions vi ASSET PURCHASE AGREEMENT ------------------------ THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this _____ day of December, 1997, is entered into by and among Sinclair Communications, Inc., a Maryland corporation ("Purchaser"), Max Management LLC, a Virginia limited liability company (the "Seller"), and Max Media Properties LLC, a Virginia limited liability company ("MMP"). RECITALS: WHEREAS, Seller owns 188,034 Class C Membership Units (out of a total of 11,631,431 Membership Units) of MMP (the "Assets"); and WHEREAS, Seller desires to sell, assign and transfer the Assets, and Purchaser desires to acquire the Assets, all on the terms described herein; WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into a Stock Purchase Agreement (the "MRI Agreement") to acquire all of the issued and outstanding shares of Max Radio Inc. ("MRI"). MRI is the owner of 31% of the equity of MTR Holding Corp., a Virginia corporation ("MTR"), 3,069,000 Class A Membership Units (out of a total 11,631,431 Membership Units) of MMP, and a 2% limited partnership interest in Radio License L.P., a Virginia limited partnership ("RLLP"), the holder of the FCC Licenses of the Radio Stations (as defined below); and WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into a Stock Purchase Agreement (the "Investors Agreement") to acquire all of the issued and outstanding shares of Max Investors, Inc., a Virginia corporation ("Investors"). Investors is the owner of 3,133,897 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into an Asset Purchase Agreement (the "MTC Agreement") to acquire from Max Television Company, a Virginia corporation ("MTC"), 5,140,500 Class B Membership Units (out of a total 11,631,431 Membership Units) of MMP, 69% of the equity of MTR and a 2% limited partnership interests in the Television Licensees (as defined below); and WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, MMP is the owner of the assets (other than the FCC Licenses) and operator of television stations WSYT-TV in the Syracuse, New York market, WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio market, WEMT- TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri and KETK-TV in the Tyler, Texas market (each a "Television Station" and collectively, the "Television Stations"); and WHEREAS, MMP is the owner of the assets (other than the FCC Licenses) and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina ("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro, North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG"; together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM, in Virginia Beach, Virginia ("WPTE"), and WFOG-FM, in Suffolk, Virginia ("WFOG"; together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio Station" and collectively, the "Radio Stations"); and WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky, pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA Stations" and for purposes of this Agreement, the LMA Stations, the Radio Stations and the Television Stations shall be collectively referred to as the "Stations"); and WHEREAS, MMP owns a 98% general partnership interest in RLLP; and WHEREAS, MMP owns a 98% general partnership interest in each of Max Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities LP"), Max Television of Charleston L.P. and Max Television of Tyler L.P. (each a "Television Licensee" and collectively, the "Television Licensees" and together with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a Television Station as indicated on Annex A hereto; and WHEREAS, the parties desire that, before the Closing and after receipt of any required approval of the FCC, MMP transfer all partnership interests it holds in Dayton LP and Tri-Cities LP to Max Media Properties II LLC, a newly-created Virginia limited liability company ("MMP II") (the "MMP II Transfers"); and WHEREAS, the parties desire that, after the MMP II Transfers, but before the Closing, MMP distribute to MTC all of the membership interests in MMP II; and WHEREAS, on the consummation of this Agreement, the MTC Agreement, the 2 Investors Agreement and the MRI Agreement (collectively, the "Purchase Agreements") Purchaser will own, directly or indirectly, all of the 11,631,431 Membership Units of MMP and all general and limited partnership interests in the FCC Licensee Entities, other than in Dayton LP and Tri-Cities LP (the "MMP II Licenses"); and WHEREAS, MMP holds certain assets more fully described below (the "Excluded Assets") that will not be acquired by Purchaser; and WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, all of the Assets. SECTION 1 --------- DEFINITIONS ----------- As used in this Agreement, capitalized terms shall have the meaning specified in the text hereof or on Annex 1 which is incorporated herein by reference, which meaning shall be applicable to both the singular and plural forms of the terms defined. SECTION 2 SALE OF ASSETS/EXCLUDED ASSETS 2.1. SALE OF ASSETS. Upon and subject to the terms and conditions stated in this Agreement, on the Closing Date (as hereinafter defined), Seller hereby agrees to transfer, convey, assign and deliver to Purchaser on the Closing Date, and Purchaser agrees to acquire, all of Seller's right, title and interest in the Assets, together with any additions thereto, between the date of this Agreement and the Closing Date, but excluding those assets described in Section 2.2, free and clear of any claims, liabilities, security interests, mortgages, liens, pledges, conditions, charges, or encumbrances of any nature whatsoever other than as described on Schedule 2.1. 2.2 EXCLUDED ASSETS. (a) The following assets (collectively, the "Excluded Assets") may be distributed by MMP to Seller and to the holders of Membership Units in MMP, and may be distributed by Seller or its designee prior to the Closing: 3 (i) all cash, cash equivalents and cash items of any kind whatsoever, certificates of deposit, money market instruments, bank balances and rights in and to bank accounts, and Treasury Bills; (ii) all furniture, fixtures and equipment located at the principal place of business of MMP, the address of which is 900 Laskin Road, Virginia Beach, Virginia 23451 and the leasehold interest therein; (iii) the Option Agreement with Gary and Susan Clarke, WWBI TV, Inc. dated as of July 11, 1997, as amended and all promissory notes and agreements related thereto and all related collateral and other documents; (iv) all notes payable and other amounts due from MCC Air Inc. and all assets, including real property, promissory notes and agreements relating solely to the sale and lease of WMQX-AM, Greensboro, NC to Winston-Salem Radio Corporation and Willis Broadcasting Corporation; (v) subject to the terms and conditions of the Indemnification Escrow Agreement (as defined below), the accounts receivable of MMP. (vi) the names "Max Media," "Max Television," "Max Radio" and "Max Media Properties". Any distribution of Excluded Assets by MMP will be made pro rata to the holders of Membership Units in MMP unless otherwise agreed to by Purchaser. (b) Notwithstanding anything to the contrary in Section 2.2(a) above, MTR and MMP shall each retain an amount of cash, cash equivalents and other cash items that are sufficient to cover and pay their respective Closing Date Liabilities. For purposes of this Agreement, the term "Closing Date Liabilities" shall mean the liabilities of MTR and MMP (other than for Funded Debt, liabilities with respect to program contract liabilities accruing after the Closing Date and liabilities with respect to trade and barter obligations arising after the Closing Date) whether or not disclosed on any Schedule hereto (A) as of the Closing Date; (B) for operations prior to the Closing Date; and (C) for all liabilities of any kind whatsoever under that certain Mutual Release dated as of January 1, 1997 and that certain Settlement Agreement dated as of January 17, 1997 (collectively the "Shareholder Settlement Agreements"). Except as otherwise provided in this Section 2.2(b), the Closing Date Liabilities shall be determined in accordance with GAAP consistently applied with prior periods, and shall be consistent with the books and records of MTR and MMP. The amount of cash, cash equivalents and cash items retained to cover the Closing Date Liabilities shall not be considered Excluded Assets. 4 (i) MMP shall deliver to Purchaser at the Closing a certificate (the "Estimate Certificate") setting forth its good faith estimate of the Closing Date Liabilities, which shall be used to determine the amount of cash, cash equivalents and other cash items required to be retained by MTR and MMP pursuant to this Section 2.2(b). (ii) Within one hundred twenty (120) days of the Closing, Purchaser shall cause its accountant to prepare and deliver to Seller a certificate setting forth its calculation of the Closing Date Liabilities (the "Accountant's Certificate"). The amount of the Closing Date Liabilities as set forth on the Accountant's Certificate shall be final unless Sellers' Agents notify Purchaser within thirty (30) days from their receipt of the Accountant's Certificate that they dispute the Accountant's Certificate. If Sellers' Agents and Purchaser are unable to agree on the amount of the Closing Date Liabilities within fifteen (15) days after Sellers' Agents' notice, the parties shall jointly appoint and engage an independent accountant of national or regional repute (the "Independent Accountant") to perform an independent evaluation of the Closing Date Liabilities. The findings of the Independent Accountant as to the amount of the Closing Date Liabilities shall be final and binding on the parties hereto. (iii) Upon the determination of the Closing Date Liabilities becoming final which is different from the Estimate Certificate either (A) Purchaser shall be entitled to a payment from the Indemnification Escrow equal to the amount by which the aggregate amount of the Closing Date Liabilities exceeds the Closing Date Liabilities shown on the Estimate Certificate, taking into account any amounts paid from the Indemnification Escrow under provisions similar to this provision in the MRI Agreement, the Management Agreement and the Investors Agreement, or (B) Purchaser shall pay to Disbursing Agent an amount by which the aggregate amount of Closing Date Liabilities shown on the Estimate Certificate exceeds the Closing Date Liabilities as finally determined. (iv) For purposes of determining the amount of the Tax liabilities of MTR to be included in the Closing Date Liabilities (the "Closing Date Tax Liabilities"), such Tax liabilities shall include all Tax liabilities of MTR that are attributable to items of income, gain, loss, deduction and credit of MMP and the FCC Licensee Entities accruing through and including the Closing Date, notwithstanding that such items may be reported by MTR, Purchaser, or Purchaser's Affiliates in Taxable Periods ending after the Closing Date. The amount of the Tax liabilities attributable to the Tax items of MMP and the FCC Licensee Entities shall be determined by assuming that the taxable years of MMP and the FCC Licensee Entities, as well as the taxable years of the Company and MTR, end as of close of business on the Closing Date and by assuming Purchaser's compliance with Section 8.8. The Closing Date Tax Liabilities shall not include, and Purchaser shall have no rights 5 of Indemnification under Section 10 with respect to, any Tax Liabilities arising from the MMP II Distribution. (v) Notwithstanding anything to the contrary contained in this Section 2.2, the final determination of the Closing Date Liabilities hereunder shall not affect Purchaser's indemnification rights pursuant to Section 10 to the extent the actual Closing Date Liabilities exceed the final determination thereunder. SECTION 3 PURCHASE PRICE -------------- 3.1 Payment. In consideration for the sale of the Stock, Purchaser shall pay to Seller the "Purchase Price," payable as follows: (1)Purchaser has deposited with First Union National Bank, as Escrow Agent pursuant to the Deposit Escrow Agreement, the Escrow Deposit which shall be distributed in accordance with the Deposit Escrow Agreement in the form attached hereto as Exhibit A. (2)At the Closing, the "Initial Deposit" which shall be held in Escrow (the "Indemnification Escrow") by Citibank, N.A. as Escrow Agent pursuant to the Indemnification Escrow Agreement in the form of Exhibit B hereto (the "Indemnification Escrow Agreement"); and (3)The balance of the Purchase Price at the Closing, by wire transfer of federal or other immediately available funds to the accounts specified by Disbursing Agent pursuant to wire instructions delivered in writing to Purchaser not later than two (2) Business Days prior to the Closing. 3.2. DISBURSING AGENT. The Disbursing Agent shall disburse the Purchase Price to Seller in accordance with the Disbursement Agreement. 6 SECTION 4 CLOSING The closing of the transaction contemplated by this Agreement (the "Closing"), subject to fulfillment or waiver of the conditions set forth in Section 11 hereof, shall be held at the offices of Clark & Stant, P.C., One Columbus Center, Suite 900, Virginia Beach, Virginia 23462, at 10:00 A.M. local time (but shall be deemed to have occurred at the close of business on such day), on the later to occur of (a) five Business Days after all applicable waiting periods under the H-S-R Act shall have expired or terminated, or (b) five Business Days after the Final Order (the date of Closing being the "Closing Date"), unless (i) Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser shall give Sellers reasonable notice of the Closing, or (ii) the parties shall mutually agree upon a different date or location; provided, however, that in no event shall the Closing be held prior to March 18, 1998; and provided, further, that in the event the Closing is postponed past July 15, 1998, due to a postponement of the Closing under Section 9.8(b) or otherwise, Seller, in its sole discretion, may postpone the Closing to September 1, 1998. In no event shall Closing occur later than the Termination Date. SECTION 5 REPRESENTATIONS AND WARRANTIES OF SELLER 5.1. RESERVED 5.2. REPRESENTATIONS AND WARRANTIES AS TO SELLER . Seller hereby represents and warrants to Purchaser as follows: a. ORGANIZATION AND GOOD STANDING. Seller is a limited liability company duly organized and validly existing under the laws of the Commonwealth of Virginia hereto and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. To the extent required by law, Seller is qualified as a foreign limited liability company and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. Seller does not own any direct or indirect subsidiary corporation. b. RESERVED 7 c. NO CONFLICTS. Except as described on Schedule 5.2c, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of organization or operating agreement of Seller, (ii) violate any provision of applicable law, rule and regulation, which violation would prevent or materially interfere with Seller's ability to perform hereunder or have a Material Adverse Effect, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Seller is a party or to which its property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with Seller's ability to perform hereunder or have a Material Adverse Effect. d. FINANCIAL STATEMENTS. As of the date of this Agreement, Seller has not issued any financial statements. Except as set forth on Schedule 5.2.d hereto, since February 14, 1997, there has not been any Material Adverse Effect on the business, financial condition, operations or results of operations of Seller taken as a whole. Without limiting the generality of the foregoing, since February 14, 1997, except as set forth on Schedule 5.2d: (i) Seller has not sold, leased, transferred, or assigned Asset; (ii) Seller has not entered into any material agreement, contract, lease, or license affecting the Assets; (iii) Seller has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which the Company is a party or by which the Company is bound; (iv) Seller has not imposed any security interest upon any of the Assets; (viii) Seller has not granted any license or sublicense of any material rights under or with respect to any Asset; (ix) there has been no change made or authorized in the charter or bylaws of Seller; (x) the Assets have not experienced any material damage, destruction, or loss (whether or not covered by insurance); 8 (xi) Seller has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Company Plan or Company Benefit Arrangement); (xii) Seller has not made or changed any material Tax election or taken any other action with respect to Taxes inconsistent with past practices affecting the Assets; (xiii) Seller has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and (xiv) except as set forth in this Agreement, Seller has not committed to any of the foregoing. e. EMPLOYEE BENEFIT PLANS. Seller does not, and has not in the past, instituted or maintained any Benefit Arrangement or Benefit Plan. Neither Seller nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan Subject to Title IV of ERISA. Neither Seller nor any ERISA Affiliate has ever made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37). Seller has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement. f. LABOR. Seller has not employed any employees. g. INSURANCE. Seller maintains no insurance policies. h. MATERIAL CONTRACTS. Schedule 5.2h hereto contains a list of all the Material Contracts and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts listed on Schedule 5.2h are legal, valid and binding obligations of Seller enforceable in accordance with their terms and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the right of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). There exists no default or event which, with notice or lapse of time, or both, would constitute a default by Seller or to the Seller's Knowledge any other party to any such Material Contract or which would permit termination, modification or acceleration. Seller has not received notice (or otherwise has knowledge) that any party to 9 any Material Contract intends to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. i. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2i, Seller is in material compliance with all material applicable Federal, state and local laws, rules and regulations, and to Seller's knowledge, there are no actions threatened or pending alleging noncompliance therewith. j. LITIGATION. Except as set forth on Schedule 5.2j hereto, there is no suit, claim, action, proceeding or arbitration pending or, to Seller's Knowledge, threatened against Seller. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency specifically against or specifically affecting Seller, except as disclosed on Schedule 5.2j. k. NO BROKERS. Except as described on Schedule 5.2k, Seller has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the sale of the Stock and the transactions contemplated by this Agreement. l. CONSENTS. Except (a) as set forth on Schedule 5.2l hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC Applications, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of Seller is required in connection with the execution and delivery of this Agreement by Seller or the consummation of the transactions contemplated hereby (including any consents required under any Company Material Contract as a result of the change in control contemplated hereby). m. TAX MATTERS. (a) Except as set forth on Schedule 5.2m(a) hereto: (i) All Tax Returns required to be filed by or with respect to Seller have been filed when due in a timely fashion, and all Tax Returns required to be filed by or with respect to Seller for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to Seller are true, correct and complete in all material respects. (ii) Seller h as paid in full on a timely basis all Taxes owed by Seller, whether or not shown on any Tax Return, and Seller will have paid prior to the 10 Closing Date all Taxes owed with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) Seller has no liability for unpaid income Taxes other than its Tax liability attributable to Seller's allocable share of MMP's items of income, gain, loss, deduction and credit accruing through the date hereof. (iv) Seller has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to Seller and Seller has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is currently in effect with respect to the assessment, collection or payment of Taxes of Seller or for which Seller is liable. (vii) No extension of the time within which to file any Tax Return of Seller is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted, or assessed against Seller. (ix) There are no liens on the assets of Seller relating or attributable to Taxes (except liens for Taxes not yet due). (x) Seller is not and has not been at any time during the preceding five years a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (xi) There is no agreement or consent made under Section 341(f) of the Code affecting Seller. (xii) Seller has not agreed to, nor is it required to, make any adjustments under Section 481 (a) of the Code as a result of a change in accounting methods. 11 (xiii) Seller is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and Seller has not assumed the Tax liability of any other entity or person under contract. (xiv) Seller is not and has not at any time been a member of an affiliated group filing a consolidated federal income tax return and does not have any liability for the Taxes of another entity or person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise. (xv) Except for MMP and the FCC Licensee Entities, Seller is not a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xvi) None of Seller's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (b) Seller has furnished or otherwise made available to Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to Seller since January 1, 1994; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to Seller relating to Taxes. (c) Schedule 5.2m(c) contains complete and accurate descriptions of (i) Seller's tax capital account in MMP, and (ii) material Tax elections made by or with respect to Seller. Seller has no net operating losses or other Tax attributes presently subject to limitation under Code Sections 382, 383 or 384, or the federal consolidated return regulations. n. RESERVED o. ACCOUNTS RECEIVABLE. Seller has no accounts receivable. p. RESERVED q. REPRESENTATIONS AS TO SELLER INTERESTS. (i) Seller is the record and the beneficial owner of 188,034 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP, (the "Seller Interests"); (ii) Seller holds of record and owns beneficially Seller Interests free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.2q hereof, all of which will be released at or before the Closing; (iii) Seller 12 has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of Seller; (iv) this Agreement has been duly executed and delivered by Seller and constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (v) except as described on Schedule 5.2q, Seller Interests are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. 5.3. REPRESENTATIONS AND WARRANTIES AS TO THE MMP AND THE FCC LICENSEE ENTITIES. Seller and MMP, jointly and severally, hereby represent and warrant to Purchaser as to MMP and the FCC Licensee Entities as follows: a. MMP ORGANIZATION AND GOOD STANDING. MMP is a limited liability company duly organized and validly existing under the laws of Virginia and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. To the extent required by law, MMP is qualified as a foreign limited liability company and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification. MMP owns 98% of the outstanding partnership interests in the FCC Licensee Entities. b. CAPITALIZATION OF MMP. The designations of each class of the membership units of MMP and the number of authorized and issued and outstanding membership units thereof is as described on Schedule 5.3b to the MRI Agreement. All membership units have been validly issued and are fully paid and nonassessable and are held of record by the respective members of MMP as set forth on Schedule 5.3b to the MRI Agreement. Except as described on Schedule 5.3b to the MRI Agreement, (i) there are no other issued or outstanding equity securities of MMP; (ii) there are no membership or value appreciation rights, phantom membership rights, profit participation rights, or other similar rights with respect to membership units outstanding; and (iii) there are no other issued or outstanding membership interests or other securities of MMP convertible or exchangeable at any time into equity securities of MMP. Except as set forth in the Operating Agreement of MMP as amended, MMP is not subject to any commitment or obligation that would require the issuance or sale of additional membership interests or membership units of MMP at any time under options, subscriptions, warrants, rights or any other obligations. Schedule 5.3b to the MRI Agreement sets forth the equity interests in any corporation, 13 partnership, limited liability company, joint venture or other entity owned by MMP. c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE ENTITIES. Each FCC License Entity is a limited partnership duly organized and validly existing under the laws of the Commonwealth of Virginia and has full partnership power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. Each FCC License Entity is qualified as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. No FCC License Entity owns any direct or indirect subsidiaries. MMP is the sole general partner and owns ninety-eight percent (98%) of the partnership interests of each of the FCC License Entities. MTC is the sole limited partner and owns two percent (2%) of the partnership interests of each of the FCC License Entities other than RLLP. MRI is the sole limited partner and owns two percent (2%) of the partnership interests of RLLP. All such partnership interests have been validly issued and are fully paid and nonassessable and are held of record by the respective partners as set forth above. There are no (i) other issued or outstanding equity securities of any FCC License Entity, (ii) partnership or value appreciation rights, phantom partnership rights, profit participation rights, or other similar rights with respect to partnership interests outstanding and (iii) other issued or outstanding partnership interests or other securities of any FCC License Entity convertible or exchangeable at any time into equity securities of such FCC License Entity. No FCC License Entity is subject to any commitment or obligation that would require the issuance or sale of additional partnership interests of any FCC License Entity at any time under options, subscriptions, warrants, rights or any other obligations. No FCC License Entity holds any equity interest in any corporation, partnership, limited liability company, joint venture or other entity. d. NO CONFLICTS. Except as described on Schedule 5.3d to the MRI Agreement, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of organization or operating agreement of MMP or the limited partnership agreements of the FCC Licensee Entities, (ii) violate any provision of applicable material law, rule and regulation, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any material agreement, indenture, mortgage or instrument to which either MMP or any FCC Licensee Entity is a party or to which any of their property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would have a MMP Material Adverse Effect. e. REAL PROPERTY. The MMP Real Property owned and all leaseholds and other interests in MMP Real Property used or useful in the Business and all buildings, 14 structures, towers, and improvements thereon used or useful in the business and operations of the Stations are listed on Schedule 5.3e to the MRI Agreement and, except for Permitted Encumbrances and as disclosed in Schedule 5.3e to the MRI Agreement, MMP has good and marketable fee simple title (insurable at standard rates by a reputable national title insurer) to all fee estates included in the Real Property, and good title to all other MMP Real Property, in each case clear of all liens. The FCC Licensee Entities own no real property, leaseholds or other interests in real property. No portion of the MMP Real Property or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or, to MMP's Knowledge, threatened. MMP has a valid leasehold interest in all leased property and subleases to which it is a party, and MMP is the owner and holder of all the leased property purported to be granted by such leases and subleases. The MMP Real Property and the leases and subleases listed on Schedule 5.3e to the MRI Agreement constitute all of the real property owned, leased or used by MMP in the business and operations of the Stations, which is material to the business and operations of the Stations. The Sellers have delivered or caused to be delivered to the Purchaser correct and complete copies of the deeds, leases and subleases listed in Schedule 5.3e to the MRI Agreement. With respect to each lease and sublease listed in Schedule 5.3e to the MRI Agreement: (a) the lease or sublease is legal, valid, binding, enforceable, and in full force and effect in all material respects subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with several principles of equity (whether applied by a court of law or equity); (b) MMP and, to MMP's knowledge, no other party to the lease or sublease is in material breach or default, and no event has occurred which, with notice or lapse of time, would constitute a material breach or default or permit termination, modification, or acceleration thereunder; (c) MMP and, to MMP's knowledge, no other party to the lease or sublease has repudiated any material provision thereof; (d) MMP is not a party to and, to MMP's knowledge, there are no material disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; (e) except as set forth on Schedule 5.3e to the MRI Agreement, MMP has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered 15 any interest in the leasehold or subleasehold; and (f) all facilities leased or subleased thereunder material to the operation of the Stations have received all approvals of governmental authorities (including material licenses and permits) required in connection with the operation thereof, and have been operated and maintained in accordance with applicable laws, rules, and regulations in all material respects. f. PERSONAL PROPERTY. Schedule 5.3f to the MRI Agreement lists as of the date hereof all items of Personal Property having a fair market value in excess of $5,000.00. Except as set forth on Schedule 5.3f to the MRI Agreement, MMP has good and marketable title to all of its material items of tangible personal property and assets used or useful by MMP located on its premises or shown on the MMP Financial Statements are free and clear of all liens, security interests and encumbrances other than those that would not materially affect Purchaser's use or ownership of such personal property after the Closing. The tangible personal property of MMP has been maintained in accordance with normal industry practice and is in good condition and repair given the age and use of such property (subject to normal wear and tear) and is adequate for its present use by MMP. g. FINANCIAL STATEMENTS. MMP has provided or made available to Purchaser copies of the MMP Financial Statements. The MMP Financial Statements have been prepared in accordance with GAAP consistently applied with prior periods except in the case of the unaudited MMP Financial Statements, the absence of year-end audit adjustments and notes. The MMP Financial Statements present fairly the financial position of MMP as at and for the periods indicated therein, and are consistent with the books and records of MMP. Except as set forth on Schedule 5.3g to the MRI Agreement hereto, since December 31, 1996, there has not been any Material Adverse Effect on the business, financial condition, operations, or results of operations of MMP taken as a whole. Without limiting the generality of the foregoing, since that date, except as described on Schedule 5.3g to the MRI Agreement: (i) MMP has not sold, leased, transferred, or assigned any material assets, tangible or intangible, outside the ordinary course of business; (ii) MMP has not entered into any material agreement, contract, lease, or license outside the ordinary course of business; (iii) MMP has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which MMP is a party or by which MMP is bound; 16 (iv) MMP has not imposed any security interest upon any of its assets, tangible or intangible; (v) MMP has not made any material capital expenditures outside the ordinary course of business; (vi) MMP has not made any material capital investment in, or any material loan to, any other Person outside the ordinary course of business; (vii) MMP has not created, incurred, assumed, or guaranteed more than $45 million in aggregate indebtedness for borrowed money and capitalized lease obligations; (viii) MMP has not granted any license or sublicense of any material rights under or with respect to any Intellectual Property; (ix) there has been no change made or authorized in the operating agreement of MMP; (x) MMP has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (xi) MMP has not made any loan to, or entered into any other transaction with, any of its managers, officers, and employees outside the ordinary course of business; (xii) MMP has not entered into any employment contract outside the ordinary course of business or collective bargaining agreement, written or oral, or modified the terms of any such existing contract or agreement; (xiii) MMP has not granted any increase in the base compensation of any of its members outside the ordinary course of business; 17 (xiv) MMP has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its managers, officers, and employees (or taken any such action with respect to any other MMP Plan or MMP Benefit Arrangement); (xv) MMP has not made any other material change in employment terms for any of its members or employees outside the ordinary course of business; (xvi) MMP has not made or changed any material Tax election or taken any other action with respect to Taxes not in the ordinary course of business and consistent with past practice; (xvii) MMP has not made any distributions other than in the ordinary course of business, and has not made any non-pro rata distributions; (xviii) MMP has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and (xix) except as contemplated by this Agreement, the Investors Agreement, the MRI Agreement, the MTC Agreement, and Assignment and Assumption Agreement by and between MMP and the Max Media LLC II Distribution Agreement, MMP has not committed to any of the foregoing. h. FCC. MMP and the FCC Licensee Entities have been and currently are operated in material compliance with the terms of the FCC Licenses, the Communications Act of 1934, as amended, and applicable rules, regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC Licenses, a true and complete list of which is set forth on Schedule 5.3h to the MRI Agreement, and true and complete copies of each of which have been delivered to Purchaser, are valid and in full force and effect. Except as set forth on Schedule 5.3h to the MRI Agreement, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses and, to Sellers' and MMP's Knowledge, there is not now before the FCC any investigation or complaint against MMP or the FCC Licensee Entities relating to the Stations, the unfavorable resolution of which would impair the qualifications of the FCC Licensee Entities to hold any FCC Licenses. Except as set forth on Schedule 5.3h to the MRI Agreement, there is no proceeding pending before the FCC, and there is no outstanding notice of violation from the FCC with respect to the Stations. Except as set forth on Schedule 5.3h to the MRI Agreement, no order or notice of violation has been issued by any governmental entity which permits, revocation, adverse modification or termination of any FCC License. Except as set forth on Schedule 5.3h to the MRI Agreement and except for 18 those conditions or restrictions appearing on the face of the FCC Licenses, or other licenses, none of the FCC Licenses or other licenses is subject to any restriction or condition which would limit the operation of the Stations as currently operated. The FCC Licenses listed in Schedule 5.3h to the MRI Agreement are currently in effect and are not subject to any liens, or other encumbrances. No license renewal applications are pending with respect to any of the FCC Licenses. As of the date hereof, Sellers, the Company, MMP, and the FCC License Entities have no reason to believe that the FCC would not renew the FCC Licenses in the ordinary course for a full license term without any adverse conditions, upon the timely filing of appropriate applications and payment of the required filing fee. As of the date hereof, Sellers, the Company, MMP and the FCC Licensee Entities have no reason to believe that the FCC would not grant the FCC Application in the ordinary course without any adverse conditions. All documents required by 47 C.F.R. Section 73.3526 to be kept in each Station's public inspection files are in such file, and such file will be maintained in proper order and complete up to and through the Closing Date. i. INTELLECTUAL PROPERTY. Set forth on Schedule 5.3i to the MRI Agreement is a complete list of all Intellectual Property owned by or licensed to MMP on the date hereof material to the operations of the Stations. To MMP's Knowledge, except as otherwise set forth on Schedule 5.3i to the MRI Agreement hereto, MMP owns such Intellectual Property free and clear of any royalty, lien, encumbrance or charge and does not interfere with the rights of others. Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not received any written notice or written claim that any such Intellectual Property is not valid or enforceable, or of any infringement upon or conflict with any patent, trademark, service mark, copyright or trade name of any third party by MMP. Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not given any notice of infringement to any third party with respect to any of the Intellectual Property and to MMP's Knowledge no such infringement exists. There is no Intellectual Property owned by or licensed to the FCC Licensee Entities. j. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit Plans and Benefit Arrangements: (a) Schedule 5.3j to the MRI Agreement completely and accurately lists all MMP Plans and MMP Benefit Arrangements currently in existence and specifically identifies any that are Qualified Plans. Since January 1, 1996 (the date of formation of MMP), MMP has maintained or contributed solely to the Qualified Plans listed on Schedule 5.3j to the MRI Agreement. The Qualified Plans listed on Schedule 5.3j to the MRI Agreement have always qualified in form and operation under Code Section 401(a) and have a currently applicable determination letter from the Internal Revenue Service, and its trust has always been exempt under Code Section 501, and nothing has occurred with respect to such plan and trust that could cause the loss of such qualification or exemption or 19 the imposition of any liability, lien, penalty, or tax under ERISA or the Code. (b) Each MMP Plan and each MMP Benefit Arrangement has been maintained in accordance with its constituent documents and with all applicable provisions of the Code, ERISA and other domestic and foreign laws, including federal, state, and foreign securities laws and all laws respecting reporting and disclosure. No MMP Plan holds employer securities. (c) Neither MMP nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV of ERISA. Neither MMP nor any ERISA Affiliate has never made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37)). MMP has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement that is not a MMP Benefit Arrangement or with respect to any Benefit Plan sponsored or maintained (or that has been or should have been sponsored or maintained) by any ERISA Affiliate; and no facts exist that could reasonably be expected to result in such liability, as a result of termination, withdrawal or funding waiver with respect to any such plan, program, or arrangements. (d) There are no pending claims or lawsuits by, against, or relating to any non-MMP Benefit Plans or non-MMP Benefit Arrangements that would, if successful, result in liability for MMP, and no claims or lawsuits (other than routine benefit claims) have been asserted, instituted or, to the knowledge of Sellers and the Company after due inquiry of MMP, threatened by, against, or relating to any MMP Plan or MMP Benefit Arrangement, and MMP has advised Sellers and the Company that MMP does not have knowledge of any fact that could form the basis for any such claim or lawsuit. MMP Plans and MMP Benefit Arrangements are not presently under audit or examination (and have not received notice of a potential audit or examination) by any governmental authority, and no matters are pending with respect to the Qualified Plan under any governmental compliance programs. (e) No MMP Plan or MMP Benefit Arrangement contains any provision or is subject to any law that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions this Agreement contemplates, and MMP has not declared or paid any bonus or other incentive compensation or established any severance plan, program, or arrangement in contemplation of the transactions contemplated by this Agreement, the Investors Agreement, the MRI Agreement or the MTC Agreement. (f) With respect to each MMP Plan, there have been no violations 20 of Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims would result in any liability for MMP or any Person required to be indemnified by it. (g) MMP has made all required contributions to each MMP Plan as of the last day of each plan's most recent fiscal year, all benefits accrued under any unfunded MMP Plan or MMP Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with generally accepted accounting principles; and all monies withheld from employee paychecks with respect to MMP Plans have been transferred to the appropriate plan within the timing required by governmental regulations. (h) MMP and its ERISA Affiliates have complied with the health continuation rules of Code Sections 4980B (and its predecessor) and with Code Section 5000. No employee or former employee of MMP nor beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits subject to reporting under Statement of Financial Accounting Standards No. 106, other than as required by Code Section 4980B or other applicable law. (i) There are no contracts, agreements, plans or arrangements, including but not limited to the provisions of this Agreement, covering any employee or former employee of MMP that, individually or collectively, could give rise to the payment of any amount (or portion thereof) that would not be deductible pursuant to Code Sections 280G, 404 or 162. (j) The FCC Licensee Entities employ no employees and do not and have not in the past maintained or contributed to any Benefit Plans or Benefit Arrangements. k. LABOR. Except as set forth on Schedule 5.3k to the MRI Agreement, with respect to employees of and service providers to MMP and the FCC Licensee Entities: (a) MMP has been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice. (b) The employees of MMP are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against, or currently being negotiated by, MMP or, to MMP's Knowledge, no labor 21 representation organization effort exists nor has there been any such activity within the past three years. (c) All Persons classified by MMP and the FCC Licensee Entities as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and MMP has fully and accurately reported their compensation on IRS Forms 1099 when required to do so. (d) Since December 31, 1996, except as described on Schedule 5.3k(d) to the MRI Agreement, no employee of or group of employees, the loss of whom would have significant adverse effect on the business of MMP or the FCC Licensee Entities, has notified MMP of his or their intent to (A) terminate his or their relationship with MMP or the FCC Licensee Entities, or (B) make any demand for material payments or modifications of his or their arrangements with MMP. (e) There is no charge or compliance proceeding actually pending or, to the knowledge of MMP, threatened against MMP or the FCC Licensee Entities before the Equal Employment Opportunity Commission or any state, local, or foreign agency responsible for the prevention of unlawful employment practices. (f) The FCC Licensee Entities do not employ, and have not in the past, employed employees. l. INSURANCE. Schedule 5.3l to the MRI Agreement hereto contains a list of all insurance policies concerning the Business and describes coverage (including whether occurrence or claims made), other than employee-benefit related insurance policies. All such policies are legal, valid, binding, enforceable and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by court of law or equity). There are no existing breaches or defaults with respect to such policies, and no notice of cancellation or termination has been received. 22 m. MATERIAL CONTRACTS. Schedule 5.3m to the MRI Agreement hereto contains a list of all the Material Contracts of MMP and the FCC Licensee Entities (other than cash agreements for the sale of advertising time and retransmission consent agreements) and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts are legal, valid and binding obligations of MMP or the FCC Licensee Entities, as the case may be, enforceable in accordance with their terms and in full force and effect. There exists no default or event which, with notice or lapse of time, or both, would constitute a default by any party to any such Material Contract or which would permit termination, modification or acceleration. Neither MMP nor the FCC Licensee Entities have received notice, nor to MMP's Knowledge, does any party to any Material Contract intend to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. n. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.3n to the MRI Agreement, MMP and the FCC Licensee Entities are in material compliance with all material applicable Federal, state and local laws, rules and regulations, and there are no actions threatened or pending alleging noncompliance therewith. o. LITIGATION. Except as set forth on Schedule 5.3o to the MRI Agreement hereto, there is no suit, claim, action, proceeding or arbitration pending or, to MMP's Knowledge, threatened against MMP or the FCC Licensee Entities that seeks to enjoin or obtain damages in respect of MMP's conduct of the Business or operation of the Stations, or the transactions contemplated hereby. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency against or affecting the Business, MMP or the FCC Licensee Entities, except as disclosed on Schedule 5.3o to the MRI Agreement. p. CONSENTS. Except (a) as set forth on Schedule 5.3p to the MRI Agreement hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of MMP or the FCC Licensee Entities is required in connection with the execution and delivery of this Agreement by Sellers or the consummation of any of the transactions contemplated hereby (including any consents required under any MMP or FCC Licensee Entities contract as a result of the change in control contemplated hereby). q. ENVIRONMENTAL. Except as set forth on Schedule 5.3q to the MRI Agreement hereto: 23 (a) All of the operations of MMP at or from any MMP Real Property comply in all material respects with applicable Environmental Laws. MMP has not engaged in or permitted any operations or activities upon any of the MMP Real Property for the purpose of or involving the treatment, storage, use, generation, release, discharge, emission, or disposal of any Hazardous Substances at the MMP Real Property, except in substantial compliance with applicable Environmental Laws. (b) None of the MMP Real Property is listed or, to MMP's Knowledge, proposed for listing on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification of sites requiring investigation or remediation maintained by any state or other governmental authority. MMP has not received any notice from any governmental entity or third party of any actual or threatened Environmental Liabilities with respect to the MMP Real Property or the conduct of the Business. (c) To MMP's Knowledge, after due inquiry, there are no conditions existing at the MMP Real Property that require, or which with the giving of notice or the passage of time or both would likely require remedial or corrective action, removal or closure pursuant to the Environmental Laws. (d) To MMP's Knowledge, after due inquiry, MMP has all the material permits, authorizations, licenses, consents and approvals necessary for the current conduct of the Business and for the operations on, in or at the MMP Real Property which are required under applicable Environmental Laws and are in substantial compliance with the terms and conditions of all such permits, authorizations, licenses, consents and approvals. (e) To MMP's Knowledge, after due inquiry, there are no Hazardous Substances present on or in the MMP Real Property or at any geologically or hydrologically adjoining property, including any Hazardous Substances contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether movable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the MMP Real Property or such adjoining property, or incorporated into any structure therein or thereon. Neither MMP or any other Person for whose conduct it is or may be held responsible, nor to MMP's Knowledge after due inquiry or any other Person, has permitted or conducted, or was aware of, any Hazardous Substances, or any illegal activity conducted with respect to the MMP Real Property or any other properties or assets (whether real, personal, or mixed) in which MMP has or had an interest. 24 r. TAX MATTERS. (a) Except as set forth on Schedule 5.3r(a) to the MRI Agreement hereto: (i) All Tax Returns required to be filed by or with respect to MMP have been filed when due in a timely fashion, and all Tax Returns required to be filed by or with respect to MMP for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to MMP are true, correct and complete in all material respects. (ii) MMP has paid in full on a timely basis all Taxes owed by it, whether or not shown on any Tax Return, and MMP will have paid prior to the Closing Date all Taxes payable with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) MMP's liability for unpaid Taxes (including any liability of MMP for unpaid Taxes of any other Entity or Person), (a) did not, as of the date of the MMP Financial Statements, exceed the current liability accruals for such Taxes (excluding reserves for deferred Taxes) set forth on the MMP Financial Statements, (b) does not exceed such accruals as adjusted on the books of MMP for transactions and events through the date hereof in accordance with the past custom and practice of MMP, and (c) will not as of the Closing Date exceed its liabilities for such Taxes as reflected in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii). (iv) MMP has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to MMP and MMP has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is currently in effect or has been requested with respect to the assessment, collection or payment of Taxes of MMP or for which MMP is liable. 25 (vii) No extension of the time within which to file any Tax Return of MMP is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted or assessed against MMP. (ix) There are no liens on the assets of MMP relating or attributable to Taxes (except liens for Taxes not yet due). (x) MMP is and has since its formation been classified as a partnership for U.S. federal income tax purposes and has in effect a valid election under Section 754 of the Code. (xi) MMP has not agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. (xii) MMP is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and MMP has not assumed the Tax liability of any other entity or person under contract. (xiii) MMP does not have any liability for the Taxes of another entity or person as a transferee or successor, or otherwise. (xiv) Except for itself and the FCC Licensee Entities, MMP is not and has not at any time been a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xv) None of MMP's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (xvi) The FCC Licensee Entities' sole asset is the FCC Licenses, and the FCC Licensee Entities are not and have not been required to file Tax Returns or pay Taxes. (b) Sellers have furnished or otherwise caused to be made available to Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to MMP since January 1, 1996; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to MMP relating to Taxes. 26 (c) Schedule 5.3r(c) to the MRI Agreement contains complete and accurate descriptions of (i) MMP's basis in its assets, and (ii) material Tax elections made by or with respect to MMP. s. ACCOUNTS RECEIVABLE. All accounts receivable of MMP that are reflected on the MMP Financial Statements or on the accounting records of MMP as of the Closing Date (collectively, the "MMP Accounts Receivable") represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. Unless paid prior to the Closing Date, the MMP Accounts Receivable are or will be as of the Closing Date current and collectable net of the respective reserve shown on the MMP Financial Statements or on the accounting records of MMP as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the MMP Accounts Receivable as of the Closing Date than the reserve reflected in the MMP Financial Statements represented of the MMP Accounts Receivable reflected therein and will not represent a MMP Material Adverse Effect in the composition of such MMP Accounts Receivable in terms of aging). Subject to such reserves, each of the MMP Accounts Receivable either has been or will be collected in full, without any setoff, within ninety (90) days after the day on which it first becomes due and payable. There is no contest, claim, or right of setoff, other than returns in the ordinary course of business, under any contract with any obligor of an MMP Accounts Receivable relating to the amount or validity of such MMP Accounts Receivable. MMP shall deliver on the Closing Date a complete and accurate list of all MMP Accounts Receivable as of the Closing Date. t. REPRESENTATIONS AS TO MMP INTERESTS. (i) MMP is the record and the beneficial owner of a 98% general partnership interest in each of the Television Licensees; (ii) MMP holds of record and owns beneficially these interests free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.3t to the MRI Agreement hereof, all of which will be released at or before the Closing; (iii) MMP has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of MMP; (iv) this Agreement has been duly executed and delivered by MMP and constitutes a legal, valid and binding obligation of MMP, enforceable against MMP in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (v) except as described on Schedule 5.3t to the MRI Agreement, MMP's interests in the Television Licensees are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. 27 5.4. [RESERVED] SECTION 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Seller and MMP that: 6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland. Purchaser has full corporate power and authority to carry on its business as it is now being conducted. 6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate power and authority to enter into this Agreement. The consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). 6.3. NO CONFLICTS. Except as described on Schedule 6.3 to the MRI Agreement hereof, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any of the provisions of the articles of incorporation or by-laws of Purchaser, (ii) violate any provision of applicable law, rule or regulation, which violation would prevent or interfere with Purchaser's ability to perform hereunder, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Purchaser is a party or to which its property is subject, or constitute a default thereunder, except where such conflict, breach, right of termination, acceleration or default would not have a material adverse effect on the business or financial condition of Purchaser or prevent or materially interfere with Purchaser's ability to perform hereunder. 6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 to the MRI Agreement hereto, (ii) for filings pursuant to the H-S-R Act, or (iii) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of Purchaser is required in connection with the execution and delivery of this 28 Agreement by Purchaser or the consummation of any of the transactions contemplated hereby. 6.5. LITIGATION. Except as set forth on Schedule 6.5 to the MRI Agreement hereto, there is no suit, claim, action, proceeding or arbitration pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks to enjoin or obtain damages in respect of the transactions contemplated hereby. 6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the purchase of the Stock and the transactions contemplated by this Agreement. 6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on Schedule 6.7 to the MRI Agreement, Purchaser is legally and financially qualified to be the Licensee of, acquire, own and operate the Stations under the Communications Act and the rules, regulations and policies of the FCC. Purchaser knows of no fact that would, under existing law and the existing rules, regulations, policies and procedures of the FCC, (a) disqualify Purchaser as an assignee of the FCC Licenses or as the owner and operator of the Stations, or (b) cause the FCC to fail to approve in a timely fashion the application for the FCC Consent. Except as described on Schedule 6.7 to the MRI Agreement, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Purchaser, nor will processing pursuant to any exception or rule or general applicability be requested or required in connection with the consummation of the transactions contemplated by this Agreement Purchaser will have on hand at the Closing, adequate financial resources to consummate the transactions contemplated by this Agreement, the Investors Agreement, the Management Agreement and the MTC Agreement. SECTION 7 ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES 7.1. LIMITATION; SURVIVAL. Except as otherwise provided in Section 3.2 of the Indemnification Escrow Agreement, and subject to the provisions of Section 10.3, the representations and warranties herein and the obligations of the parties shall survive the Closing for a period ending on the earlier to occur of (i) 15 calendar months after the Closing Date and (ii) October 31, 1999, but in no event shall the period be less than 12 calendar months after the Closing Date; and provided further, however, that representations and warranties relating to any claims as to which notice shall have been given pursuant to 29 Section 10.4 on or before such date shall survive until the final resolution of such claims. SECTION 8 TAX MATTERS ----------- 8.1. RESERVED 8.2. TAX RETURNS. ------------ (a) Seller shall prepare or cause to be prepared and file or cause to be filed, within the time (including extensions) and manner provided by law, all Tax Returns of Seller, MMP, and the FCC Licensee Entities that are required to be filed on or before the Closing Date. In addition, Seller shall prepare or cause to be prepared and file or cause to be filed prior to the Closing Date all Tax Returns for Taxable Periods of Seller, MMP, and the FCC Licensee Entities for Taxable Periods ending on or before December 31, 1997, even if such Tax Returns are not yet due. Each of Seller, MMP and the FCC Licensee Entities shall pay or cause to be paid all Taxes shown as due on its Tax Returns. Purchaser shall have an opportunity to review and consent to the filing of all such Tax Returns, which consent shall not be unreasonably withheld or delayed. (b) Purchaser shall prepare or cause to be prepared and file or cause to be filed, within the time and manner provided by law, all Tax Returns of MMP and the FCC Licensee Entities (i) for Taxable Periods ending on or before the Closing Date that are due after the Closing Date, except as described in Section 8.2a, and (ii) for Taxable Periods beginning before and ending after the Closing Date ("Straddle Periods"). Purchaser shall pay or cause to be paid all Taxes shown as due on such Tax Returns; provided that this sentence shall not in any way limit or affect Purchaser's rights to any indemnification under other provisions of this Agreement. Purchaser shall provide Seller a reasonable opportunity to review and consent to the filing of such Tax Returns, which consent shall not be unreasonably withheld or delayed. Purchaser shall not file amended Tax Returns with respect to Taxable Periods ending on or before the Closing Date or Straddle Periods without Seller's consent; provided, however, that Purchaser may file amended Tax Returns for such Taxable Periods without Seller's consent if (i) such amended Tax Returns are filed to correct errors or omissions in previously filed Tax Returns that either constitute or are related to a breach of any representation or warranty set forth in Sections 5.2m or 5.3r (determined without regard to the limitation on the survival of such representations and warranties set forth in Section 7.1), or (ii) the filing of such amended Tax Return would not increase the Taxes of Seller or Taxes for which Seller has indemnification responsibility hereunder by more than $25,000. 30 (c) All Tax Returns prepared and filed pursuant to this Section 8.2 shall be prepared and filed in accordance with applicable law and in a manner consistent with past practices of MMP (to the extent consistent with applicable law). 8.3. APPORTIONMENT. The parties agree to cause MMP and the FCC Licensee Entities to file all Tax Returns for any Taxable Period that would otherwise be a Straddle Period on the basis that the relevant Taxable Period consists of two periods, one ending as of the close of business on the Closing Date and one beginning the day after the Closing Date, unless the relevant Tax Authority will not accept a Tax Return filed on that basis. For purposes of apportioning any Tax to the portion of any Straddle Period that ends on the Closing Date, the determination shall be made assuming that there was a closing of the books as of the close of business on the Closing Date and that the taxable years of MMP and the FCC Licensee Entities ended on that date, except that real, personal and intangible property Taxes shall be apportioned ratably on a daily basis between the portions of the Straddle Period in question. 8.4. COOPERATION IN TAX MATTERS. Seller and Purchaser shall (a) cooperate fully, as reasonably requested, in connection with the preparation and filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make available to the other, as reasonably requested, all information, records or documents with respect to Tax matters pertinent to Seller, MMP and the FCC Licensee Entities for all Taxable Periods ending on or before the Closing Date and Straddle Periods; and (c) preserve information, records or documents relating to Tax matters pertinent to MMP and the FCC Licensee Entities that is in their possession or under their control until the expiration of any applicable statute of limitations. 8.5. CERTAIN TAXES. Seller shall timely pay all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees arising from or relating to the sale and transfer of the Assets, and Seller shall at its own expense file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees. If required by applicable law, Purchaser will join in the execution of any such Tax Returns and other documentation. 8.6. FIRPTA. Seller shall deliver to Purchaser at the Closing a certificate or certificates in form and substance satisfactory to Purchaser, duly executed and acknowledged, certifying all facts necessary to exempt the transactions contemplated hereunder from withholding under Section 1445 of the Code. 8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing Date, in its sole and absolute discretion, cause MMP and any of the FCC Licensee Entities to make a Code Section 754 Election with respect to the Taxable Period in which the 31 Closing occurs or later Taxable Periods. 8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not cause MMP or the FCC Licensee Entities to take any actions on the Closing Date other than in the ordinary course of their business, except (i) such actions as are expressly contemplated by this Agreement, including the repayment of MMP's Funded Debt, and (ii) such actions as would not increase Taxes of Seller or Taxes for which Seller has indemnification responsibility hereunder. SECTION 9 ADDITIONAL COVENANTS AND UNDERTAKINGS ------------------------------------- 9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchasers, Seller and MMP (and MMP shall cause the FCC Licensee Entities) to agree that each will execute and deliver to the other any and all documents, in addition to those expressly provided for herein, that may be necessary or appropriate to implement the provisions of this Agreement, whether before, at, or after the Closing. The parties agree to cooperate with each other to any extent reasonably required in order to accomplish fully the transactions herein contemplated. 9.2. ACCESS TO INFORMATION. Seller and MMP, from and after the date of this Agreement and until the Closing Date or termination pursuant to Section 14.1, shall give Purchaser and Purchaser's employees and counsel full and complete access upon reasonable notice during normal business hours, to all officers, employees, offices, properties, agreements, records and affairs of Seller, MMP, the FCC Licensee Entities or otherwise relating to the Business, shall provide Purchaser with all financial statements of Seller, the FCC Licensee Entities and MMP which are currently prepared in the ordinary course of business, which shall be prepared and delivered to Purchaser each month between the date hereof and the Closing Date, and shall provide copies of such information concerning Seller, MMP, the FCC Licensees and the Business as Purchaser may reasonably request; provided, however, that the foregoing shall not permit Purchaser or any agent thereof to (i) disrupt the Business, or (ii) contact any employee of Seller or MMP without providing reasonable prior notice to Seller and allowing a representative of Seller or MMP to be present. The Company and Seller will use their commercially reasonable efforts to obtain the consent of its auditors to permit inclusion of the Financial Statements and the MMP Financial Statements in applicable securities filings of Sinclair Broadcast Group, Inc. ("SBGI"). If Purchaser requests, it shall have the immediate right, without causing unreasonable disruption to the Business, to have the access provided for in the first sentence hereof to conduct an audit of each Station's financial information, and, subject to the foregoing, MMP and Seller shall cooperate with Purchaser's reasonable requests in connection with such audit, including, without limitation, giving all reasonable consents 32 thereto as long as any expenses thereof are borne by Purchaser. 9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by this Agreement, from and after the date hereof, Seller and MMP shall cause the Business to be conducted in the ordinary course. Except as contemplated by this Agreement or as consented to by Purchaser (which consent shall not unreasonably be withheld), from and after the date hereof, Seller and MMP shall act and cause the FCC Licensee Entities to act, as follows: (a) Seller and MMP will not adopt or cause the FCC Licensee Entities to adopt any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; (b) Seller shall not change or amend its charter or by-laws and MMP shall not change or amend the operating agreement dated as of January 1, 1996, as amended February 14, 1997 or cause or allow any of the FCC Licensee Entities to change or amend any limited partnership agreement; (c) Except (i) for the disposition of obsolete equipment in the ordinary course of business, (ii) the transfer of the Excluded Assets, (iii) the transfers of the MMP II Licenses to MMP II and the distribution of MMP II to Seller or (iv) as set forth on Schedule 9.3(c) to the MRI Agreement, neither Seller nor MMP shall sell, mortgage, pledge or otherwise dispose of any assets or properties owned, leased or used in the operation of the Business; (d) Neither Seller nor MMP or the FCC Licensee Entities will merge or consolidate with, agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity other than Seller's acquisition of MMP II pursuant to the MMP II Distribution; (e) MMP will not merge or consolidate with, or agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity or cause the FCC Licensee Entities to do likewise; (f) Neither Seller nor MMP or the FCC Licensee Entities will authorize for issuance, issue or sell any additional shares of its capital stock or any securities or obligations convertible or exchangeable into shares of its capital stock or issue or grant any option, warrant or other right to purchase any shares of its capital stock; (g) Neither Seller nor MMP or the FCC Licensee Entities will incur, or 33 agree to incur, any debt for borrowed money other than draws under the Company's or MMP's, as the case may be, existing revolving credit agreements; (h) Neither Seller nor MMP or the FCC Licensee Entities will change its historical practices concerning the payment of accounts payable; and (i) Neither Seller nor MMP or the FCC Licensee Entities will declare, issue, or otherwise approve the payment of dividends or distributions of any kind in respect of its membership interest or redeem, purchase or otherwise acquire any of its membership interest. (j) Seller and MMP shall maintain the existing insurance coverages on the assets of the Stations or other policies providing substantially similar coverages. (k) Seller and MMP will not permit any increases in the compensation of any of the employees of Seller or MMP except as required by law or existing contract or agreement or enter into or amend any Company Plan, MMP Plan, Company Benefit Arrangement, or MMP Benefit Arrangement other than as contemplated by MMP's operating budgets and in accordance with the past practice. (l) Neither Seller nor MMP or the FCC Licensee Entities shall enter into or renew any contract or commitment relating to the Stations or the Assets of MMP, or incur any obligation that will be binding on Purchaser after Closing, except in the ordinary course of business, and MMP shall not enter into, modify, amend, renew, or change any contract with respect to programming for the Stations for any period after the Closing Date without the prior approval of Purchaser. (m) Neither Seller nor MMP or the FCC Licensee Entities shall enter into any transactions with any Affiliate of Seller that will be binding upon Purchaser, or the Stations following the Closing Date. (n) Seller and MMP shall use all commercially reasonable efforts to maintain the assets of the Stations or replacements thereof in good operating condition and adequate repair, normal wear and tear excepted. (o) Seller and MMP shall, in connection with the operation of the Stations, make expenditures materially consistent with the estimates of expenses set forth in MMP's operating budgets of the Stations and, including, without limitation, expenditures in respect of promotional, programming and engineering activities for the Station (and any employee expenditures related to such activities) for any period covered by the current operating budgets of the Stations. 34 (p) Neither Seller nor MMP shall make or allow MTR or the FCC Licensee Entities to make or change any material Tax election, amend any Tax Return, or take or omit to take any other action not in the ordinary course of business and consistent with past practice that would have the effect of increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of MMP for any Post-Closing Tax Period. (q) Except as provided by Section 2.2 hereof and the MMP II Distribution, MMP and the FCC Licensee Entities shall not make distributions other than in the ordinary course of business and consistent with past practice, and shall not make non-pro rata distributions. (r) MMP shall not enter into or renew any Tradeout Agreement that would be binding on Purchaser after the Closing Date, except in the ordinary course of business, as contemplated by MMP's operating budgets and in accordance with past practice. (s) Except as provided in Section 9.3(r) above, MMP shall not enter into or renew any Time Sales Agreement except in the ordinary course of business and which are for cash at prevailing rates for a term not exceeding twelve (12) months. (t) MMP shall not acquire or enter into or renew any Local Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network Affiliation Agreement, without the prior approval of Purchaser other than as contemplated by this Agreement, the MTC Agreement, the MRI Agreement, and the Investor Agreement. (u) Neither Seller nor MMP shall enter into or become subject to any employment, labor, union or professional service contract not terminable at will, or any bonus, pension, insurance, profit sharing, incentive, deferred compensation, severance pay, retirement, hospitalization, employee benefit, or other similar plans, or increase the compensation payable or to become payable to any employee, except in the ordinary course of business, other than any value appreciation rights agreements with current employees of MMP, all of which liabilities shall be paid by MMP at or prior to Closing. (v) Neither Seller nor MMP or the FCC Licensee Entities shall take any action which may jeopardize the validity or enforceability of or rights under the FCC Licenses. (w) Before the Closing, MMP shall pay all one-time fees under Section 3.1 of the Time Brokerage Agreements ("LMAs") aggregating $1,430,000.00, and MMP shall amend the LMAs with the LMA Stations to reflect the payment by MMP before the Closing of the fees set forth in Section 3.1 aggregating of the LMAs and the reduction of 35 continuing fees as a result of such payments. 9.4. H-S-R ACT. Each of Purchaser and Seller shall, within ten Business Days following the date hereof, file duly completed and executed Pre-Merger Notification and Report Forms as required under the H-S-R Act and shall otherwise use their respective best efforts to comply promptly with any requests made by the Federal Trade Commission ("FTC") or the Department of Justice ("DOJ") pursuant to the H-S-R Act or the regulations promulgated thereunder. Seller shall cause MMP, to the extent required by law, to join in or provide information in connection with such filing, including, but not limited to, any response to any request by the FTC or DOJ. All filing fees and other similar payments in connection with the H-S-R Act shall be split equally by Purchaser and the Seller. 9.5. FCC APPLICATION. (a) Each of Purchaser, MMP and Seller shall, within seven Business Days following the date hereof, file with the FCC the FCC Application; provided that the parties shall cooperate with each other in the preparation of the FCC Application and shall in good faith and with due diligence take all reasonable steps necessary to expedite the processing of the FCC Application and to secure such consents or approvals as expeditiously as practicable; and provided further that MMP shall cause the FCC Licensee Entities, to the extent deemed reasonably necessary by counsel to Purchaser to join in and provide information in connection with the FCC Application and comply with the immediately preceding provisions and 9.5(b) below. If the Closing shall not have occurred for any reason within the initial effective periods of the granting of FCC approval of the FCC Application, and no party shall have terminated this Agreement under Section 14, the parties shall jointly request and use their respective best efforts to obtain one or more extensions of the effective periods of such grants. No party shall knowingly take, or fail to take, any action the intent or reasonably anticipated consequence of which would be to cause the FCC not to grant approval of the FCC Application. (b) Seller and MMP, as the case may be, shall publish (and cause the FCC Licensee Entities to publish) the notices required by the FCC Rules and Regulations relative to the filing of the FCC Application. Copies of all applications, documents and papers filed after the date hereof and prior to the Closing, or filed after the Closing with respect to the transaction under this Agreement, by Purchaser, Seller, MMP, or the FCC Licensee Entities with the FCC shall be mailed to the other simultaneously with the filing of the same with the FCC. Each party shall bear its own costs and expenses (including the fees and disbursements of its counsel) in connection with the preparation of the portion of the application to be prepared by it and in connection with the processing of that application. All filing and grant fees, if any, paid to the FCC, shall be split equally by Purchaser and the Seller. None of the information contained in any filing made by Purchaser or Seller with 37 the FCC with respect to the transaction contemplated by this Agreement shall contain any untrue statement of a material fact. (c) FCC APPLICATIONS TO TRANSFER CERTAIN FCC LICENSES. Seller and MMP shall cause the FCC Licensee Entities holding the FCC Licenses for Television Stations WKEF-TV in Dayton, Ohio, WEMT-TV in Greeneville, Tennessee, within five (5) Business Days following the date hereof, to file with the FCC the MMP II FCC Applications and take all reasonable steps necessary to expedite the processing of the MMP II FCC Applications to secure the Consent of the FCC to the transfer of control of the FCC Licenses from MMP to MTC. 9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit Seller (a) to have reasonable access to the books and records of Purchaser and those retained or maintained by the Company relating to the operation of the Business prior to the Closing or after the Closing to the extent related to transactions or events occurring prior to the Closing, and (b) to have reasonable access to employees of the Company and Purchaser to obtain information relating to such matters. Purchaser shall maintain such books and records for a period of four (4) years following the Closing. 9.7. EMPLOYEES AND EMPLOYEE BENEFITS. Purchaser is not planning or contemplating, and has not made or taken, any decisions or actions concerning the employees of the Stations after the Closing Date that would require the service of notice under the Worker Adjustment and Retraining Notification Act of 1988, as amended, (the so-called WARN Act) or any other similar law. 9.8. INTERRUPTION OF BROADCAST TRANSMISSION. (a) In the event of any loss, damage or impairment, confiscation or condemnation of any of the assets of the Stations prior to the completion of the Closing that interferes with the normal operation of the Stations, MMP shall notify Purchaser of same in writing immediately, specifying with particularity the loss, damage or impairment, confiscation or condemnation incurred, the cause thereof, if known or reasonably ascertainable, and the insurance coverage. MMP shall apply the proceeds of any insurance policy, judgment or award with respect thereto and take such other commercially reasonable actions, as determined in its sole discretion, as are necessary to repair, replace or restore such assets of any Station so damaged to their prior condition as soon as possible after such loss, damages or impairment, confiscation or condemnation. (b) If before the Closing Date, due to damage or destruction of the assets of any Station (other than WMMP-TV in the Charleston, South Carolina market), the regular broadcast transmission of one (1) or more Television Stations or two (2) or more 37 Radio Stations in the normal and usual manner is interrupted for a period of twelve (12) continuous hours or more, MMP shall give prompt written notice thereof to Purchaser. If on the Closing Date, due to damages or destruction of the assets of one (1) or more Television Stations (other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more Radio Stations the regular broadcast transmission of one (1) or more Television Stations (other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more Radio Stations in the normal and usual manner is interrupted such that the regular broadcast signal of any such Station (including its effective radiated power) is diminished in any material respect, then (i) MMP shall immediately give written notice thereof to Purchaser; and (ii) Purchaser shall have the right, by giving prompt written notice to the other, to postpone the Closing Date for a period of up to sixty (60) days provided, however, that the Closing shall occur no later than ten (10) Business Days after regular broadcast transmission has been restored. (c) In the event any one (1) or more Television Stations (other than WMMP-TV in Charleston, South Carolina market) or two (2) or more Radio Stations normal and usual transmission has not been resumed by the Closing Date as postponed pursuant to section (b) above, Purchaser may, pursuant to Section 14.1(e), terminate this Agreement by written notice to the Sellers' Agent. Notwithstanding the foregoing, however, Purchaser may, at its option, proceed to close this Agreement and complete the restoration and replacement of any damaged assets of the Station in question after the Closing Date, MMP shall deliver or assign to Purchaser all insurance or other proceeds received in connection therewith to the extent such proceeds are received by or payable to the Company or MMP and have not therefore been used in or committed to the restoration or replacement of the assets. (d) If before the Closing Date, due to damage or destruction of the assets the regular broadcast transmission of any Station (other than WMMP-TV in the Charleston, South Carolina market) in the normal and usual manner is interrupted for a period of seven (7) continuous days or more, MMP shall give prompt written notice thereof (the "Interruption Notice") to Purchaser. Upon receipt of the Interruption Notice, Purchaser shall have the right, in its sole and absolute discretion, by giving prompt written notice thereof to Seller and MMP within two (2) Business Days of the date of the Interruption Notice, to terminate this Agreement with the effect specified in Section 14.2(b) hereof. (e) Until the Closing Date, MMP will maintain and cause MMP to maintain the existing insurance coverages listed on Schedule 5.3l to the MRI Agreement on the Stations and each Station's assets. 9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and is not 38 relying on the specification of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agrees not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. 9.10. COLLECTION OF ACCOUNTS RECEIVABLE. (a) At the Closing, Sellers' Agents shall designate Purchaser as its agent solely for the purposes of collecting the MMP Accounts Receivable. Purchaser will collect the MMP Accounts Receivable during the period beginning on the Closing Date and ending on the 180th day after the Closing Date (the "Collection Period") with the same care and diligence Purchaser uses with respect to its own accounts receivable and hold all such MMP Accounts Receivable in trust for Sellers until remitted by Purchaser to the Indemnification Escrow Agent or the Collections Account pursuant hereto. Purchaser shall not make any referral or compromise of any of the MMP Accounts Receivable to a collection agency or attorney for collection and shall not settle or adjust the amount of any of the MMP Accounts Receivable without the written approval of Sellers' Agent. If, during the Collection Period, Purchaser receives monies from an account debtor of Purchaser that is also an account debtor of MMP with respect to any MMP Accounts Receivable, Purchaser shall credit the sums received to the oldest account due, except where an account is disputed by the account debtor as properly due, and the account debtor has so notified Purchaser in writing, in which case, payments received shall be applied in accordance with the account debtor's instructions; provided that upon resolution of such dispute if any amounts in dispute are received by Purchaser, Purchaser shall remit such amounts to the Indemnification Escrow Agent in accordance with the Indemnification Escrow Agreement up to the amount of the Additional Indemnification Amount Deposit and, thereafter, to the Collections Account. (b) On the ninetieth (90th) day after the Closing Date and on or before the fifth Business Day after the end of each full fifteen (15) day period thereafter during the Collection Period, Purchaser shall deliver to Sellers' Agents a list of the amounts collected by Purchaser before the end of such period with respect to the Accounts Receivable. On or before the fifth Business Day after the end of the Collection Period, Purchaser shall deliver to Sellers' Agents a list of all of the Accounts Receivable that remain uncollected. (c) Sellers' Agents shall establish and maintain during the Collection Period (and for as long after the Collection Period as Sellers deem appropriate) a bank account (the "Collections Account") at a commercial bank in Norfolk, Virginia, as 39 notified in writing by Sellers' Agents to Purchaser for the deposit of collections of the MMP Accounts Receivable in accordance with this Section 9.10. Sellers' Agents shall have sole disbursement authority over the Collections Account. On the ninetieth (90th) day after the Closing Date (or if such day is not a Business Day, on the next succeeding Business Day), Purchaser shall (i) deposit with the Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement all amounts collected with respect to any MMP Accounts Receivable, not to exceed the excess of $12,750,000 over the Initial Deposit (the "Additional Indemnification Amount Deposit"), and (ii) deposit in the Collections Account any other MMP Accounts Receivable collected by Purchaser as of such date. On and after the ninetieth (90th) day after the Closing Date until the expiration of the Collections Period, within five (5) Business Days of the end of each full fifteen (15) day period, Purchaser shall deposit all amounts collected with respect to the Accounts Receivable with the Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement until the total of all amounts deposited pursuant to the previous sentence and this sentence equals the Additional Indemnification Amount Deposit and, thereafter, in the Collections Account. Sellers' Agents shall be entitled to dispose of all amounts deposited in the Collections Account from time to time as it chooses, in its sole discretion, and Purchaser and the Indemnification Escrow Agent shall have no rights therein; provided, however, that Purchasers shall have no liability whatsoever to Sellers with respect to Sellers' Agents disposition of any amounts disbursed by Sellers' Agent from the Collections Account. (d) After the expiration of the Collection Period, Purchaser shall have no further obligation hereunder other than (1) so long as Sellers' Agents continue to maintain the Collections Account, to deposit in such account any payments with respect to any of the MMP Accounts Receivable that Purchaser subsequently receives, and (2) thereafter, to remit directly to Sellers' Agents any payments with respect to any of the MMP Accounts Receivable that Purchaser subsequently receives. (e) Any MMP Accounts Receivable remaining uncollected 180 days after the Closing Date shall be transferred to Sellers' Agents, together with all files concerning the collection or attempt to collect such MMP Accounts Receivable hereunder, and Purchaser shall thereafter have no further responsibility with respect thereto. (f) Purchaser shall have no right to setoff any amounts collected for MMP Accounts Receivable against any amounts owed to Purchaser by Seller; provided that this Section 9.10 shall not be deemed to limit the right of Purchaser to make claims against the Indemnification Amount in accordance with, and subject to, the terms and conditions of this Agreement and the Indemnification Escrow Agreement. 40 9.11. OTHER ACQUISITIONS. Without limiting any other provisions of this Agreement, prior to the Closing, without the prior written consent of Sellers' Agents, neither Purchaser nor any of its subsidiaries or any party acting directly or indirectly by or on behalf of any of them shall acquire or enter into any agreement to acquire a television station or radio station in any markets in which any Television Station or Radio Station currently broadcasts, if such acquisition would materially delay the granting of the FCC Application; provided, however, that nothing in this Section 9.11 shall be construed to preclude Purchaser proceeding to closing with respect to any transaction pending as of the date hereof. 9.12. PAYMENT OF CERTAIN LIABILITIES PRIOR TO CLOSING. Seller and MMP shall comply in all respects with their obligations under Section 2.2(b) of this Agreement. 9.13. RESERVED 9.14. VALUE APPRECIATION RIGHTS AND INCENTIVE FEES. Before Closing, MMP shall make all payments, discharge all obligations and terminate any and all Value Appreciation Rights Agreements ("VARS"), and the Tyler and Nacogdoches Management Incentive Agreements ("Incentive Agreements"), including, but not limited to, the VARS and Incentive Agreements listed on Schedules 5.3j and 5.3m to the MRI Agreement. 41 SECTION 10 INDEMNIFICATION 10.1. INDEMNIFICATION OF PURCHASER BY SELLER. (a) Subject to Section 10.3 hereof after the Closing Date, Seller shall indemnify and hold Purchaser harmless from and against any and all Losses, however incurred, which arise out of or result from any breach by Seller of any representation or warranty of Seller in Section 5.1 of this Agreement. (b) Subject to Section 10.3 hereof after the Closing Date, Seller shall indemnify and hold Purchaser harmless from and against any and all Losses, howsoever incurred, which arise out of or result from: (i) any breach of any representation or warranty of Seller set forth in Sections 5.2, 5.3 or 5.4 of this Agreement; provided, however, for purposes of this Section 10.1(b)(i), the representation set forth in Sections 5.2c and 5.3d will be deemed not to include the requirement of a MMP Material Adverse Effect; (ii) the material failure by Seller to perform any covenant of Seller contained herein; (iii) breaches by Seller, MMP or any of the FCC License Entities of other agreements and certificates specifically contemplated hereby; (iv) any and all Taxes of MMP and the FCC Licensee Entities (including any liability of MMP or the FCC Licensee Entities for Taxes of any other entity or person) for any Pre-Closing Tax Period except to the extent that such Taxes are specifically identified in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii); (v) [RESERVED] (vi) any liabilities under the Shareholder Settlement Agreements; or 42 (vii) the Closing Date Liabilities, to the extent the Closing Date Liabilities exceed (A) the aggregate cash equivalents and other cash items retained as provided by Section 2.2(b) and (B) payments made from the Indemnification Escrow as provided by Section 2.2(b)(iii). (c) [RESERVED] 10.2. INDEMNIFICATION OF SELLER BY PURCHASER. Subject to Section 10.3 hereof after the Closing, Purchaser shall indemnify and hold Seller harmless from and against any and all Losses, howsoever incurred, which arises out of or results from: (a) any breach by Purchaser of any representation or warranty of Purchaser set forth in Section 6 of this Agreement; or (b) the material failure by Purchaser to perform any covenant of Purchaser contained herein. (c) any and all Taxes of MMP and the FCC Licensee Entities (including any liability of MMP or the FCC Licensee Entities for Taxes of any other persons) for any Post-Closing Tax Period except to the extent that (i) such Taxes should have been but were not specifically identified in the Closing Date Liabilities, or (ii) such Taxes arise out of, result from or are attributable to a breach of any representation, warranty or covenant of Sellers set forth in this Agreement. 10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION OBLIGATIONS. Seller's obligation to indemnify Purchaser pursuant to Section 10.1 shall be subject to all of the following limitations: (a) Notwithstanding anything contained in this Agreement or applicable law to the contrary, Purchaser agrees that the payment of any claim (whether such claim is framed in tort, contract, or otherwise) made by Purchaser for indemnification hereunder subsequent to the Closing Date, for whatever reason, shall be limited to, and shall only be made from, the Indemnification Amount in accordance with the Indemnification Escrow Agreement and, except for claims against the Indemnification Amount, Purchaser waives and releases, and shall have no recourse against, Seller as a result of the breach of any representation, warranty, covenant or agreement of Seller contained herein, or otherwise arising out of or in connection with the transactions contemplated hereby or the operation of the Stations, and such indemnification shall be the sole and exclusive remedy for Purchaser with respect to any such claim for indemnification after the Closing Date; 43 provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Sellers' fraud. The Indemnification Escrow shall be disbursed in accordance with the Indemnification Escrow Agreement. (b) Anything in this Agreement or any applicable law to the contrary notwithstanding, it is understood and agreed by Purchaser that, other than with respect to Seller (but not including any partner, director, officer, employee, agent or Affiliate Seller (including any shareholder, director, officer, employee, agent or Affiliate of the Seller)) as expressly provided for in Section 10.1, no partner, director, officer, employee, agent or Affiliate of Seller (including any shareholder, director, officer, employee, agent or Affiliate of Seller) shall have (i) any personal liability to Purchaser as a result of the breach of any representation, warranty, covenant or agreement of Sellers contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Stations, or (ii) any personal obligation to indemnify Purchaser for any of Purchaser's claims pursuant to Section 10.1 and Purchaser waives and releases and shall have no recourse against any of such parties described in this Section 10.3(c) as a result of the breach of any representation, warranty, covenant or agreement of Seller contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Stations; provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Seller's fraud. (c) Notwithstanding any other provision of this Agreement to the contrary, Seller shall not be liable to Purchaser in respect of any indemnification hereunder until the aggregate amount of Losses of Purchaser under this Agreement, the MRI Agreement, the Investors Agreement and the Management Agreement exceeds Two Hundred Fifty Thousand Dollars ($250,000.00) (the "Basket Amount"), and then only to the extent of the excess of Losses over the amount of One Hundred Twenty Five Thousand Dollars ($125,000.00); provided, however, that this paragraph shall not apply to (i) payments pursuant to Section 2.2(b)(iii), (ii) indemnification pursuant to Section 10.1(b)(iv), 10.1(b)(vi), and 10.1(b)(vii) (to the extent indemnification pursuant to Section 10.1(b)(vii) relates to an item disclosed on a Schedule and/or set forth on the Estimate Certificate or the Accountant's Certificate), or (iii) indemnification pursuant to Sections 10.1(b)(i) for breaches of the representations and warranties set forth in Sections 5.2m, 5.3r, and 5.41. (d) In determining the amount of any Tax or other Loss for which indemnification is provided under this Agreement, such Loss shall be (i) net of any insurance recovery made by the indemnified party, (ii) reduced to take into account any net Tax benefit realized by the indemnified party arising from the deductibility of such Tax or Loss, and (iii) increased to take account of any net Tax cost incurred by the 44 indemnified party arising from the receipt of indemnification payments hereunder. Any indemnification payment hereunder shall initially be made without regard to this paragraph and shall be reduced to reflect any net Tax benefit or increased to reflect any net Tax cost only after the indemnified party has actually realized such benefit or cost. For purposes of this Agreement, an indemnified party shall be deemed to have "actually realized" a net Tax benefit or net Tax cost to the extent that, and at such time as, the amount of Taxes payable by such indemnified party is (x) reduced below the amount of Taxes that such indemnified party would have been required to pay but for the deductibility of such Tax or Losses, and (y) increased above the amount of Taxes that such indemnified party would have been required to pay but for the receipt of such indemnification payments. The amount of any reduction hereunder shall be adjusted to reflect any final determination (which shall include the execution of Form 870-AD or successor form) with respect to the indemnified party's liability for Taxes. Any indemnity payments under this Agreement shall be treated as an adjustment to the Purchase Price for Tax purposes, unless a final determination with respect to the indemnified party or any of its affiliates causes any such payment not to be treated as an adjustment to the Purchase Price. (e) No claim for indemnification for Losses shall be made after expiration of the applicable period set forth in Section 7.1 hereof. (f) Anything to the contrary in this Section 10.3 notwithstanding, the terms, conditions and limitations set forth in this Section 10.3 do not apply to or limit Purchaser's rights under Section 14.2. 10.4. NOTICE OF CLAIM; DEFENSE OF ACTION. (a) An indemnified party shall promptly give the Sellers' Agent notice of any matter which an indemnified party has determined has given or could give rise to a right of indemnification under this Agreement, stating the nature and, if known, the amount of the Losses, and method of computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right to indemnification is claimed or arises; provided that the failure of any party to give notice promptly as required in this Section 10.4 shall not relieve any indemnifying party of its indemnification obligations except to the extent that such failure materially prejudices the rights of such indemnifying party. The indemnified party shall give continuing notice promptly thereafter of all developments coming to Sellers' Agent's attention materially affecting any matter relating to any indemnification claims. 45 (b) Except as otherwise provided in Section 10.5, the obligations and liabilities of an indemnifying party under this Section 10 with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Section 10, shall be governed by and contingent upon the following additional terms and conditions: (i) With respect to third party claims, promptly after receipt by an indemnified party of notice of the commencement of any action or the presentation or other assertion of any claim which could result in any indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified party shall give prompt notice thereof to Sellers' Agent and the indemnifying part(ies) shall be entitled to participate therein or, to the extent that it desires, assume the defense thereof with its own counsel. (ii) If the indemnifying part(ies) elects to assume the defense of any such action or claim, the indemnifying part(ies) shall not be liable to the indemnified party for any fees of other counsel or any other expenses, in each case incurred by such indemnified party in connection with the defense thereof. (iii) The indemnifying part(ies) shall be authorized, without consent of the indemnified party being required, to settle or compromise any such action or claim, provided that such settlement or compromise includes an unconditional release of the indemnified party from all liability arising out of such action or claim. (iv) Whether or not an indemnifying part(ies) elects to assume the defense of any action or claim, the indemnifying part(ies) shall not be liable for any compromise or settlement of any such action or claim effected without its consent, such consent not to be unreasonably withheld. (v) The parties agree to cooperate to the fullest extent possible in connection with any claim for which indemnification is or may be sought under this Agreement, including, without limitation, making available all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably requested by the other party. 10.5 TAX CONTESTS. ------------- (a) If any party receives written notice from any Taxing Authority of any Tax Proceeding with respect to any Tax for which the other party is obligated to provide indemnification under this Agreement, such party shall give prompt written notice thereof to the other party; provided, however, that the failure to give such notice shall not affect the indemnification provided hereunder except to the extent that the failure to give such notice materially prejudices the indemnifying party. 46 (b) Seller, acting through Sellers' Agents, shall have the right, at its own expense, to control and make all decisions with respect to any Tax Proceeding relating solely to Taxes of Seller for Taxable Periods ending on or before the Closing Date; provided, that Purchaser and counsel of its own choosing shall have the right, at Purchaser's own expense, to participate fully in all aspects of the prosecution or defense of such Tax Proceeding; and provided further that Seller shall not settle any such Tax Proceeding without the prior written consent of Purchaser if such settlements could increase the past, present or future Tax liability of Purchaser or any of its Affiliates, or for any Post-Closing Tax Period by an amount greater than $25,000. (c) RESERVED (d) If Seller, acting through Sellers' Agents, does not exercise its right to assume control of or participate in any Tax Proceeding as provided under this Section 10.5, Purchaser may, without waiving any rights to indemnification hereunder, defend or settle the same in such manner as it may deem appropriate in its sole and absolute discretion. (e) Purchaser shall control all Tax Proceedings relating to Taxes or Tax Returns of MMP and the FCC Licensee Entities. In the case of Tax Proceedings relating solely to Taxable Periods of MMP ending on or before the Closing Date and Straddle Periods of MMP, Purchaser shall keep Sellers' Agents fully informed as to the status of any such Tax Proceeding and shall not settle such a Tax Proceeding without the prior written consent of Sellers' Agents, which consent shall not be unreasonably withheld; provided that Sellers' Agents' consent to a settlement shall only be required if such settlements could increase Seller's Taxes or Taxes for which Seller has indemnification responsibility hereunder by an amount greater than $25,000. (f) In the event that the provisions of this Section 10.5 and the provisions of Section 10.4(b) conflict or otherwise each apply by the terms, this Section 10.5 shall exclusively govern all matters concerning Taxes. 47 SECTION 11 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE - ----------------------------------------------------------- 11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The obligation of Purchaser to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Seller shall have complied in all material respects with its agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Seller contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Purchaser shall have received a certificate of one of Sellers' Agents, dated as of the Closing Date and signed by Sellers' Agent, certifying as to the fulfillment of the condition set forth in this Section 11.1(a) ("Sellers' Bring-Down Certificate"). (b) No statute, rule or regulation, or order of any court or administrative agency shall be in effect which restrains or prohibits Purchaser from consummating the transactions contemplated hereby and no action or proceeding shall be pending wherein an unfavorable ruling would affect any right to own the Assets or the assets of the Station. (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) All consents identified on Schedules 5.2h hereto and Schedules 5. 3e and 5.3m to the MRI Agreement as required consents shall have been received. (e) The Final Order approving the applications for transfer of control of the FCC Licenses (other than the MMP II Licenses) shall have been obtained. All the material conditions contained in the Final Order required to be satisfied on or prior to the Closing Date shall have been duly satisfied and performed. Notwithstanding the foregoing, other than conditions relating the broadcast industry generally, if the consent of the FCC is conditional or qualified in any manner that has a material adverse effect on Purchaser or requires Purchaser or any of its subsidiaries to divest any television or radio station owned, operated or programmed by Purchaser or any of its subsidiaries. Purchaser may, nevertheless, in its sole discretion, require the consummation of the transactions contemplated by this Agreement, but shall not be required to do so. 48 (f) Seller shall have delivered to Purchaser at the Closing each document required by Section 12.1 hereof. (g) Since the date of this Agreement through the Closing Date, there shall not have been either a Material Adverse Effect with respect to the Assets or a MMP Material Adverse Effect with respect to the business, operations, properties, assets, or condition of MMP, and no event shall have occurred or circumstance exist that reasonably could be expected to result in either a Material Adverse Effect or an MMP Material Adverse Effect. (h) The transfer of the FCC Licenses for Television Stations WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, to MMP II and the distribution of MMP II to MTC shall have occurred pursuant to the Assignment and Assumption Agreement and the Distribution Agreement substantially in the form attached hereto as Exhibit C, and MMP and MMP II shall have entered into one or more Time Brokerage Agreements generally in the form (subject to such revisions, additions and deletions as determined by counsel to MMP II and Purchaser prior to the Closing) attached hereto as Exhibit D. (i) The closings under the Investors Agreement, the MRI Agreement and the MTC Agreement shall have occurred or will occur simultaneously with the Closing. (j) Seller or MMP, as the case may be, shall have complied with its obligations under Section 9.12. 11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER. The obligation of Seller to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Purchaser shall have complied in all material respects with its agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Purchaser contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Seller shall have received a certificate of Purchaser, dated as of the Closing Date and signed by an officer of Purchaser, certifying as to the fulfillment of the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down Certificate"). (b) No statute, rule or regulation or order of any court or administrative agency shall be in effect which restrains or prohibits Seller from consummating the 49 transactions contemplated hereby. (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) The issuance by the FCC of a Final Order approving the applications for transfer of control of the FCC Licenses contemplated by this Agreement shall have occurred, and there shall have been duly satisfied and performed on or prior to the Closing Date all the material conditions contained in the Final Order required to be so satisfied; provided, however, Purchaser, in its sole discretion, may waive the necessity of a "Final Grant" by the FCC and close following an "Initial Grant". (e) Purchaser shall have delivered to Seller at the Closing the Purchase Price and each document required by Section 12.2 hereof. (f) The closings under the Investors Agreement, the MRI Agreement and the MTC Agreement shall have occurred or occur simultaneously with the Closing. SECTION 12 DELIVERIES AT THE CLOSING 12.1. DELIVERIES BY SELLER. At the Closing, Seller will deliver or cause to be delivered at the Closing to Purchaser: (a) Seller's Bring-Down Certificate; (b) a legal opinion of Clark & Stant, P.C., counsel to Seller and MMP substantially in the form attached as Exhibit E hereto; (c) a legal opinion of counsel to the FCC Licensee Entities in the form attached hereto as Exhibit F; (d) a bill of sale, assignment and other transfer documents, dated as of the Closing Date and executed by the Seller, transferring the Assets to Purchaser; (e) [RESERVED]; (f) a certificate as to the existence of Seller issued by the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; 50 (g) a certificate as to the existence and good standing of MMP issued by the Secretary of the State Corporation Commission of the Commonwealth of Virginia not more than five (5) Business Days before the Closing Date and certificates issued by the appropriate governmental authorities in each jurisdiction in which MMP is qualified to do business and a certificate as to the existence for each of the FCC Licensee Entities of the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; (h) receipt for Purchase Price; (i) [RESERVED]; (j) the certificate(s) required by Section 8.6; (k) a copy of any instrument evidencing any consents received; (l) the Indemnification Escrow Agreement duly executed by Seller and Seller's Agent; (m) a copy of any instrument evidencing any consent received, including, but not limited to, estoppel certificates from MMP's landlords with respect to the Real Property; (n) the certificate required by Section 2.2(b)(i); (o) the Estimate Certificate; (p) the amendments to the LMAs in a form reasonably satisfactory to Purchaser duly executed by the necessary parties thereto; (q) the amendment to the MMP operating agreement in a form reasonably satisfactory to Purchaser as contemplated by Section 12.l(r) of the MTC Agreement; 51 (r) the covenants not to compete and solicit duly executed by A. E. Loving, Jr., John A. Trinder and Charles A. McFadden in a form reasonably satisfactory to Purchaser; and (s) such other documents as Purchaser shall reasonably request; 12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be delivered at the Closing to Seller, the Disbursing Agent or the Indemnification Escrow Agent, as the case may be: (a) Purchaser's Bring-Down Certificate; (b) a legal opinion of Thomas & Libowitz, P.A., counsel to Purchaser, substantially in the form attached as Exhibit G hereto; (c) the Purchase Price as required pursuant to Section 3.1 hereof; (d) the Indemnification Escrow Agreement duly executed by Purchaser; (e) a certificate as to the existence and good standing of the Purchaser issued by the Maryland Department of Assessments and Taxation of the State of Maryland dated as of the Closing Date; (f) one or more fully executed Time Brokerage Agreements as negotiated pursuant to Section 11.1(h) hereof; and (g) such other documents as Seller shall reasonably request. SECTION 13 EXPENSES -------- Except as provided in Sections 9.4 and 9.5, each party will pay its own fees, expenses, and disbursements and those of its counsel in connection with the subject matter of this Agreement (including the negotiations with respect hereto and the preparation of any documents) and all other costs and expenses incurred by it in the performance and compliance with all conditions and obligations to be performed by it pursuant to this Agreement or as contemplated hereby. 52 SECTION 14 TERMINATION 14.1 TERMINATION. This Agreement may be terminated: (a) At any time by mutual written consent of Purchaser and Seller; (b) By either Purchaser or Seller, if the terminating party is not in default or breach in any material respect of its obligations under this Agreement, if the Closing hereunder has not taken place on or before October 31, 1998, except where the Closing has been postponed pursuant to the provisions of Section 9.8, in which case the applicable date shall be upon the expiration of the period referred to in Section 9.8(b) (the "Termination Date"); (c) by Seller, if Seller's not in default or breach in any respect of their obligations under this Agreement, if all of the conditions in Section 11.2 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.8); (d) by Purchaser, if Purchaser is not in default or breach in any material respect of its obligations under this Agreement, if all of the conditions set forth in Section 11.1 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.8); (e) by Purchaser, pursuant to Section 9.8. 14.2 PROCEDURE AND EFFECT OF TERMINATION. (a) In the event of termination of this Agreement by either or both Purchaser and/or Seller pursuant to Sections 9.8 or 14.1 hereof, prompt written notice thereof shall forthwith be given to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any of the parties hereto, but subject to and without limiting any other rights of the parties specified herein in the event a party is in default or breach in any material respect of its obligations under this Agreement. If this Agreement is terminated as provided herein, all filings, applications and other submissions relating to the transactions contemplated hereby as to which termination has occurred shall, to the extent practicable, be withdrawn from the agency or other Person to which such filing is made. 53 (b) If this Agreement is terminated pursuant to Section 14.1(d), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser and Purchaser shall have the right to pursue all remedies available hereunder at law or in equity, including, without limitation, the right to seek specific performance and/or actual monetary damages, but excluding consequential and incidental damages. In recognition of the unique character of the property to be sold hereunder, and the damages which Purchaser will suffer in the event of a termination pursuant to the foregoing Sections of this Agreement, Seller hereby waives any defense that Purchaser has an adequate remedy at law for the breach of this Agreement by Seller. (c) If this Agreement is terminated pursuant to Section 14.1(c) and Purchaser shall be in breach in any material respect of its representations, warranties, covenants, agreements, or obligations set forth in this Agreement, then and in that event, Seller shall have the right to retain the amount delivered by Purchaser pursuant to Section 3.1(1) as liquidated damages, and as the sole and exclusive remedy of Seller as a consequence of Purchaser's default (which aggregate amount the parties agree is a reasonable estimate of the damages that will be suffered by Seller as a result of the default by Purchaser and does not constitute a penalty), the parties hereby acknowledging the inconvenience and nonfeasability of otherwise obtaining inadequate remedy. (d) If this Agreement is terminated pursuant to Sections 14.1(a), 14.1(b) and 14.1(e), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser. (e) A notice of termination made under any provision of Section 14.1 of this Agreement shall be deemed to be a notice of termination under the termination provisions of the Investor Agreement, the MTC Agreement and the MRI Agreement. (f) In the event of a default by either party that results in a lawsuit or other proceeding for any remedy available under this Agreement, the prevailing party, to the extent it is the prevailing party, shall be entitled to reimbursement from the other party of its reasonable legal fees and expenses, whether incurred in arbitration, at trial, or on appeal. SECTION 15 NOTICES ------- All notices, requests, consents, payments, demands, and other communications required or contemplated under this Agreement shall be in writing and (a) personally delivered or sent via telecopy (receipt confirmed), or (b) sent by Federal Express or other reputable overnight delivery service (for next Business Day delivery), shipping prepaid, as 54 follows: To Purchaser: SINCLAIR COMMUNICATIONS, INC. ------------ 2000 W. 41st Street Baltimore, Maryland 21211 Attention: David D. Smith Telecopy: (410) 467-5043 Telephone: (410) 662-1008 with copies Sinclair Communications, Inc. (which shall not constitute 2000 W. 41st Street notice) to: Baltimore, Maryland 21211 Attention: General Counsel Telecopy: (410) 662-4707 Telephone: (410) 662-1422 and Thomas & Libowitz, P.A. Suite 1100 100 Light Street Baltimore, Maryland 21202 Attention: Steven A. Thomas Telecopy: (410) 752-2046 Telephone: (410) 752-2468 To Sellers' Agents: Anthony R. Ignaczak ------------------ Quad-C, Inc. 230 East High Street Charlottesville, Virginia 22902 Telecopy: (804) 979-1145 Telephone: (804) 979-9227 Allen B. Rider, III Colonnade Capital, L.L.C. 13th Floor 901 East Byrd Richmond, Virginia 23219 Telecopy: (804) 782-6606 Telephone: (804) 782-3512 55 Stephen W. Burke Clark & Stant, P.C. Suite 900 One Columbus Center Virginia Beach, Virginia 23462 Telecopy: (757) 473-0395 Telephone: (757) 499-8800 or to such other Persons or addresses as any Person may request by notice given as aforesaid. Notices shall be deemed given and received at the time of personal delivery or completed telecopying, or, if sent by Federal Express or such other overnight delivery service one Business Day after such sending. SECTION 16 SELLERS' AGENTS --------------- 16.1. SELLERS' AGENTS. Seller hereby irrevocably appoints Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called the "Sellers' Agents") as his, her or its agent and attorney-in-fact to take any action required or permitted to be taken by Seller under the terms of this Agreement, including, without limiting, the generality of the foregoing, the payment of expenses relating to the transactions contemplated by the Agreement, and the right to waive, modify or amend any of the terms of this Agreement in any respect, whether or not material, and agrees to be bound by any and all actions taken by the Sellers' Agents on his or its behalf. Any action to be taken by the Sellers' Agents shall be unanimous. In the event of the death, incapacity or liquidation of any of Sellers' Agents, such person or entity shall not be replaced, and the remaining Sellers' Agents shall continue in that capacity. Seller agrees to indemnify the Sellers' Agents from and against and in respect of any and all liabilities, damages, claims, costs, and expenses, including, but not limited to attorneys' fees, arising out of or due to any action by them as the Sellers' Agents and any and all actions, proceedings, demands, assessments, or judgments, costs, and expenses incidental thereto, except to the extent that the same result from bad faith or gross negligence on the part of the Sellers' Agents. Purchaser shall be entitled to rely exclusively upon any communications given by the Sellers' Agents on behalf of Seller, and shall not be liable for any action taken or not taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to disregard any notices or communications given or made by Seller unless given or made through the Sellers' Agents. SECTION 17 56 MISCELLANEOUS 17.1. HEADINGS. The headings contained in this Agreement (including, but not limited to, the titles of the Schedules and Exhibits hereto) have been inserted for the convenience of reference only, and neither such headings nor the placement of any term hereof under any particular heading shall in any way restrict or modify any of the terms or provisions hereof. Terms used in the singular shall be read in the plural, and vice versa, and terms used in the masculine gender shall be read in the feminine or neuter gender when the context so requires. 17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits attached to or referenced in this Agreement constitute an integral part of this Agreement as if fully rewritten herein. 17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. 17.4. ENTIRE AGREEMENT. This Agreement, the Investors Agreement, the MTC Agreement, the MRI Agreement and the FCC Licensee Transfer Agreement, the Annexes, Schedules and Exhibits and the documents to be delivered hereunder and thereunder constitute the entire understanding and agreement between the parties hereto concerning the subject matter hereof. All negotiations and writings between the parties hereto are merged into this Agreement, the Investors Agreement, the MTC Agreement, the MRI Agreement, the FCC Licensee Transfer Agreement, and there are no representations, warranties, covenants, understandings, or agreements, oral or otherwise, in relation thereto between the parties other than those incorporated herein or to be delivered hereunder. 17.5. GOVERNING LAW. This Agreement is to be delivered in and should be construed in accordance with and governed by the laws of the Commonwealth of Virginia without giving effect to conflict of laws principles. 17.6. MODIFICATION. This Agreement cannot be modified or amended except in writing signed by each of the Purchaser and Sellers' Agent. 17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights and obligations hereunder shall be assigned, delegated, sold, transferred, sublicensed, or otherwise disposed of by operation of law or otherwise, without the prior written consent of each of the other parties hereto; provided, however, that Purchaser may assign its rights and obligations hereunder to one or more subsidiaries so long as Purchaser is not relieved of its 57 obligations hereunder; and provided further that any change of control in respect of Purchaser's parent, SBGI, shall not require the consent of Sellers. In the event of such permitted assignment or other transfer, all of the rights, obligations, liabilities, and other terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against, the respective successors and assigns of the parties hereto, whether so expressed or not. 17.8. WAIVER. Any waiver of any provision hereof (or in any related document or instrument) shall not be effective unless made expressly and in a writing executed in the name of the party sought to be charged. The failure of any party to insist, in any one or more instances, on performance of any of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or of the future performance of any such term, covenant, or condition, but the obligations of the parties with respect hereto shall continue in full force and effect. 17.9. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and if any part of any provision is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, such provision may be changed, consistent with the intent of the parties hereto, to the extent reasonably necessary to make the provision, as so changed, legal, valid, binding, and enforceable. If any provision of this Agreement is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, and if such provision cannot be changed consistent with the intent of the parties hereto to make it fully legal, valid, binding and enforceable, then such provisions shall be stricken from this Agreement, and the remaining provisions of this Agreement shall not in any way be affected or impaired, but shall remain in full force and effect. 17.10. ANNOUNCEMENTS. From the date of this Agreement, all further public announcements relating to this Agreement or the transactions contemplated hereby will be made only as agreed upon jointly by the parties hereto, except that nothing herein shall prevent Seller or any Affiliate thereof or Purchaser from making any disclosure in connection with the transactions contemplated by this Agreement if required by applicable law or otherwise as a result of its, or its Affiliate's, being a public company, provided that prior notice of such disclosure is given to the other party hereto. 17.11. SPECIFIC PERFORMANCE. Sellers acknowledges that Purchaser will have no adequate remedy at law if Seller fails to perform its obligation to consummate the sale of Stock contemplated under this Agreement. In such event, Purchaser shall have the right, in addition to any other rights or remedies it may have, to specific performance of this Agreement. 58 17.12 FEES AND EXPENSES. Except as otherwise provided in this Agreement, each party shall pay their own expenses incurred in connection with the authorization, preparation, execution, and performance of this Agreement and the exhibits, Schedules, and other documentation, including all fees and expenses of counsel, accountants, and each party shall be responsible for all fees and commissions payable to any finder, broker, adviser, or other similar Person retained by or on behalf of such party; provided, however, that all transfer taxes, recordation taxes, sales taxes, and document stamps in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Seller and all other filing fees (including all FCC and H-S-R Act filing fees), and other charges levied by any governmental entity in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Seller. Purchaser hereby waives compliance with the provisions of any applicable bulk transfer law. 17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 17.14 INTERPRETATION. The Purchaser and Seller acknowledge and agree that the preparation and drafting of this Agreement and the Exhibits hereto are the result of the efforts of all parties to this Agreement and every covenant, term, and provision of this Agreement shall be construed according to its fair meaning and shall not be construed against any particular party as the drafter of such covenant, term, and/or provision. The Purchaser and Seller agree that this Agreement is to be construed in a manner consistent with the terms of the Investors Agreement, the MTC Agreement and the MRI Agreement. [SIGNATURE PAGES TO FOLLOW --REST OF PAGE LEFT INTENTIONALLY BLANK] 59 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date and year first written above. MAX MANAGEMENT LLC, a Virginia limited liability company By ________________________________ its __________________________ SINCLAIR COMMUNICATIONS, INC., a Maryland corporation By ________________________________ its __________________________ 60 ANNEX 1 DEFINITIONS As used in the attached Asset Purchase Agreement, the following terms shall have the corresponding meaning set forth below: "Affiliate" of, or a Person "Affiliated" with, a specified Person, means a Person who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. "Agreement" has the meaning set forth in the preamble. "Allocable Portion" shall mean 0% in the case of each of Investors and MRI, 96.470% in the case of MTC and 3.530% in the case of Seller. "Assets" has the meaning set forth in the Recitals. "Basket Amount" has the meaning set forth in Section 10.3(c). "Benefit Arrangement" shall mean any benefit arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Benefit Plan, including without limitation, employment agreements, severance agreements, executive compensation arrangements, including but not limited to stock options, restricted stock rights and performance unit awards, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discounts, employee loans, employee banking privileges, any plans subject to Section 125 of the code, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. "Benefit Plan" shall have the meaning given in Section 3(3) of ERISA. 61 "Broadcast Time Sales Agreement" shall mean all contracts and agreements pursuant to which MMP has sold commercial air time on the Stations for cash. "Business" means the business of owning and operating the Stations. "Business Day" means any day on which banks in New York City are open for business. "Cash Price" shall mean the excess of $252 million over the Funded Debt immediately prior to the Closing. "CERCLA" has the meaning set forth in Section 5.3q of the Agreement. "Closing" has the meaning set forth in Section 4 of the Agreement. "Closing Date Liabilities" has the meaning set forth in Section 2.2(b) of the Agreement. "Closing Date Tax Liabilities" shall have the meaning set forth in Section 2.2(b)(iv) of this Agreement. "Closing Date" has the meaning set forth in Section 4 of the Agreement. "Closing Date Estimated Accounts Receivable" has the meaning of an amount equal to the Sellers' good faith estimate of Accounts Receivable of MMP as of the Closing Date, which have been outstanding for no more than 120 days, as set forth in the Certificate of Sellers' Agent delivered to Purchaser five (5) days before the Closing Date. "Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time. "Company" refers to Seller in the Agreement. "Company Benefit Arrangement" shall mean any Benefit Arrangement sponsored or maintained by the Company or with respect to which the Company has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former directors, employees, or agents of the Company. 62 "Company Plan" shall mean, as of the Closing Date, any Benefit Plan for which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Benefit Plan maintained by the Company or to which the Company is obligated to make payments, in each case with respect to any present or former employees of the Company. Company Plan shall include any Qualified Plan terminated within the preceding six years. "Consents" means the consents, permits, or approvals of government authorities and other third parties necessary to lawfully and validly transfer the Stock and the Station assets to Purchaser to maintain the validity and effectiveness (any default or violation of the terms thereof) of any Material Contract and any licenses (including, without limitation, the FCC Licenses) to be transferred to Purchaser, or otherwise to consummate the transactions contemplated by this Agreement. "Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. "Disbursing Agent" means Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke. "Disbursement Agreement" means that certain Disbursement Agreement dated not later thirty (30) days prior to the Closing, among the Disbursing Agent and the Seller. "Environment" means any surface or subsurface physical medium or natural resource, including air, land, soil (surface or subsurface), surface waters, ground waters, wetlands, stream and river sediments, rock and biota. "Environmental Laws" means any federal, state, or local law, legislation, rule, regulation, ordinance or code of the United States or any subdivision thereof relating to the injury to, or the pollution or protection of, human health and safety or the Environment. "Environmental Liability" means any loss, liability, damage, cost or expense arising under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 63 "ERISA Affiliate" shall mean any Person that together with the Company or MMP, as applicable, would be or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any general partnership of which the Company or MMP, as applicable, is or has been a general partner. "Estimate Certificate" shall have the meaning set forth in Section 2.2(b)(i). "Excluded Assets" shall have the meaning set forth in Section 2.2. "FCC" has the meaning set forth in the recitals to the Agreement. "FCC Application" means the applications requesting approval and consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP II Transfers, and (ii) the transfer of control of the FCC Licenses to Purchaser or its assignee for those Television Stations and Radio Stations not included in the MMP II Transfers. "FCC Licenses" means those licenses, permits and authorizations issued by the FCC to the FCC Licensee Entities in connection with the business and operations of the Stations (together with any renewals, extensions, modifications or additions thereto between the date of this Agreement and the Closing Date. "FCC Licensee Entities" shall have the meaning set forth in the Recitals. "FCC Rules and Regulations" has the meaning set forth in Section 5.3h of the Agreement. "Final Order" means action by the FCC as to which no further steps (including those of appeal or certiorari) can be taken in any action or proceeding to review, modify or set the determination aside, whether under Section 402 or 405 of the Communications Act, or otherwise. "Funded Debt" means indebtedness of MMP for borrowed money (including capitalized lease obligations), including any and all fees, costs or other payments associated with its payoff or retirement, other than (i) any indebtedness due after the Closing Date with respect to program contract liabilities, and (ii) Closing Date Liabilities. "GAAP" means generally accepted accounting principles. "Hazardous Substances" means petroleum, petroleum products, petroleum-derived substances, radioactive materials, hazardous wastes, polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any materials containing asbestos, and any materials 64 or substances regulated or defined as or included in the definition of "hazardous substances, "hazardous materials," "hazardous constituents," "toxic substances," "pollutants, "pollutants," "contaminants" or any similar denomination intended to classify substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or reactivity under any Environmental Laws. "H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Initial Deposit" means $12,750,000 less an amount equal to the lesser of $6,375,000 or ninety percent (90%) of the Closing Date Estimated Accounts Receivable. "Initial Grant" means the date of the publication of the FCC "Public Notice" announcing the grant of the "Assignment Applications" for the FCC License to be transferred hereunder which contain no conditions materially adverse to Purchaser. The term "Public Notice" and "Assignment Applications" have the same meaning herein as are generally given the same under existing FCC rules, regulation and procedures. "Intellectual Property" means the patents, patent applications, trademark registrations and applications therefor, service mark registrations and applications therefor, copyright registrations and applications therefor and trade names that are (i) owned by the Company and (ii) material to the continued operation of the Business. "IRS" means the Internal Revenue Service. "Incentive Agreements" has the meaning set forth in Section 9.14. "Indemnification Amount" means $12,750,000.00 deposited or collected pursuant to the Indemnification Escrow Agreement. "Indemnification Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. "Indemnification Escrow" has the meaning set forth in Section 3.1 of the Agreement. "Investors Agreement" has the meaning set forth in the Recitals. "Investors" has the meaning set forth in the Recitals. 65 "Knowledge or knowledge" shall mean with respect to Seller, MMP, MTR and the FCC Licensee Entities the actual knowledge (without any requirement of inquiry except as otherwise provided in the Agreement) of A. E. Loving, Jr., John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb, David J. Wilhelm and Jacquelyn D. Smullen, the general managers of the Stations, the managers and officers of MMP, and the officers and directors of Seller. "LMA Stations" shall have the meaning set forth in the Recitals. "Losses" means any loss, liability, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) but exclusive of incidental or consequential damages. "MMP Accounts Receivable" has the meaning given in Section 5.3s. "MMP's Benefit Arrangements" means any Benefit arrangement sponsored or maintained by MMP or by the FCC Licensee Entities or with respect to which MMP or the FCC Licensee Entities has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former director, employees, or agent of MMP or the FCC Licensee Entities. "MMP's Benefit Plan" means, as of the Closing Date, any Benefit Plan for which MMP or the FCC Licensee Entities is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Benefit Plan maintained by MMP or the FCC Licensee Entities or which MMP or the FCC Licensee Entities is obligated to make payments, in each case with respect to any present or former employees of MMP or the FCC Licensee Entities. MMP's Benefit Plan shall include any Qualified Plan terminated within the preceding six (6) years. "MMP II FCC Applications" means the application requesting the approval and consent of the FCC to the transfer of control of Television Stations WKEF-TV and WEMT-TV from MMP to MTC. "MMP Financial Statements" means the balance sheet of MMP at December 31, 1996, the audited consolidated statements of operations and cash flows for the year then ended, all notes thereto and the independent auditor's audit report thereon, together with the unaudited balance sheet of MMP at September 30, 1997 and the unaudited statement of operations for the nine (9) months then ended. 66 "MMP Material Adverse Effect" shall mean a material adverse effect on the business, or financial condition of any Television Station with the exception of WMMP-TV in the Charleston, South Carolina market or the Radio Stations taken as a whole. "MMP Real Property" means all real property owned or leased by MMP. "MRI" shall have the meaning set forth in the Recitals. "MRI Agreement" shall have the meaning set forth in the Recitals. "MTR" has the meaning set forth in the Recitals. "Material Adverse Effect" shall mean a material adverse effect on the business, or financial condition of the Company taken as a whole. "Material Contract" means all agreements to which Seller or MMP is a party or by or to which it or its assets or properties are bound, except: (i) agreements for the cash sale of advertising time with a term of less than six months, (ii) agreements cancelable on no more than 90 days' notice without material penalty, or (iii) agreements which are otherwise immaterial to the Business and the Station. "Permitted Encumbrances" shall mean liens for taxes not yet due and payable; landlord's liens; liens for property taxes not delinquent; statutory liens that were created in the ordinary course of business; restrictions or rights required to be granted to governmental authorities or otherwise imposed by governmental authorities under applicable law; zoning, building or similar restrictions relating to or effecting property, including leasehold interests; all liens of record as of the date of this Agreement, but only if such liens do not materially effect the ownership or use of the MMP Real Property or leasehold interests and real property owned by others and operating leases for personal property and leased interests in property leased to others; liens and encumbrances on the MMP Real Property, currently of record as of the date hereof, and other liens or encumbrances on the MMP Real Property, in any case that individually or in the aggregate do not materially effect the current use and enjoyment thereof in the operation of any Station. "Person" means a natural person, a governmental entity, agency or representative (at any level of government), a corporation, partnership, joint venture or other entity or association, as the context requires. "Pre-Closing Tax Period" means any Taxable Period or portion thereof that ends on or before the Closing Date. 67 "Post-Closing Tax Period" means any Taxable Period or portion thereof beginning after the Closing Date. "Pro Rata Share" shall mean 26.9433% in the case of Investors, 1.6167% in the case of Seller, 26.6519% in the case of MRI, and 44.7881% in the case of MTC. "Purchase Price" shall mean the sum of (a) the Pro Rata Share of the excess of the Cash Price over 40% the Step-Up, plus (b) the Allocable Portion of 40% of the Step-Up. "Purchaser" has the meaning set forth in the preamble to the Agreement. "Purchaser's Bring-Down Certificate" has the meaning set forth in Section 11.2(a) of the Agreement. "Purchaser's Knowledge" means the actual knowledge of the officers of Purchaser. "Qualified Plan" shall mean any Company Plan or MMP Plan that meets, purports to meet, or is intended to meet the requirements of Section 401(a) of the Code. "RLLP" shall have the meaning set forth in the Recitals. "Radio Stations" shall have the meaning set forth in the Recitals. "Real Property" means any real property owned or leased by Seller. "Related Agreement" means any document delivered at the Closing and any contract which is to be entered into at the Closing or otherwise pursuant to this Agreement, including the Escrow Agreement. "Seller" has the meaning set forth in the preamble to the Agreement. "Seller's Agents" shall have the meaning set forth in Section 16.1. "Sellers' Bring-Down Certificate" has the meaning set forth in Section 11.1(a) of this Agreement. "Seller Interests" shall have the meaning set forth in Section 5.3t2q. 68 "Shareholder Settlement Agreements" shall have the meaning set forth in Section 2.2(b). "Step Up" shall mean the amount of Section 754 basis step-up, calculated as the present value (determined using an 8.0% discount rate over a 15-year period assuming straight line amortization) of 45.812% of the Cash Price minus (or plus in the case of a negative) the aggregate tax basis capital accounts of MTC and Seller in MMP immediately prior to the Closing. "Stations" has the meaning set forth in the recitals to the Agreement. "Stock" has the meaning set forth in the recitals to the Agreement. "Straddle Period" shall have the meaning set forth in Section 8.2 of this Agreement. "Tax" or "Taxes" means all taxes, including, but not limited to, income (whether net or gross), excise, property, sales, transfer, gains, gross receipts, occupation, privilege, payroll, wage, unemployment, workers' compensation, social security, occupation, use, value added, franchise, license, severance, stamp, premium, windfall profits, environmental (including taxes under Code Sec. 59A), capital stock, withholding, disability, registration, alternative or add-on minimum, estimated or other tax of any kind whatsoever (whether disputed or not) imposed by any Tax Authority, including any related charges, fees, interest, penalties, additions to tax or other assessments. "Tax Authority" means any federal, national, foreign, state, municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body or other authority exercising any taxing or tax regulatory authority. "Tax Liability" means any liability for a Tax. "Taxable Period" means any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any applicable statute, rule or regulation. "Tax Proceeding" means any audit, examination, claim or other administrative or judicial proceeding relating to Taxes or Tax Returns. "Tax Returns" means all returns, reports, forms, estimates, information returns and statements (including any related or supporting information) filed or to be filed with any Tax Authority in connection with the determination, assessment, collection or administration of any Taxes. 69 "Television Licensee" shall have the meaning set forth in the Recitals. "Television Stations" shall have the meaning set forth in the Recitals. "Termination Date" shall have the meaning set forth in Section 14.1(b). "Trade-out Agreements" shall mean all contracts and agreements (excluding program contracts) pursuant to which MMP has sold, traded or bartered commercial air time on the Stations in consideration for any property or services in lieu of or in addition to cash. "VARS" has the meaning set forth in Section 9.14. EX-10.61 7 EXHIBIT 10.61 ASSET PURCHASE AGREEMENT BY AND BETWEEN SINCLAIR COMMUNICATIONS, INC. AND MAX TELEVISION COMPANY MAX MEDIA PROPERTIES LLC AND MAX MEDIA PROPERTIES II LLC TABLE OF CONTENTS 1. DEFINITIONS................................................................3 2. SALE OF ASSETS/EXCLUDED ASSETS.............................................3 2.1. Sale of Assets.................................................3 2.2. Excluded Assets................................................3 3. PURCHASE PRICE.............................................................6 3.1. Payment........................................................6 3.2. Disbursing Agent...............................................6 4. CLOSING....................................................................6 5. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................7 5.1. RESERVED.......................................................7 5.2. Representations and Warranties as to the Company...............7 a. Organization and Good Standing........................7 b. RESERVED..............................................7 c. No Conflicts..........................................7 d. Financial Statements..................................8 e. Employee Benefit Plans................................9 f. Labor ...............................................11 g. Insurance............................................11 h. Material Contracts..................................12 i. Compliance with Laws.................................12 j. Litigation...........................................12 k. No Brokers...........................................12 l. Consents.............................................12 m. Tax Matters..........................................13 n. RESERVED.............................................15 o. Accounts Receivable..................................15 p. RESERVED.............................................15 q. Representations as to the Company Interests..........15 5.3. Representations and Warranties as to the MMP and the FCC Licensee Entities............................................15 a. Organization and Good Standing.......................16 b. Capitalization of MMP................................16 c. Organization and Capitalization of the FCC License Entities............................................16 d. No Conflicts.........................................17 e. Real Property........................................17 f. Personal Property....................................18 g. Financial Statements.................................18 h. FCC..................................................21 i. Intellectual Property................................21 j. Employee Benefit Plans...............................22 k. Labor................................................24 l. Insurance............................................25 m. Material Contracts...................................25 n. Compliance with Laws.................................25 o. Litigation...........................................26 p. Consents.............................................26 q. Environmental........................................26 r. Tax Matters..........................................27 s. Accounts Receivable..................................29 t. Representations as to MMP Interests..................30 5.4. Representations and Warranties as to MTR......................30 a. Organization and Good Standing.......................30 b. Capitalization.......................................30 c. No Conflicts.........................................31 d. Financial Statements.................................31 e. Employee Benefit Plans...............................33 f. Labor................................................33 g. Insurance............................................33 h. Material Contracts...................................33 i. Compliance with Laws.................................33 j. Litigation...........................................33 k. Consents.............................................34 l. Tax Matters..........................................34 m. Dividends............................................36 n. MTR Assets...........................................36 o. Representations as to MTR Interests..................36 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................36 6.1. Organization and Good Standing................................36 6.2. Execution and Effect of Agreement.............................37 6.3. No Conflicts..................................................37 6.4. Consents .....................................................37 6.5. Litigation....................................................37 6.6. No Brokers....................................................37 6.7. Purchaser Qualifications......................................38 7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES............38 7.1. Limitation; Survival..........................................38 8. TAX MATTERS...............................................................38 8.1. Section 338 Election..........................................38 8.2. Tax Returns...................................................39 8.3. Apportionment.................................................40 8.4. Cooperation in Tax Matters....................................40 8.5. Certain Taxes.................................................40 8.6. FIRPTA........................................................40 8.7. Section 754 Election..........................................40 8.8. Closing Date Actions..........................................41 9. ADDITIONAL COVENANTS AND UNDERTAKINGS.....................................41 9.1. Further Assurances and Assistance.............................41 9.2. Access to Information.........................................41 9.3. Conduct of Business Prior to Closing..........................42 9.4. H-S-R Act.....................................................45 9.5. FCC Application...............................................45 (c)FCC Applications to Transfer Certain FCC Licenses.....46 9.6. Books and Records.............................................46 9.7. Employees and Employee Benefits...............................46 9.8. Interruption of Broadcast Transmission........................47 9.9. Interpretation of Certain Provisions..........................48 9.10. Collection of Accounts Receivable.............................48 9.11. Other Acquisitions............................................50 9.12. Payment of Certain Liabilities Prior to Closing...............50 9.13. RESERVED......................................................50 9.14. Value Appreciation Rights and Incentive Fees..................50 10. INDEMNIFICATION..........................................................51 10.1. Indemnification of Purchaser by Sellers.......................51 10.2. Indemnification of Sellers by Purchaser.......................52 10.3. Limitations and Other Provisions Regarding Indemnification Obligation...................................................52 10.4. Notice of Claim Defense of Action.............................54 10.5 Tax Contests..................................................55 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE..............57 11.1. Conditions Precedent to the Obligation of Purchaser...........57 11.2. Conditions Precedent to the Obligation of Sellers.............58 12. DELIVERIES AT THE CLOSING................................................59 12.1. Deliveries by Sellers.........................................59 12.2. Deliveries by Purchaser.......................................61 13. EXPENSES.................................................................61 14. TERMINATION..............................................................62 14.1 Termination...................................................62 14.2 Procedure and Effect of Termination...........................62 15. NOTICES..................................................................64 16. SELLERS' AGENTS..........................................................65 16.1. Sellers' Agents...............................................65 17. MISCELLANEOUS............................................................66 17.1. Headings......................................................66 17.2. Schedules and Exhibits........................................66 17.3. Execution in Counterparts.....................................66 17.4. Entire Agreement..............................................66 17.5. Governing Law.................................................67 17.6. Modification..................................................67 17.7. Successors and Assigns........................................67 17.8. Waiver........................................................67 17.9. Severability..................................................67 17.10. Announcements.................................................68 17.11. Specific Performance..........................................68 17.12. Fees and Expenses.............................................68 17.13. Third Party Beneficiaries.....................................68 17.14. Interpretation................................................68 ANNEX 1 - DEFINITIONS ANNEX 2 - SELLERS EXHIBITS Exhibit A ......... Deposit Escrow Agreement Exhibit B ......... Indemnification Escrow Agreement Exhibit C ......... MMP II Assignment and Assumption Agreement Exhibit D ......... Time Brokerage Agreements Exhibit E ......... Opinion of Counsel, ......... Clark & Stant, P.A. Exhibit F ......... Opinion of Sellers' FCC Counsel Exhibit G ......... Opinion of Counsel, ......... Thomas & Libowitz, P.A. SCHEDULES 5.1a(ii) ......... Encumbrances of Stock 5.1a(vi) ......... Options and Agreements 5.1b ......... Share Brokers 5.1c ......... No Conflicts 5.2b ......... Capitalization 5.2c ......... Conflicts 5.2d ......... Financial Statements 5.2e ......... Employee Benefit Plans 5.2f ......... Labor 5.2g ......... Insurance 5.2h ......... Material Contracts 5.2i ......... Compliance with Laws 5.2j ......... Litigation 5.2k ......... Brokers 5.2l ......... Consents 5.2m(a) ......... Tax Matters 5.2m(c) ......... Tax Basis and Tax Elections 5.2q ......... Company Interest 5.3b ......... Capitalization 5.3d ......... Conflicts 5.3e ......... Real Property 5.3f ......... Personal Property 5.3g ......... Financial Statements 5.3h ......... FCC Licenses 5.3i ......... Intellectual Property 5.3j ......... Employee Benefit Plans 5.3k ......... Labor 5.3k(d) ......... Employee Terminations or Demands 5.3l ......... Insurance 5.3m ......... Material Contracts 5.3n ......... Compliance with Laws 5.3o ......... Litigation 5.3p ......... Consents 5.3q ......... Environmental Matters 5.3r(a) ......... Tax Matters 5.3r(c) ......... Tax Basis and Tax Elections 5.3t ......... Representations as to MMP Interests 5.4b ......... Capitalization 5.4d ......... Financial Matters 5.4h ......... Material Contracts 5.4l(a) ......... Tax Matters 5.4l(c) ......... Tax Basis and Tax Elections 5.4o ......... Representations as to MTR Interests 6.3 ......... Conflicts 6.4 ......... Consents 6.5 ......... Litigation 6.7 ......... Purchaser Qualifications 9.3(c) ......... Planned Asset Dispositions ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this _____ day of December, 1997, is entered into by and among Sinclair Communications, Inc., a Maryland corporation ("Purchaser"), Max Television Company, a Virginia corporation ("Seller"), and Max Media Properties LLC, a Virginia limited liability company ("MMP"). RECITALS: WHEREAS, Seller owns among other things 5,140,500 Class B Membership Units (out of a total 11,631,431 Membership Units) of MMP, 69% of the equity of MTR and a 2% limited partnership interests in the Television Licensees (as defined below) (the "Assets") ; and WHEREAS, Seller desires to sell, assign and transfer the Assets, and Purchaser desires to acquire the Assets, all on the terms described herein; WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into a Stock Purchase Agreement (the "MRI Agreement") to acquire all of the issued and outstanding shares of Max Radio Inc. ("MRI"). MRI is the owner of 31% of the equity of MTR Holding Corp., a Virginia corporation ("MTR"), 3,069,000 Class A Membership Units (out of a total 11,631,431 Membership Units) of MMP, and a 2% limited partnership interest in Radio License L.P., a Virginia limited partnership ("RLLP"), the holder of the FCC Licenses of the Radio Stations (as defined below); and WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into a Stock Purchase Agreement (the "Investors Agreement") to acquire all of the issued and outstanding shares of Max Investors, Inc., a Virginia corporation ("Investors"). Investors is the owner of 3,133,897 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into an Asset Purchase Agreement (the "Management Agreement") to acquire from Max Management LLC, a Virginia limited liability company ("Management"); 188,034 Class C Membership Units (out of a total of 11,631,431 Membership Units) of MMP and WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, MMP is the owner of the assets (other than the FCC Licenses) and operator of television stations WSYT-TV in the Syracuse, New York market, WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio market, WEMT- TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri and KETK-TV in the Tyler, Texas market (each a "Television Station" and collectively, the "Television Stations"); and WHEREAS, MMP is the owner of the assets (other than the FCC Licenses) and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina ("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro, North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG"; together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM, inVirginia Beach, Virginia ("WPTE"), and WFOG-FM, inSuffolk, Virginia ("WFOG"; together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio Station" and collectively, the "Radio Stations"); and WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky, pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA Stations" and for purposes of this Agreement, the LMA Stations, the Radio Stations and the Television Stations shall be collectively referred to as the "Stations"); and WHEREAS, MMP owns a 98% general partnership interest in RLLP; and WHEREAS, MMP owns a 98% general partnership interest in each of Max Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities LP"), Max Television of Charleston L.P. and Max Television of Tyler L.P. (each a "Television Licensee" and collectively, the "Television Licensees" and together with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a Television Station as indicated on Annex A hereto; and WHEREAS, the parties desire that, before the Closing and after receipt of any required approval of the FCC, MMP transfer all partnership interests it holds in Dayton LP and Tri-Cities LP to Max Media Properties II LLC, a newly-created Virginia limited liability company ("MMP II") (the "MMP II Transfers"); and WHEREAS, the parties desire that, after the MMP II Transfers, but before the Closing, MMP distribute to MTC all of the membership interests in MMP II; and WHEREAS, on the consummation of this Agreement, the MRI Agreement, the 2 Investors Agreement and the Management Agreement (collectively, the "Purchase Agreements"), Purchaser will own, directly or indirectly, all of the 11,631,431 Membership Units of MMP and all general and limited partnership interests in the FCC Licensee Entities, other than in Dayton LP and Tri-Cities LP (the "MMP II Licenses"); and WHEREAS, MMP holds certain assets more fully described below (the "Excluded Assets") that will not be acquired by Purchaser; and WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, the Assets. SECTION 1 DEFINITIONS As used in this Agreement, capitalized terms shall have the meaning specified in the text hereof or on Annex 1 which is incorporated herein by reference, which meaning shall be applicable to both the singular and plural forms of the terms defined. SECTION 2 SALE OF ASSETS/EXCLUDED ASSETS 2.1. SALE OF ASSETS. Upon and subject to the terms and conditions stated in this Agreement, on the Closing Date (as hereinafter defined), Seller hereby agrees to transfer, convey, assign and deliver to Purchaser on the Closing Date, and Purchaser agrees to acquire, all of Seller's right, title and interest in the Assets, together with any additions thereto, between the date of this Agreement and the Closing Date, but excluding those assets described in Section 2.2, free and clear of any claims, liabilities, security interests, mortgages, liens, pledges, conditions, charges, or encumbrances of any nature whatsoever other than as described on Schedule 2.1. 2.2 EXCLUDED ASSETS. (a) The following assets (collectively, the "Excluded Assets") may be distributed by MMP to Seller and to the holders of Membership Units in MMP, and may be distributed by the Company and MTR to their shareholders or its designee prior to the Closing: (i) all cash, cash equivalents and cash items of any kind whatsoever, certificates of deposit, money market instruments, bank balances and rights in 3 and to bank accounts, and Treasury Bills; (ii) all furniture, fixtures and equipment located at the principal place of business of MMP, the address of which is 900 Laskin Road, Virginia Beach, Virginia 23451 and the leasehold interest therein; (iii) the Option Agreement with Gary and Susan Clarke, WWBI TV, Inc. dated as of July 11, 1997, as amended and all promissory notes and agreements related thereto and all related collateral and other documents; (iv) all notes payable and other amounts due from MCC Air Inc. and all assets, including real property, promissory notes and agreements relating solely to the sale and lease of WMQX-AM, Greensboro, NC to Winston-Salem Radio Corporation and Willis Broadcasting Corporation; (v) subject to the terms and conditions of the Indemnification Escrow Agreement (as defined below), the accounts receivable of MMP. (vi) the names "Max Media," "Max Television," "Max Radio" and "Max Media Properties". Any distribution of Excluded Assets by MMP will be made pro rata to the holders of Membership Units in MMP unless otherwise agreed to by Purchaser. (b) Notwithstanding anything to the contrary in Section 2.2(a) above, MTR and MMP shall each retain an amount of cash, cash equivalents and other cash items that are sufficient to cover and pay their respective Closing Date Liabilities. For purposes of this Agreement, the term "Closing Date Liabilities" shall mean the liabilities of MTR and MMP (other than for Funded Debt, liabilities with respect to program contract liabilities accruing after the Closing Date and liabilities with respect to trade and barter obligations arising after the Closing Date) whether or not disclosed on any Schedule hereto (A) as of the Closing Date; (B) for operations prior to the Closing Date; and (C) for all liabilities of any kind whatsoever under that certain Mutual Release dated as of January 1, 1997 and that certain Settlement Agreement dated as of January 17, 1997 (collectively the "Shareholder Settlement Agreements"). Except as otherwise provided in this Section 2.2(b), the Closing Date Liabilities shall be determined in accordance with GAAP consistently applied with prior periods, and shall be consistent with the books and records of MTR and MMP. The amount of cash, cash equivalents and cash items retained to cover the Closing Date Liabilities shall not be considered Excluded Assets. (i) MMP shall deliver to Purchaser at the Closing a certificate (the "Estimate Certificate") setting forth its good faith estimate of the Closing Date Liabilities, 4 which shall be used to determine the amount of cash, cash equivalents and other cash items required to be retained by MTR and MMP pursuant to this Section 2.2(b). (ii) Within one hundred twenty (120) days of the Closing, Purchaser shall cause its accountant to prepare and deliver to Seller a certificate setting forth its calculation of the Closing Date Liabilities (the "Accountant's Certificate"). The amount of the Closing Date Liabilities as set forth on the Accountant's Certificate shall be final unless Sellers' Agents notify Purchaser within thirty (30) days from their receipt of the Accountant's Certificate that they dispute the Accountant's Certificate. If Sellers' Agents and Purchaser are unable to agree on the amount of the Closing Date Liabilities within fifteen (15) days after Sellers' Agents' notice, the parties shall jointly appoint and engage an independent accountant of national or regional repute (the "Independent Accountant") to perform an independent evaluation of the Closing Date Liabilities. The findings of the Independent Accountant as to the amount of the Closing Date Liabilities shall be final and binding on the parties hereto. (iii) Upon the determination of the Closing Date Liabilities becoming final which is different from the Estimate Certificate either (A) Purchaser shall be entitled to a payment from the Indemnification Escrow equal to the amount by which the aggregate amount of the Closing Date Liabilities exceeds the Closing Date Liabilities shown on the Estimate Certificate, taking into account any amounts paid from the Indemnification Escrow under provisions similar to this provision in the MRI Agreement, the Management Agreement and the Investors Agreement, or (B) Purchaser shall pay to Disbursing Agent an amount by which the aggregate amount of Closing Date Liabilities shown on the Estimate Certificate exceeds the Closing Date Liabilities as finally determined. (iv) For purposes of determining the amount of the Tax liabilities of MTR to be included in the Closing Date Liabilities (the "Closing Date Tax Liabilities"), such Tax liabilities shall include all Tax liabilities of MTR that are attributable to items of income, gain, loss, deduction and credit of MMP and the FCC Licensee Entities accruing through and including the Closing Date, notwithstanding that such items may be reported by MTR, Purchaser, or Purchaser's Affiliates in Taxable Periods ending after the Closing Date. The amount of the Tax liabilities attributable to the Tax items of MMP and the FCC Licensee Entities shall be determined by assuming that the taxable years of MMP and the FCC Licensee Entities, as well as the taxable years of the Company and MTR, end as of close of business on the Closing Date and by assuming Purchaser's compliance with Section 8.8. The Closing Date Tax Liabilities shall not include, and Purchaser shall have no rights of Indemnification under Section 10 with respect to, any Tax Liabilities arising from the MMP II Distribution. 5 (v) Notwithstanding anything to the contrary contained in this Section 2.2, the final determination of the Closing Date Liabilities hereunder shall not affect Purchaser's indemnification rights pursuant to Section 10 to the extent the actual Closing Date Liabilities exceed the final determination thereunder. SECTION 3 PURCHASE PRICE 3.1 Payment. In consideration for the sale of the Assets, Purchaser shall pay to Seller the "Purchase Price", payable as follows: (1) Purchaser has deposited with First Union National Bank, as Escrow Agent pursuant to the Deposit Escrow Agreement, the Escrow Deposit which shall be distributed in accordance with the Deposit Escrow Agreement in the form attached hereto as Exhibit A. (2) At the Closing, the "Initial Deposit" which shall be held in Escrow (the "Indemnification Escrow") by Citibank, N.A. as Escrow Agent pursuant to the Indemnification Escrow Agreement in the form of Exhibit B hereto (the "Indemnification Escrow Agreement"); and (3) the balance of the Purchase Price at the Closing, by wire transfer of federal or other immediately available funds to the accounts specified by Disbursing Agent pursuant to wire instructions delivered in writing to Purchaser not later than two (2) Business Days prior to the Closing. 3.2. DISBURSING AGENT. The Disbursing Agent shall disburse the Purchase Price to Seller in accordance with the Disbursement Agreement. SECTION 4 CLOSING The closing of the transaction contemplated by this Agreement (the "Closing"), subject to fulfillment or waiver of the conditions set forth in Section 11 hereof, shall be held at the offices of Clark & Stant, P.C., One Columbus Center, Suite 900, Virginia Beach, Virginia 23462, at 10:00 A.M. local time (but shall be deemed to have occurred at the close of business on such day), on the later to occur of (a) five Business Days after all applicable waiting periods under the H-S-R Act shall have expired or terminated, or (b) five Business Days after the Final Order (the date of Closing being the "Closing Date"), unless (i) 6 Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser shall give Sellers reasonable notice of the Closing, or (ii) the parties shall mutually agree upon a different date or location; provided, however, that in no event shall the Closing be held prior to March 18, 1998; and provided, further, that in the event the Closing is postponed past July 15, 1998, due to a postponement of the Closing under Section 9.8(b) or otherwise, Seller, in its sole discretion, may postpone the Closing to September 1, 1998. In no event shall Closing occur later than the Termination Date. SECTION 5 REPRESENTATIONS AND WARRANTIES OF SELLER 5.1. RESERVED 5.2. REPRESENTATIONS AND WARRANTIES AS TO SELLER . Seller hereby represents and warrants to Purchaser as follows: a. ORGANIZATION AND GOOD STANDING. Seller is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia hereto and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. The Company is qualified as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. Other than stock of MTR, the Company does not own any direct or indirect subsidiary corporation. b. RESERVED c. NO CONFLICTS. Except as described on Schedule 5.2c, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of incorporation or by-laws of Seller, (ii) violate any provision of applicable law, rule and regulation, which violation would prevent or materially interfere with Seller's ability to perform hereunder or have a Material Adverse Effect, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Seller is a party or to which its property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with the Seller's ability to perform hereunder or have a Material Adverse 7 Effect. d. FINANCIAL STATEMENTS. Seller has provided or made available to Purchaser copies of the Financial Statements. The Financial Statements have been prepared in accordance with GAAP consistently applied with prior periods. The Financial Statements present fairly the financial position of the Company as at and for the periods indicated therein. Except as set forth on Schedule 5.2.d hereto, since December 31, 1996, there has not been any Material Adverse Effect on the business, financial condition, operations or results of operations of Seller taken as a whole. Without limiting the generality of the foregoing, since December 31, 1996, except as set forth on Schedule 5.2d: (i) Seller has not sold, leased, transferred, or assigned Asset; (ii) Seller has not entered into any material agreement, contract, lease, or license affecting the Assets; (iii) Seller has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which Seller is a party or by which Seller is bound; (iv) Seller has not imposed any security interest upon any of the Assets; (viii) Seller has not granted any license or sublicense of any material rights under or with respect to any Asset; (ix) there has been no change made or authorized in the charter or bylaws of Seller; (x) the Assets have not experienced any material damage, destruction, or loss (whether or not covered by insurance); (xi) Seller has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Company Plan or Company Benefit Arrangement); (xii) Seller has not made or changed any material Tax election or taken any other action with respect to Taxes inconsistent with past practices affecting the Assets; 8 (xiii) Seller has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and (xiv) except as set forth in this Agreement, Seller has not committed to any of the foregoing. e. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit Plans and Benefit Arrangements: (a) Schedule 5.2e completely and accurately lists all Company Plans and Company Benefit Arrangements and specifically identifies any that are Qualified Plans. Neither Seller nor any ERISA Affiliate has ever maintained or contributed to any Qualified Plans other than those listed on Schedule 5.2e. The Qualified Plan has always qualified in form and operation under Code Section 401(a) and has a currently applicable determination letter from the Internal Revenue Service, and its trust has always been exempt under Code Section 501, and nothing has occurred with respect to such plan and trust that could cause the loss of such qualification or exemption or the imposition of any liability, lien, penalty, or tax under ERISA or the Code. (b) Each Company Plan and each Company Benefit Arrangement has been maintained in accordance with its constituent documents and with all applicable provisions of the Code, ERISA and other domestic and foreign laws, including federal, state, and foreign securities laws and all laws respecting reporting and disclosure. No Company Plan holds employer securities. (c) Neither Seller nor any ERISA Affiliate (since August 1, 1992) has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV of ERISA. Neither Seller nor any ERISA Affiliate has ever made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37)). Seller has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement that is not a Company Benefit Arrangement or with respect to any Benefit Plan sponsored or maintained (or which has been or should have been sponsored or maintained) by any ERISA Affiliate; and no facts exist that could reasonably be expected to result in such liability, as a result of termination, withdrawal or funding waiver with respect to any such plan, program, or arrangements. (d) There are no pending claims or lawsuits by, against, or relating to any non-Company Benefit Plans or non-Company Benefit Arrangements that would, if successful, result in liability for Seller, and no claims or lawsuits (other than routine benefit 9 claims) have been asserted, instituted or, to the Knowledge of Seller, threatened by, against, or relating to any Company Plan or Company Benefit Arrangement, and Seller does not have Knowledge of any fact that could form the basis for any such claim or lawsuit. The Company Plans and Company Benefit Arrangements are not presently under audit or examination (and have not received notice of a potential audit or examination) by any governmental authority, and no matters are pending with respect to the Qualified Plan under any governmental compliance programs. (e) No Company Plan or Company Benefit Arrangement contains any provision or is subject to any law that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions this Agreement contemplates, and Seller has not declared or paid any bonus or other incentive compensation or established any severance plan, program, or arrangement in contemplation of the transactions contemplated by this Agreement. (f) With respect to each Company Plan, there have been no violations of Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims would result in any liability for Seller or any Person required to be indemnified by it. (g) Seller has made all required contributions to the Company Plan as of the last day of each plan's most recent fiscal year, all benefits accrued under any unfunded Company Plan or Company Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with generally accepted accounting principles; and all monies withheld from employee paychecks with respect to Company Plans have been transferred to the appropriate plan within the timing required by governmental regulations. (h) Seller and its ERISA Affiliates have complied with the health continuation rules of Code Sections 4980B (and its predecessor) and with Code Section 5000. No employee or former employee of Seller nor beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits subject to reporting under Statement of Financial Accounting Standards No. 106, other than as required by Code Section 4980B or other applicable law. (i) There are no contracts, agreements, plans or arrangements, including but not limited to the provisions of this Agreement, covering any employee or former employee of Seller that, individually or collectively, could give rise to the payment of any amount (or portion thereof) that would not be deductible pursuant to Code Sections 280G, 404 or 162. 10 f. LABOR. With respect to employees of and service providers to Seller, except as set forth on Schedule 5.2f: (a) Seller is and has been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and has not and is not engaged in any unfair labor practice. (b) The employees of Seller are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against, or currently being negotiated by, the Company, and to Seller's knowledge, no labor representation organization effort exists nor has there been any such activity within the past three years. (c) All Persons classified by Seller as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and Seller has fully and accurately reported their compensation on IRS Forms 1099 when required to do so. (d) Since December 31, 1996, Seller has not employed any employees. (e) There is no charge or compliance proceeding actually pending or threatened against Seller before the Equal Employment Opportunity Commission or any state, local, or foreign agency responsible for the prevention of unlawful employment practices. g. INSURANCE. Schedule 5.2g hereto contains a list of all insurance policies of Seller and describes coverage thereunder (including whether occurrence or claims made), other than employee-benefit related insurance policies. All such policies are legal, valid, binding, enforceable and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by court of law or equity). There are no existing breaches or defaults by Seller or, to Seller's Knowledge by any other party with respect to such policies, and no notice of cancellation or termination has been received. h. MATERIAL CONTRACTS. Schedule 5.2h hereto contains a list of all the Material Contracts and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts listed on Schedule 5.2h are 11 legal, valid and binding obligations of Seller enforceable in accordance with their terms and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the right of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). There exists no default or event which, with notice or lapse of time, or both, would constitute a default by Seller or to the Company's Knowledge any other party to any such Material Contract or which would permit termination, modification or acceleration. Seller has not received notice (or otherwise has knowledge) that any party to any Material Contract intends to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. i. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2i, Seller is in material compliance with all material applicable Federal, state and local laws, rules and regulations, and to Seller's knowledge, there are no actions threatened or pending alleging noncompliance therewith. j. LITIGATION. Except as set forth on Schedule 5.2j hereto, there is no suit, claim, action, proceeding or arbitration pending or, to Seller's Knowledge, threatened against Seller. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency specifically against or specifically affecting Seller, except as disclosed on Schedule 5.2j. k. NO BROKERS. Except as described on Schedule 5.2k, Seller has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the sale of the Stock and the transactions contemplated by this Agreement. l. CONSENTS. Except (a) as set forth on Schedule 5.2l hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC Applications, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of Seller is required in connection with the execution and delivery of this Agreement by Seller or the consummation of the transactions contemplated hereby (including any consents required under any Company Material Contract as a result of the change in control contemplated hereby). m. TAX MATTERS. (a) Except as set forth on Schedule 5.2m(a) hereto: (i) All Tax Returns required to be filed by or with respect to Seller have been filed when due in a timely fashion, and all Tax Returns required to be 12 filed by or with respect to Seller for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to Seller are true, correct and complete in all material respects. (ii) Seller has paid in full on a timely basis all Taxes owed by Seller, whether or not shown on any Tax Return, and Seller will have paid prior to the Closing Date all Taxes owed with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) Seller's liability for unpaid Taxes did not, as of the date of the Financial Statements exceed the liability for such Taxes (excluding reserves for deferred Taxes) set forth on the Financial Statements. Seller has no liability for unpaid income Taxes other than its Tax liability attributable to Seller's allocable share of MMP's items of income, gain, loss, deduction and credit accruing through the date hereof. (iv) Seller has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to Seller and Seller has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is currently in effect with respect to the assessment, collection or payment of Taxes of Seller or for which Seller is liable. (vii) No extension of the time within which to file any Tax Return of Seller is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted, or assessed against Seller. (ix) There are no liens on the assets of Seller relating or attributable to Taxes (except liens for Taxes not yet due). (x) Seller is not and has not been at any time during the preceding five years a "United States real property holding corporation" within the 13 meaning of Section 897(c)(2) of the Code. (xi) There is no agreement or consent made under Section 341(f) of the Code affecting Seller. (xii) Seller has not agreed to, nor is it required to, make any adjustments under Section 481 (a) of the Code as a result of a change in accounting methods. (xiii) Seller is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and Seller has not assumed the Tax liability of any other entity or person under contract. (xiv) Seller is not and has not at any time been a member of an affiliated group filing a consolidated federal income tax return and does not have any liability for the Taxes of another entity or person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise. (xv) Except for MMP and the Television Licensees, Seller is not a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xvi) None of Seller's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (b) Seller has furnished or otherwise made available to Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to Seller since January 1, 1994; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to Seller relating to Taxes. (c) Schedule 5.2m(c) contains complete and accurate descriptions of (i) Seller's basis in the stock of MTR and its tax capital account in MMP, and (ii) material Tax elections made by or with respect to Seller. Seller has no net operating losses or other Tax attributes presently subject to limitation under Code Sections 382, 383 or 384, or the federal consolidated return regulations. n. RESERVED o. ACCOUNTS RECEIVABLE. Seller has no accounts receivable 14 p. RESERVED q. REPRESENTATIONS AS TO SELLER INTERESTS. (i) Seller is the record and the beneficial owner of 5,140,500 Class B Membership Units (out of a total 11,631,431 Membership Units) of MMP, sixty-nine (69) shares (out of a total one hundred (100) issued and outstanding shares) of the issued and outstanding shares of MTR and a 2% limited partnership interest in each Television Licensee (collectively, the "Seller Interests"); (ii) Seller holds of record and owns beneficially Seller Interests free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.2q hereof, all of which will be released at or before the Closing; (iii) Seller has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of Seller; (iv) this Agreement has been duly executed and delivered by Seller and constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (v) except as described on Schedule 5.2q, Seller Interests are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. 5.3. REPRESENTATIONS AND WARRANTIES AS TO THE MMP AND THE FCC LICENSEE ENTITIES. Seller and MMP, jointly and severally, hereby represent and warrant to Purchaser as to MMP and the FCC Licensee Entities as follows: a. MMP ORGANIZATION AND GOOD STANDING. MMP is a limited liability company duly organized and validly existing under the laws of Virginia and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. To the extent required by law, MMP is qualified as a foreign limited liability company and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification. MMP owns 98% of the outstanding partnership interests in the FCC Licensee Entities. b. CAPITALIZATION OF MMP. The designations of each class of the membership units of MMP and the number of authorized and issued and outstanding membership units thereof is as described on Schedule 5.3b to the MRI Agreement. All 15 membership units have been validly issued and are fully paid and nonassessable and are held of record by the respective members of MMP as set forth on Schedule 5.3b to the MRI Agreement. Except as described on Schedule 5.3b to the MRI Agreement, (i) there are no other issued or outstanding equity securities of MMP; (ii) there are no membership or value appreciation rights, phantom membership rights, profit participation rights, or other similar rights with respect to membership units outstanding; and (iii) there are no other issued or outstanding membership interests or other securities of MMP convertible or exchangeable at any time into equity securities of MMP. Except as set forth in the Operating Agreement of MMP as amended, MMP is not subject to any commitment or obligation that would require the issuance or sale of additional membership interests or membership units of MMP at any time under options, subscriptions, warrants, rights or any other obligations. Schedule 5.3b to the MRI Agreement sets forth the equity interests in any corporation, partnership, limited liability company, joint venture or other entity owned by MMP. c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE ENTITIES. Each FCC License Entity is a limited partnership duly organized and validly existing under the laws of the Commonwealth of Virginia and has full partnership power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. Each FCC License Entity is qualified as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. No FCC License Entity owns any direct or indirect subsidiaries. MMP is the sole general partner and owns ninety-eight percent (98%) of the partnership interests of each of the FCC License Entities. Seller is the sole limited partner and owns two percent (2%) of the partnership interests of each of the FCC License Entities other than RLLP. MRI is the sole limited partner and owns two percent (2%) of the partnership interests of RLLP. All such partnership interests have been validly issued and are fully paid and nonassessable and are held of record by the respective partners as set forth above. There are no (i) other issued or outstanding equity securities of any FCC License Entity, (ii) partnership or value appreciation rights, phantom partnership rights, profit participation rights, or other similar rights with respect to partnership interests outstanding and (iii) other issued or outstanding partnership interests or other securities of any FCC License Entity convertible or exchangeable at any time into equity securities of such FCC License Entity. No FCC License Entity is subject to any commitment or obligation that would require the issuance or sale of additional partnership interests of any FCC License Entity at any time under options, subscriptions, warrants, rights or any other obligations. No FCC License Entity holds any equity interest in any corporation, partnership, limited liability company, joint venture or other entity. d. NO CONFLICTS. Except as described on Schedule 5.3d to the MRI Agreement, neither the execution and delivery of this Agreement nor the consummation of 16 the transactions contemplated hereby will (i) violate any provision of the articles of organization or operating agreement of MMP or the limited partnership agreements of the FCC Licensee Entities, (ii) violate any provision of applicable material law, rule and regulation, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any material agreement, indenture, mortgage or instrument to which either MMP or any FCC Licensee Entity is a party or to which any of their property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would have a MMP Material Adverse Effect. e. REAL PROPERTY. The MMP Real Property owned and all leaseholds and other interests in MMP Real Property used or useful in the Business and all buildings, structures, towers, and improvements thereon used or useful in the business and operations of the Stations are listed on Schedule 5.3e to the MRI Agreement and, except for Permitted Encumbrances and as disclosed in Schedule 5.3e to the MRI Agreement, MMP has good and marketable fee simple title (insurable at standard rates by a reputable national title insurer) to all fee estates included in the Real Property, and good title to all other MMP Real Property, in each case clear of all liens. The FCC Licensee Entities own no real property, leaseholds or other interests in real property. No portion of the MMP Real Property or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or, to MMP's Knowledge, threatened. MMP has a valid leasehold interest in all leased property and subleases to which it is a party, and MMP is the owner and holder of all the leased property purported to be granted by such leases and subleases. The MMP Real Property and the leases and subleases listed on Schedule 5.3e to the MRI Agreement constitute all of the real property owned, leased or used by MMP in the business and operations of the Stations, which is material to the business and operations of the Stations. The Sellers have delivered or caused to be delivered to the Purchaser correct and complete copies of the deeds, leases and subleases listed in Schedule 5.3e to the MRI Agreement. With respect to each lease and sublease listed in Schedule 5.3e to the MRI Agreement: (a) the lease or sublease is legal, valid, binding, enforceable, and in full force and effect in all material respects subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with several principles of equity (whether applied by a court of law or equity); (b) MMP and, to MMP's knowledge, no other party to the lease or sublease is in material breach or default, and no event has occurred which, with notice 17 or lapse of time, would constitute a material breach or default or permit termination, modification, or acceleration thereunder; (c) MMP and, to MMP's knowledge, no other party to the lease or sublease has repudiated any material provision thereof; (d) MMP is not a party to and, to MMP's knowledge, there are no material disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; (e) except as set forth on Schedule 5.3e to the MRI Agreement, MMP has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold; and (f) all facilities leased or subleased thereunder material to the operation of the Stations have received all approvals of governmental authorities (including material licenses and permits) required in connection with the operation thereof, and have been operated and maintained in accordance with applicable laws, rules, and regulations in all material respects. f. PERSONAL PROPERTY. Schedule 5.3f to the MRI Agreement lists as of the date hereof all items of Personal Property having a fair market value in excess of $5,000.00. Except as set forth on Schedule 5.3f to the MRI Agreement, MMP has good and marketable title to all of its material items of tangible personal property and assets used or useful by MMP located on its premises or shown on the MMP Financial Statements are free and clear of all liens, security interests and encumbrances other than those that would not materially affect Purchaser's use or ownership of such personal property after the Closing. The tangible personal property of MMP has been maintained in accordance with normal industry practice and is in good condition and repair given the age and use of such property (subject to normal wear and tear) and is adequate for its present use by MMP. g. FINANCIAL STATEMENTS. MMP has provided or made available to Purchaser copies of the MMP Financial Statements. The MMP Financial Statements have been prepared in accordance with GAAP consistently applied with prior periods except in the case of the unaudited MMP Financial Statements, the absence of year-end audit adjustments and notes. The MMP Financial Statements present fairly the financial position of MMP as at and for the periods indicated therein, and are consistent with the books and records of MMP. Except as set forth on Schedule 5.3g to the MRI Agreement hereto, since December 31, 1996, there has not been any Material Adverse Effect on the business, financial condition, operations, or results of operations of MMP taken as a whole. Without limiting the generality of the foregoing, since that date, except as described on 18 Schedule 5.3g to the MRI Agreement: (i) MMP has not sold, leased, transferred, or assigned any material assets, tangible or intangible, outside the ordinary course of business; (ii) MMP has not entered into any material agreement, contract, lease, or license outside the ordinary course of business; (iii) MMP has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which MMP is a party or by which MMP is bound; (iv) MMP has not imposed any security interest upon any of its assets, tangible or intangible; (v) MMP has not made any material capital expenditures outside the ordinary course of business; (vi) MMP has not made any material capital investment in, or any material loan to, any other Person outside the ordinary course of business; (vii) MMP has not created, incurred, assumed, or guaranteed more than $45,000,000.00 in aggregate indebtedness for borrowed money and capitalized lease obligations; (viii) MMP has not granted any license or sublicense of any material rights under or with respect to any Intellectual Property; (ix) there has been no change made or authorized in the operating agreement of MMP; (x) MMP has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (xi) MMP has not made any loan to, or entered into any other transaction with, any of its managers, officers, and employees outside the ordinary course of business; (xii) MMP has not entered into any employment contract outside the ordinary course of business or collective bargaining agreement, written or oral, or modified the terms of any such existing contract or agreement; 19 (xiii) MMP has not granted any increase in the base compensation of any of its members outside the ordinary course of business; (xiv) MMP has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its managers, officers, and employees (or taken any such action with respect to any other MMP Plan or MMP Benefit Arrangement); (xv) MMP has not made any other material change in employment terms for any of its members or employees outside the ordinary course of business; (xvi) MMP has not made or changed any material Tax election or taken any other action with respect to Taxes not in the ordinary course of business and consistent with past practice; (xvii) MMP has not made any distributions other than in the ordinary course of business, and has not made any non-pro rata distributions; (xviii) MMP has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and 20 (xix) except as contemplated by this Agreement, the Investors Agreement, the Management Agreement, the MRI Agreement, and Assignment and Assumption Agreement by and between MMP and the Max Media LLC II Distribution Agreement, MMP has not committed to any of the foregoing. h. FCC. MMP and the FCC Licensee Entities have been and currently are operated in material compliance with the terms of the FCC Licenses, the Communications Act of 1934, as amended, and applicable rules, regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC Licenses, a true and complete list of which is set forth on Schedule 5.3h to the MRI Agreement, and true and complete copies of each of which have been delivered to Purchaser, are valid and in full force and effect. Except as set forth on Schedule 5.3h to the MRI Agreement, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses and, to Sellers' and MMP's Knowledge, there is not now before the FCC any investigation or complaint against MMP or the FCC Licensee Entities relating to the Stations, the unfavorable resolution of which would impair the qualifications of the FCC Licensee Entities to hold any FCC Licenses. Except as set forth on Schedule 5.3h to the MRI Agreement, there is no proceeding pending before the FCC, and there is no outstanding notice of violation from the FCC with respect to the Stations. Except as set forth on Schedule 5.3h to the MRI Agreement, no order or notice of violation has been issued by any governmental entity which permits, revocation, adverse modification or termination of any FCC License. Except as set forth on Schedule 5.3h to the MRI Agreement and except for those conditions or restrictions appearing on the face of the FCC Licenses, or other licenses, none of the FCC Licenses or other licenses is subject to any restriction or condition which would limit the operation of the Stations as currently operated. The FCC Licenses listed in Schedule 5.3h to the MRI Agreement are currently in effect and are not subject to any liens, or other encumbrances. No license renewal applications are pending with respect to any of the FCC Licenses. As of the date hereof, Sellers, the Company, MMP, and the FCC License Entities have no reason to believe that the FCC would not renew the FCC Licenses in the ordinary course for a full license term without any adverse conditions, upon the timely filing of appropriate applications and payment of the required filing fee. As of the date hereof, Sellers, the Company, MMP and the FCC Licensee Entities have no reason to believe that the FCC would not grant the FCC Application in the ordinary course without any adverse conditions. All documents required by 47 C.F.R. Section 73.3526 to be kept in each Station's public inspection files are in such file, and such file will be maintained in proper order and complete up to and through the Closing Date. i. INTELLECTUAL PROPERTY. Set forth on Schedule 5.3i to the MRI Agreement is a complete list of all Intellectual Property owned by or licensed to MMP on the date hereof material to the operations of the Stations. To MMP's Knowledge, except as 21 otherwise set forth on Schedule 5.3i to the MRI Agreement hereto, MMP owns such Intellectual Property free and clear of any royalty, lien, encumbrance or charge and does not interfere with the rights of others. Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not received any written notice or written claim that any such Intellectual Property is not valid or enforceable, or of any infringement upon or conflict with any patent, trademark, service mark, copyright or trade name of any third party by MMP. Except as set forth on Schedule 5.3i to the MRI Agreement, MMP has not given any notice of infringement to any third party with respect to any of the Intellectual Property and to MMP's Knowledge no such infringement exists. There is no Intellectual Property owned by or licensed to the FCC Licensee Entities. j. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit Plans and Benefit Arrangements: (a) Schedule 5.3j to the MRI Agreement completely and accurately lists all MMP Plans and MMP Benefit Arrangements currently in existence and specifically identifies any that are Qualified Plans. Since January 1, 1996 (the date of formation of MMP), MMP has maintained or contributed solely to the Qualified Plans listed on Schedule 5.3j to the MRI Agreement. The Qualified Plans listed on Schedule 5.3j to the MRI Agreement have always qualified in form and operation under Code Section 401(a) and have a currently applicable determination letter from the Internal Revenue Service, and its trust has always been exempt under Code Section 501, and nothing has occurred with respect to such plan and trust that could cause the loss of such qualification or exemption or the imposition of any liability, lien, penalty, or tax under ERISA or the Code. (b) Each MMP Plan and each MMP Benefit Arrangement has been maintained in accordance with its constituent documents and with all applicable provisions of the Code, ERISA and other domestic and foreign laws, including federal, state, and foreign securities laws and all laws respecting reporting and disclosure. No MMP Plan holds employer securities. (c) Neither MMP nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV of ERISA. Neither MMP nor any ERISA Affiliate has never made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37)). MMP has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement that is not a MMP Benefit Arrangement or with respect to any Benefit Plan sponsored or maintained (or that has been or should have been sponsored or maintained) by any ERISA Affiliate; and no facts exist that could reasonably be expected to result in such liability, as a result of termination, withdrawal or 22 funding waiver with respect to any such plan, program, or arrangements. (d) There are no pending claims or lawsuits by, against, or relating to any non-MMP Benefit Plans or non-MMP Benefit Arrangements that would, if successful, result in liability for M MP, and no claims or lawsuits (other than routine benefit claims) have been asserted, instituted or, to the knowledge of Sellers and the Company after due inquiry of MMP, threatened by, against, or relating to any MMP Plan or MMP Benefit Arrangement, and MMP has advised Sellers and the Company that MMP does not have knowledge of any fact that could form the basis for any such claim or lawsuit. MMP Plans and MMP Benefit Arrangements are not presently under audit or examination (and have not received notice of a potential audit or examination) by any governmental authority, and no matters are pending with respect to the Qualified Plan under any governmental compliance programs. (e) No MMP Plan or MMP Benefit Arrangement contains any provision or is subject to any law that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions this Agreement contemplates, and MMP has not declared or paid any bonus or other incentive compensation or established any severance plan, program, or arrangement in contemplation of the transactions contemplated by this Agreement, the Investors Agreement, the Management Agreement or the MRI Agreement. (f) With respect to each MMP Plan, there have been no violations of Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims would result in any liability for MMP or any Person required to be indemnified by it. (g) MMP has made all required contributions to each MMP Plan as of the last day of each plan's most recent fiscal year, all benefits accrued under any unfunded MMP Plan or MMP Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with generally accepted accounting principles; and all monies withheld from employee paychecks with respect to MMP Plans have been transferred to the appropriate plan within the timing required by governmental regulations. (h) MMP and its ERISA Affiliates have complied with the health continuation rules of Code Sections 4980B (and its predecessor) and with Code Section 5000. No employee or former employee of MMP nor beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits subject to reporting under Statement of Financial Accounting Standards No. 106, other than as required by Code Section 4980B or other applicable law. 23 (i) There are no contracts, agreements, plans or arrangements, including but not limited to the provisions of this Agreement, covering any employee or former employee of MMP that, individually or collectively, could give rise to the payment of any amount (or portion thereof) that would not be deductible pursuant to Code Sections 280G, 404 or 162. (j) The FCC Licensee Entities employ no employees and do not and have not in the past maintained or contributed to any Benefit Plans or Benefit Arrangements. k. LABOR. Except as set forth on Schedule 5.3k to the MRI Agreement, with respect to employees of and service providers to MMP and the FCC Licensee Entities: (a) MMP has been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice. (b) The employees of MMP are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against, or currently being negotiated by, MMP or, to MMP's Knowledge, no labor representation organization effort exists nor has there been any such activity within the past three years. (c) All Persons classified by MMP and the FCC Licensee Entities as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and MMP has fully and accurately reported their compensation on IRS Forms 1099 when required to do so. (d) Since December 31, 1996, except as described on Schedule 5.3k(d) to the MRI Agreement, no employee of or group of employees, the loss of whom would have significant adverse effect on the business of MMP or the FCC Licensee Entities, has notified MMP of his or their intent to (A) terminate his or their relationship with MMP or the FCC Licensee Entities, or (B) make any demand for material payments or modifications of his or their arrangements with MMP. (e) There is no charge or compliance proceeding actually pending or, to the knowledge of MMP, threatened against MMP or the FCC Licensee Entities before the Equal Employment Opportunity Commission or any state, local, or foreign agency 24 responsible for the prevention of unlawful employment practices. (f) The FCC Licensee Entities do not employ, and have not in the past, employed employees. l. INSURANCE. Schedule 5.3l to the MRI Agreement hereto contains a list of all insurance policies concerning the Business and describes coverage (including whether occurrence or claims made), other than employee-benefit related insurance policies. All such policies are legal, valid, binding, enforceable and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by court of law or equity). There are no existing breaches or defaults with respect to such policies, and no notice of cancellation or termination has been received. m. MATERIAL CONTRACTS. Schedule 5.3m to the MRI Agreement hereto contains a list of all the Material Contracts of MMP and the FCC Licensee Entities (other than cash agreements for the sale of advertising time and retransmission consent agreements) and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts are legal, valid and binding obligations of MMP or the FCC Licensee Entities, as the case may be, enforceable in accordance with their terms and in full force and effect. There exists no default or event which, with notice or lapse of time, or both, would constitute a default by any party to any such Material Contract or which would permit termination, modification or acceleration. Neither MMP nor the FCC Licensee Entities have received notice, nor to MMP's Knowledge, does any party to any Material Contract intend to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. n. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.3n to the MRI Agreement, MMP and the FCC Licensee Entities are in material compliance with all material applicable Federal, state and local laws, rules and regulations, and there are no actions threatened or pending alleging noncompliance therewith. 25 o. LITIGATION. Except as set forth on Schedule 5.3o to the MRI Agreement hereto, there is no suit, claim, action, proceeding or arbitration pending or, to MMP's Knowledge, threatened against MMP or the FCC Licensee Entities that seeks to enjoin or obtain damages in respect of MMP's conduct of the Business or operation of the Stations, or the transactions contemplated hereby. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency against or affecting the Business, MMP or the FCC Licensee Entities, except as disclosed on Schedule 5.3o to the MRI Agreement. p. CONSENTS. Except (a) as set forth on Schedule 5.3p to the MRI Agreement hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of MMP or the FCC Licensee Entities is required in connection with the execution and delivery of this Agreement by Sellers or the consummation of any of the transactions contemplated hereby (including any consents required under any MMP or FCC Licensee Entities contract as a result of the change in control contemplated hereby). q. ENVIRONMENTAL. Except as set forth on Schedule 5.3q to the MRI Agreement hereto: (a) All of the operations of MMP at or from any MMP Real Property comply in all material respects with applicable Environmental Laws. MMP has not engaged in or permitted any operations or activities upon any of the MMP Real Property for the purpose of or involving the treatment, storage, use, generation, release, discharge, emission, or disposal of any Hazardous Substances at the MMP Real Property, except in substantial compliance with applicable Environmental Laws. (b) None of the MMP Real Property is listed or, to MMP's Knowledge, proposed for listing on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification of sites requiring investigation or remediation maintained by any state or other governmental authority. MMP has not received any notice from any governmental entity or third party of any actual or threatened Environmental Liabilities with respect to the MMP Real Property or the conduct of the Business. (c) To MMP's Knowledge, after due inquiry, there are no conditions existing at the MMP Real Property that require, or which with the giving of notice or the passage of time or both would likely require remedial or corrective action, removal or closure pursuant to the Environmental Laws. 26 (d) To MMP's Knowledge, after due inquiry, MMP has all the material permits, authorizations, licenses, consents and approvals necessary for the current conduct of the Business and for the operations on, in or at the MMP Real Property which are required under applicable Environmental Laws and are in substantial compliance with the terms and conditions of all such permits, authorizations, licenses, consents and approvals. (e) To MMP's Knowledge, after due inquiry, there are no Hazardous Substances present on or in the MMP Real Property or at any geologically or hydrologically adjoining property, including any Hazardous Substances contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether movable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the MMP Real Property or such adjoining property, or incorporated into any structure therein or thereon. Neither MMP or any other Person for whose conduct it is or may be held responsible, nor to MMP's Knowledge after due inquiry or any other Person, has permitted or conducted, or was aware of, any Hazardous Substances, or any illegal activity conducted with respect to the MMP Real Property or any other properties or assets (whether real, personal, or mixed) in which MMP has or had an interest. r. TAX MATTERS. (a) Except as set forth on Schedule 5.3r(a) to the MRI Agreement hereto: (i) All Tax Returns required to be filed by or with respect to MMP have been filed when due in a timely fashion, and all Tax Returns required to be filed by or with respect to MMP for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to MMP are true, correct and complete in all material respects. (ii) MMP has paid in full on a timely basis all Taxes owed by it, whether or not shown on any Tax Return, and MMP will have paid prior to the Closing Date all Taxes payable with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. 27 (iii) MMP's liability for unpaid Taxes (including any liability of MMP for unpaid Taxes of any other Entity or Person) (a) did not, as of the date of the MMP Financial Statements, exceed the current liability accruals for such Taxes (excluding reserves for deferred Taxes) set forth on the MMP Financial Statements, (b) does not exceed such accruals as adjusted on the books of MMP for transactions and events through the date hereof in accordance with the past custom and practice of MMP, and (c) will not as of the Closing Date exceed its liabilities for such Taxes as reflected in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii). (iv) MMP has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to MMP and MMP has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is currently in effect or has been requested with respect to the assessment, collection or payment of Taxes of MMP or for which MMP is liable. (vii) No extension of the time within which to file any Tax Return of MMP is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted or assessed against MMP. (ix) There are no liens on the assets of MMP relating or attributable to Taxes (except liens for Taxes not yet due). (x) MMP is and has since its formation been classified as a partnership for U.S. federal income tax purposes and has in effect a valid election under Section 754 of the Code. (xi) MMP has not agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. 28 (xii) MMP is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and MMP has not assumed the Tax liability of any other entity or person under contract. (xiii) MMP does not have any liability for the Taxes of another entity or person as a transferee or successor, or otherwise. (xiv) Except for itself and the FCC Licensee Entities, MMP is not and has not at any time been a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xv) None of MMP's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (xvi) The FCC Licensee Entities' sole asset is the FCC Licenses, and the FCC Licensee Entities are not and have not been required to file Tax Returns or pay Taxes. (b) Sellers have furnished or otherwise caused to be made available to Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to MMP since January 1, 1996; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to MMP relating to Taxes. (c) Schedule 5.3r(c) to the MRI Agreement contains complete and accurate descriptions of (i) MMP's basis in its assets, and (ii) material Tax elections made by or with respect to MMP. s. ACCOUNTS RECEIVABLE. All accounts receivable of MMP that are reflected on the MMP Financial Statements or on the accounting records of MMP as of the Closing Date (collectively, the "MMP Accounts Receivable") represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. Unless paid prior to the Closing Date, the MMP Accounts Receivable are or will be as of the Closing Date current and collectable net of the respective reserve shown on the MMP Financial Statements or on the accounting records of MMP as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the MMP Accounts Receivable as of the Closing Date than the reserve reflected in the MMP Financial Statements represented of the MMP Accounts Receivable reflected therein and will not represent a MMP Material Adverse Effect in the composition of such MMP Accounts Receivable in terms of aging). 29 Subject to such reserves, each of the MMP Accounts Receivable either has been or will be collected in full, without any setoff, within ninety (90) days after the day on which it first becomes due and payable. There is no contest, claim, or right of setoff, other than returns in the ordinary course of business, under any contract with any obligor of an MMP Accounts Receivable relating to the amount or validity of such MMP Accounts Receivable. MMP shall deliver on the Closing Date a complete and accurate list of all MMP Accounts Receivable as of the Closing Date. t. REPRESENTATIONS AS TO MMP INTERESTS. (i) MMP is the record and the beneficial owner of a 98% general partnership interest in each of the Television Licensees; (ii) MMP holds of record and owns beneficially these interests free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.3t to the MRI Agreement hereof, all of which will be released at or before the Closing; (iii) MMP has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of MMP; (iv) this Agreement has been duly executed and delivered by MMP and constitutes a legal, valid and binding obligation of MMP, enforceable against MMP in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (v) except as described on Schedule 5.3t to the MRI Agreement, MMP's interests in the Television Licensees are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. 5.4. REPRESENTATIONS AND WARRANTIES AS TO MTR. Seller hereby represents and warrants to Purchaser as to MTR as follows: a. ORGANIZATION AND GOOD STANDING. MTR is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. MTR is not qualified as a foreign corporation in any foreign jurisdiction. b. CAPITALIZATION. The designations of each class of the capital stock of MTR and the number of authorized and issued and outstanding shares thereof is as described on Schedule 5.4b to the MRI Agreement. All the shares of capital stock of MTR have been validly issued and are fully paid and nonassessable and are held of record by the respective shareholders as set forth on Schedule 5.4b to the MRI Agreement hereto. Except as described on Schedule 5.4b to the MRI Agreement, (i) no shares of capital stock of MTR 30 are held in treasury, (ii) there are no other issued or outstanding equity securities of MTR, (iii) there are no stock appreciation rights, phantom stock rights, profit participation rights, or other similar rights with respect to shares outstanding; and (iv) there are no other issued or outstanding securities of MTR convertible or exchangeable at any time into equity securities of MTR. MTR is not subject to any commitment or obligation that would require the issuance or sale of additional shares of capital stock of MTR at any time under options, subscriptions, warrants, rights or any other obligations. Except for its ownership interest in MMP, MTR holds no equity interests in any corporation, partnership, limited liability company, joint venture or other entity owned by MTR. c. NO CONFLICTS. Neither the execution and delivery of this Agreement by Sellers and MMP nor the consummation of the transactions contemplated hereby will (a) violate any provision of the articles of incorporation or by-laws of MTR, (b) violate any provision of applicable law, rule and regulation, which violation would prevent or interfere with Sellers' ability to perform hereunder, or (c) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which MTR is a party or to which its property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with the Company's ownership of 31% of the equity of MTR. d. FINANCIAL MATTERS. Except as set forth on Schedule 5.4.d to the MRI Agreement hereto, since January 1, 1996 (the date MTR first held any assets), there has not been any material adverse effect on the business, financial condition, operations or results of operations of MTR taken as a whole. Without limiting the generality of the foregoing, since that date: (i) MTR has not sold, leased, transferred, or assigned any material assets, tangible or intangible, outside the ordinary course of business; (ii) MTR has not entered into any material agreement, contract, lease, or license outside the ordinary course of business; (iii) MTR has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which MTR is a party or by which MTR is bound; (iv) MTR has not imposed any security interest upon any of its assets, tangible or intangible; 31 (v) MTR has not made any material capital expenditures outside the ordinary course of business; (vi) MTR has not made any material capital investment in, or any material loan to, any other Person other than MMP; (vii) MTR has not created, incurred, assumed, or guaranteed any indebtedness for borrowed money and capitalized lease obligations; (viii) MTR has not granted any license or sublicense of any material rights under or with respect to any Intellectual Property; (ix) there has been no change made or authorized in the charter or bylaws of MTR; (x) other than its initial issuance of Stock to Seller and MRI, MTR has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; (xi) MTR has not declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; (xii) MTR has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (xiii) MTR has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees outside the ordinary course of business; (xiv) MTR, since its formation, has had no employees; (xv) MTR has not made or changed any material Tax election or taken any other action with respect to Taxes not in the ordinary course of business and consistent with past practices; (xvi) MTR has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and (xvii) except as set forth in this Agreement and the MRI Agreement, 32 MTR has not committed to any of the foregoing. e. EMPLOYEE BENEFIT PLANS. MTR does not, and has not in the past, instituted or maintained any Benefit Arrangement or Benefit Plan. Neither MTR nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV of ERISA. Neither MTR nor any ERISA Affiliate has ever made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37). MTR has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement. f. LABOR. Prior to the date of this Agreement, MTR has not employed any employees. g. INSURANCE. MTR maintains no insurance policies. h. MATERIAL CONTRACTS. Schedule 5.4h to the MRI Agreement contains a list of all the Material Contracts and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts listed on Schedule 5.4h to the MRI Agreement are legal, valid and binding obligations of MTR enforceable in accordance with their terms and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the right of creditors generally and the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). There exists no default or event which, with notice or lapse of time, or both, would constitute a default by any party to any such Material Contract or which would permit termination, modification or acceleration. MTR has not received notice (or otherwise has knowledge) that any party to any Material Contract intends to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. i. COMPLIANCE WITH LAWS. MTR is in material compliance with all applicable Federal, state and local laws, rules and, regulations, and to MTR's knowledge, there are no actions threatened or pending alleging noncompliance therewith. j. LITIGATION. There is no suit, claim, action, proceeding or arbitration pending or threatened against MTR. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency against or affecting MTR. 33 k. CONSENTS. No filing, consent, approval or authorization of any governmental authority or of any third party on the part of MTR is required in connection with the execution and delivery of this Agreement by Seller and MMP or the consummation of any of the transactions contemplated hereby (including any consents required under any MTR contract as a result of the change in control contemplated hereby). l. TAX MATTERS. (a) Except as set forth on Schedule 5.4l(a) to the MRI Agreement: (i) All Tax Returns required to be filed by or with respect to MTR have been filed when due in a timely fashion, and all Tax Returns required to be filed by or with respect to MTR for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to MTR are true, correct and complete in all material respects. (ii) MTR has paid in full on a timely basis all Taxes owed by it, whether or not shown on any Tax Return, and MTR will have paid prior to the Closing Date all Taxes payable with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) MTR has no liability for unpaid income Taxes other than its Tax liability attributable to MTR's allocable share of MMP's items of income, gain, loss, deduction and credit accruing through the date hereof. MTR's actual liability for unpaid Taxes (determined consistently with Section 2.2(b)(iv)) will not as of the Closing Date exceed its liability for such Taxes as reflected in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii). (iv) MTR has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to MTR and MTR has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is 34 currently in effect with respect to the assessment, collection or payment of Taxes of the MTR or for which MTR is liable. (vii) No extension of the time within which to file any Tax Return of MTR is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted, or assessed against MTR. (ix) There are no liens on the assets of MTR relating or attributable to Taxes (except liens for Taxes not yet due). (x) MTR is not and has not been at any time during the preceding five years a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (xi) There is no agreement or consent made under Section 341(f) of the Code affecting MTR. (xii) MTR has not agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. (xiii) MTR is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and MTR has not assumed the Tax liability of any other entity or person under contract. (xiv) MTR is not and has not at any time been a member of an affiliated group filing a consolidated federal income tax return and does not have any liability for the Taxes of another entity or person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise. (xv) Except for MTR's ownership of 100,000 Class C Membership Units of MMP, MTR is not a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xvi) None of MTR's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (b) Sellers have furnished or otherwise made available to 35 Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to MTR since January 1, 1996; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to MTR relating to Taxes. (c) Schedule 5.4l(c) to the MRI Agreement contains complete and accurate descriptions of (i) MTR's basis in its assets, (ii) the amount of any net operating loss, net capital loss and any other Tax carryovers of MTR and (iii) material Tax elections made by or with respect to MTR. MTR has no net operating losses or other Tax attributes presently subject to limitation under Code Sections 382, 383 or 384, or the federal consolidated return regulations. m. DIVIDENDS. Since its formation, no dividends have been declared, issued or otherwise approved by the Board of Directors of MTR. The Company has no accounts receivable other than amounts due as Tax refunds from certain Tax Authorities. n. MTR ASSETS. Except for the 100,000 Class C Membership Units of MMP and cash or cash equivalents received or due from Tax refunds, MTR owns no other assets and has not engaged in any business other than in connection with its ownership of the 100,000 Class C Membership Units. o. REPRESENTATIONS AS TO MTR INTERESTS. (i) MTR is the record and beneficial owner of 100,000 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; (ii) MTR holds of record and owns beneficially this interest free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.4o to the MRI Agreement hereof, all of which will be released at or before the Closing; and (iii) except as described on Schedule 5.4o to the MRI Agreement, MTR's interest in MMP is not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. SECTION 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Seller and MMP that: 6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland. Purchaser has full corporate power and authority to carry on its business as it is now being conducted. 36 6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate power and authority to enter into this Agreement. The consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). 6.3. NO CONFLICTS. Except as described on Schedule 6.3 to the MRI Agreement hereof, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any of the provisions of the articles of incorporation or by-laws of Purchaser, (ii) violate any provision of applicable law, rule or regulation, which violation would prevent or interfere with Purchaser's ability to perform hereunder, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Purchaser is a party or to which its property is subject, or constitute a default thereunder, except where such conflict, breach, right of termination, acceleration or default would not have a material adverse effect on the business or financial condition of Purchaser or prevent or materially interfere with Purchaser's ability to perform hereunder. 6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 to the MRI Agreement hereto, (ii) for filings pursuant to the H-S-R Act, or (iii) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of Purchaser is required in connection with the execution and delivery of this Agreement by Purchaser or the consummation of any of the transactions contemplated hereby. 6.5. LITIGATION. Except as set forth on Schedule 6.5 to the MRI Agreement hereto, there is no suit, claim, action, proceeding or arbitration pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks to enjoin or obtain damages in respect of the transactions contemplated hereby. 6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the purchase of the Stock and the transactions contemplated by this Agreement. 37 6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on Schedule 6.7 to the MRI Agreement, Purchaser is legally and financially qualified to be the Licensee of, acquire, own and operate the Stations under the Communications Act and the rules, regulations and policies of the FCC. Purchaser knows of no fact that would, under existing law and the existing rules, regulations, policies and procedures of the FCC, (a) disqualify Purchaser as an assignee of the FCC Licenses or as the owner and operator of the Stations, or (b) cause the FCC to fail to approve in a timely fashion the application for the FCC Consent. Except as described on Schedule 6.7 to the MRI Agreement, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Purchaser, nor will processing pursuant to any exception or rule or general applicability be requested or required in connection with the consummation of the transactions contemplated by this Agreement Purchaser will have on hand at the Closing, adequate financial resources to consummate the transactions contemplated by this Agreement, the Investors Agreement, the Management Agreement and the MTC Agreement. SECTION 7 ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES 7.1. LIMITATION; SURVIVAL. Except as otherwise provided in Section 3.2 of the Indemnification Escrow Agreement, and subject to the provisions of Section 10.3, the representations and warranties herein and the obligations of the parties shall survive the Closing for a period ending on the earlier to occur of (i) 15 calendar months after the Closing Date and (ii) October 31, 1999, but in no event shall the period be less than 12 calendar months after the Closing Date; and provided further, however, that representations and warranties relating to any claims as to which notice shall have been given pursuant to Section 10.4 on or before such date shall survive until the final resolution of such claims. SECTION 8 TAX MATTERS 8.1. SECTION 338 ELECTION. Purchaser shall not make an election under Section 338 of the Code (or any comparable provision of state, local or foreign law) with respect to the purchase of stock in MTR as provided herein. 8.2. TAX RETURNS. (a) Seller shall prepare or cause to be prepared and file or cause to be 38 filed, within the time (including extensions) and manner provided by law, all Tax Returns of Seller, MTR, MMP, and the FCC Licensee Entities that are required to be filed on or before the Closing Date. In addition, Seller shall prepare or cause to be prepared and file or cause to be filed prior to the Closing Date all Tax Returns for Taxable Periods of Seller, MTR, MMP, and the FCC Licensee Entities for Taxable Periods ending on or before December 31, 1997, even if such Tax Returns are not yet due. Each of Seller, MTR, MMP and the FCC Licensee Entities shall pay or cause to be paid all Taxes shown as due on its Tax Returns. Purchaser shall have an opportunity to review and consent to the filing of all such Tax Returns, which consent shall not be unreasonably withheld or delayed. (b) Purchaser shall prepare or cause to be prepared and file or cause to be filed, within the time and manner provided by law, all Tax Returns of MTR, MMP, and the FCC Licensee Entities (i) for Taxable Periods ending on or before the Closing Date that are due after the Closing Date, except as described in Section 8.2a, and (ii) for Taxable Periods beginning before and ending after the Closing Date ("Straddle Periods"). Purchaser shall pay or cause to be paid all Taxes shown as due on such Tax Returns; provided that this sentence shall not in any way limit or affect Purchaser's rights to indemnification under other provisions of this Agreement. Purchaser shall provide Seller a reasonable opportunity to review and consent to the filing of such Tax Returns, which consent shall not be unreasonably withheld or delayed. Purchaser shall not file amended Tax Returns with respect to Taxable Periods ending on or before the Closing Date or Straddle Periods without Seller's consent; provided, however, that Purchaser may file amended Tax Returns for such Taxable Periods without Seller's consent if (i) such amended Tax Returns are filed to correct errors or omissions in previously filed Tax Returns that either constitute or are related to a breach of any representation or warranty set forth in Sections 5.2m, 5.3r or 5.4l (determined without regard to the limitation on the survival of such representations and warranties set forth in Section 7.1), or (ii) the filing of such amended Tax Return would not increase the Taxes of Sellers or Taxes for which Seller has indemnification responsibility hereunder by more than $25,000. (c) All Tax Returns prepared and filed pursuant to this Section 8.2 shall be prepared and filed in accordance with applicable law and in a manner consistent with past practices of MTR, and MMP (to the extent consistent with applicable law). 8.3. APPORTIONMENT. The parties agree to cause MTR, MMP, and the FCC Licensee Entities to file all Tax Returns for any Taxable Period that would otherwise be a Straddle Period on the basis that the relevant Taxable Period consists of two periods, one ending as of the close of business on the Closing Date and one beginning the day after the Closing Date, unless the relevant Tax Authority will not accept a Tax Return filed on that basis. For purposes of apportioning any Tax to the portion of any Straddle Period that 39 ends on the Closing Date, the determination shall be made assuming that there was a closing of the books as of the close of business on the Closing Date and that the taxable years of MTR, MMP and the FCC Licensee Entities ended on that date, except that real, personal and intangible property Taxes shall be apportioned ratably on a daily basis between the portions of the Straddle Period in question. 8.4. COOPERATION IN TAX MATTERS. Seller and Purchaser shall (a) cooperate fully, as reasonably requested, in connection with the preparation and filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make available to the other, as reasonably requested, all information, records or documents with respect to Tax matters pertinent to Seller, MTR, MMP and the FCC Licensee Entities for all Taxable Periods ending on or before the Closing Date and Straddle Periods; and (c) preserve information, records or documents relating to Tax matters pertinent to MTR, MMP and the FCC Licensee Entities that is in their possession or under their control until the expiration of any applicable statute of limitations. 8.5. CERTAIN TAXES. Seller shall timely pay all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees arising from or relating to the sale and transfer of the Assets, and Seller shall at its own expense file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees. If required by applicable law, Purchaser will join in the execution of any such Tax Returns and other documentation. 8.6. FIRPTA. Seller shall deliver to Purchaser at the Closing a certificate or certificates in form and substance satisfactory to Purchaser, duly executed and acknowledged, certifying all facts necessary to exempt the transactions contemplated hereunder from withholding under Section 1445 of the Code. 8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing Date, in its sole and absolute discretion, cause MMP and any of the FCC Licensee Entities to make a Code Section 754 Election with respect to the Taxable Period in which the Closing occurs or later Taxable Periods. Within ninety (90) days after the Closing, Purchaser shall cause its accountant to prepare and deliver to Seller a certificate (the "754 Certificate") setting forth the asset-by-asset allocations based on the fair market value of the assets determined pursuant to Code Sections 754, 755 and 743(b) and the regulations thereunder (the "754 Allocations"). The 754 Allocations, as set forth on the 754 Certificate, shall be final unless Sellers' Agents notify Purchaser within thirty (30) days from their receipt of the 754 Certificate that they dispute the 754 Allocations. If Sellers' Agents and Purchaser are unable to agree on the amount of the 754 Allocations within fifteen (15) days after Sellers' Agents notice, the parties shall jointly appoint and engage an independent accountant or Media appraiser of national or regional repute (the "754 40 Accountant") to perform an independent evaluation of the 754 Allocations. The findings of the 754 Accountant as to the amount of the 754 Allocations shall be final and binding on the parties hereto. 8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not cause MTR, MMP or the FCC Licensee Entities to take any actions on the Closing Date other than in the ordinary course of their business, except (i) such actions as are expressly contemplated by this Agreement, including the repayment of MMP's Funded Debt, and (ii) such actions as would not increase Taxes of Seller or Taxes for which Seller has indemnification responsibility hereunder. SECTION 9 ADDITIONAL COVENANTS AND UNDERTAKINGS 9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchasers, Seller and MMP (and MMP shall cause the FCC Licensee Entities) to agree that each will execute and deliver to the other any and all documents, in addition to those expressly provided for herein, that may be necessary or appropriate to implement the provisions of this Agreement, whether before, at, or after the Closing. The parties agree to cooperate with each other to any extent reasonably required in order to accomplish fully the transactions herein contemplated. 9.2. ACCESS TO INFORMATION. Seller and MMP, from and after the date of this Agreement and until the Closing Date or termination pursuant to Section 14.1, shall give Purchaser and Purchaser's employees and counsel full and complete access upon reasonable notice during normal business hours, to all officers, employees, offices, properties, agreements, records and affairs of Seller, MMP, the FCC Licensee Entities or otherwise relating to the Business, shall provide Purchaser with all financial statements of Seller, the FCC Licensee Entities and MMP which are currently prepared in the ordinary course of business, which shall be prepared and delivered to Purchaser each month between the date hereof and the Closing Date, and shall provide copies of such information concerning Seller, MMP, the FCC Licensees and the Business as Purchaser may reasonably request; provided, however, that the foregoing shall not permit Purchaser or any agent thereof to (i) disrupt the Business, or (ii) contact any employee of Seller or MMP without providing reasonable prior notice to Seller and allowing a representative of Seller or MMP to be present. The Company and Seller will use their commercially reasonable efforts to obtain the consent of its auditors to permit inclusion of the Financial Statements and the MMP Financial Statements in applicable securities filings of Sinclair Broadcast Group, Inc. ("SBGI"). If Purchaser requests, it shall have the immediate right, without causing unreasonable disruption to the Business, to have the access provided for in the first sentence hereof to conduct an audit of each Station's financial information, and, subject to the 41 foregoing, MMP and Seller shall cooperate with Purchaser's reasonable requests in connection with such audit, including, without limitation, giving all reasonable consents thereto as long as any expenses thereof are borne by Purchaser. 9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by this Agreement, from and after the date hereof, Seller and MMP shall cause the Business to be conducted in the ordinary course. Except as contemplated by this Agreement or as consented to by Purchaser (which consent shall not unreasonably be withheld), from and after the date hereof, Seller and MMP shall act and cause the FCC Licensee Entities to act, as follows: (a) Seller and MMP will not adopt or cause the FCC Licensee Entities to adopt any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; (b) Seller shall not change or amend its charter or by-laws and MMP shall not change or amend the operating agreement dated as of January 1, 1996, as amended February 14, 1997 or cause or allow any of the FCC Licensee Entities to change or amend any limited partnership agreement; (c) Except (i) for the disposition of obsolete equipment in the ordinary course of business, (ii) the transfer of the Excluded Assets, (iii) the transfers of the MMP II Licenses to MMP II and the distribution of MMP II to Seller or (iv) as set forth on Schedule 9.3(c) to the MRI Agreement, neither Seller nor MMP shall sell, mortgage, pledge or otherwise dispose of any assets or properties owned, leased or used in the operation of the Business; (d) Neither Seller nor MMP or the FCC Licensee Entities will merge or consolidate with, agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity other than Seller's acquisition of MMP II pursuant to the MMP II Distribution; 42 (e) MMP will not merge or consolidate with, or agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity or cause the FCC Licensee Entities to do likewise; (f) Neither Seller nor MMP or the FCC Licensee Entities will authorize for issuance, issue or sell any additional shares of its capital stock or any securities or obligations convertible or exchangeable into shares of its capital stock or issue or grant any option, warrant or other right to purchase any shares of its capital stock; (g) Neither Seller nor MMP or the FCC Licensee Entities will incur, or agree to incur, any debt for borrowed money other than draws under the Company's or MMP's, as the case may be, existing revolving credit agreements; (h) Neither Seller nor MMP or the FCC Licensee Entities will change its historical practices concerning the payment of accounts payable; and (i) Neither Seller nor MMP or the FCC Licensee Entities will declare, issue, or otherwise approve the payment of dividends or distributions of any kind in respect of its stock or redeem, purchase or otherwise acquire any of its stock. (j) Seller and MMP shall maintain the existing insurance coverages on the assets of the Stations or other policies providing substantially similar coverages. (k) Seller and MMP will not permit any increases in the compensation of any of the employees of Seller or MMP except as required by law or existing contract or agreement or enter into or amend any Company Plan, MMP Plan, Company Benefit Arrangement, or MMP Benefit Arrangement other than as contemplated by MMP's operating budgets and in accordance with the past practice. (l) Neither Seller nor MMP or the FCC Licensee Entities shall enter into or renew any contract or commitment relating to the Stations or the Assets of MMP, or incur any obligation that will be binding on Purchaser after Closing, except in the ordinary course of business, and MMP shall not enter into, modify, amend, renew, or change any contract with respect to programming for the Stations for any period after the Closing Date without the prior approval of Purchaser. (m) Neither Seller nor MMP or the FCC Licensee Entities shall enter into any transactions with any Affiliate of Seller that will be binding upon Purchaser, or the Stations following the Closing Date. 43 (n) Seller and MMP shall use all commercially reasonable efforts to maintain the assets of the Stations or replacements thereof in good operating condition and adequate repair, normal wear and tear excepted. (o) Seller and MMP shall, in connection with the operation of the Stations, make expenditures materially consistent with the estimates of expenses set forth in MMP's operating budgets of the Stations and, including, without limitation, expenditures in respect of promotional, programming and engineering activities for the Station (and any employee expenditures related to such activities) for any period covered by the current operating budgets of the Stations. (p) Neither Seller nor MMP shall make or allow MTR or the FCC Licensee Entities to make or change any material Tax election, amend any Tax Return, or take or omit to take any other action not in the ordinary course of business and consistent with past practice that would have the effect of increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of MMP for any Post-Closing Tax Period. (q) Except as provided by Section 2.2 hereof and the MMP II Distribution, MMP and the FCC Licensee Entities shall not make distributions other than in the ordinary course of business and consistent with past practice, and shall not make non-pro rata distributions. (r) MMP shall not enter into or renew any Tradeout Agreement that would be binding on Purchaser after the Closing Date, except in the ordinary course of business, as contemplated by MMP's operating budgets and in accordance with past practice. (s) Except as provided in Section 9.3(r) above, MMP shall not enter into or renew any Time Sales Agreement except in the ordinary course of business and which are for cash at prevailing rates for a term not exceeding twelve (12) months. (t) MMP shall not acquire or enter into or renew any Local Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network Affiliation Agreement, without the prior approval of Purchaser other than as contemplated by this Agreement, the Management Agreement, the MRI Agreement, and the Investor Agreement. (u) Neither Seller nor MMP shall enter into or become subject to any employment, labor, union or professional service contract not terminable at will, or any bonus, pension, insurance, profit sharing, incentive, deferred compensation, severance pay, retirement, hospitalization, employee benefit, or other similar plans, or increase the 44 compensation payable or to become payable to any employee, except in the ordinary course of business, other than any value appreciation rights agreements with current employees of MMP, all of which liabilities shall be paid by MMP at or prior to Closing. (v) Neither Seller nor MMP or the FCC Licensee Entities shall take any action which may jeopardize the validity or enforceability of or rights under the FCC Licenses. (w) Before the Closing, MMP shall pay all one-time fees under Section 3.1 of the Time Brokerage Agreements (LMAs") aggregating $1,430,000.00 and MMP shall amend LMAs with the LMA Stations to reflect the payment by MMP before the Closing of the fees set forth in Section 3.1 of the LMAs and the reduction of continuing fees as a result of such payments. 9.4. H-S-R ACT. Each of Purchaser and Seller shall, within ten Business Days following the date hereof, file duly completed and executed Pre-Merger Notification and Report Forms as required under the H-S-R Act and shall otherwise use their respective best efforts to comply promptly with any requests made by the Federal Trade Commission ("FTC") or the Department of Justice ("DOJ") pursuant to the H-S-R Act or the regulations promulgated thereunder. Seller shall cause MMP, to the extent required by law, to join in or provide information in connection with such filing, including, but not limited to, any response to any request by the FTC or DOJ. All filing fees and other similar payments in connection with the H-S-R Act shall be split equally by Purchaser and the Seller. 9.5. FCC APPLICATION. (a) Each of Purchaser, MMP and Seller shall, within seven Business Days following the date hereof, file with the FCC the FCC Application; provided that the parties shall cooperate with each other in the preparation of the FCC Application and shall in good faith and with due diligence take all reasonable steps necessary to expedite the processing of the FCC Application and to secure such consents or approvals as expeditiously as practicable; and provided further that MMP shall cause the FCC Licensee Entities, to the extent deemed reasonably necessary by counsel to Purchaser to join in and provide information in connection with the FCC Application and comply with the immediately preceding provisions and 9.5(b) below. If the Closing shall not have occurred for any reason within the initial effective periods of the granting of FCC approval of the FCC Application, and no party shall have terminated this Agreement under Section 14, the parties shall jointly request and use their respective best efforts to obtain one or more extensions of the effective periods of such grants. No party shall knowingly take, or fail to take, any action the intent or reasonably anticipated consequence of which would be to cause the FCC not to grant approval of the FCC Application. 45 (b) Seller and MMP, as the case may be, shall publish (and cause the FCC Licensee Entities to publish) the notices required by the FCC Rules and Regulations relative to the filing of the FCC Application. Copies of all applications, documents and papers filed after the date hereof and prior to the Closing, or filed after the Closing with respect to the transaction under this Agreement, by Purchaser, Seller, MMP, or the FCC Licensee Entities with the FCC shall be mailed to the other simultaneously with the filing of the same with the FCC. Each party shall bear its own costs and expenses (including the fees and disbursements of its counsel) in connection with the preparation of the portion of the application to be prepared by it and in connection with the processing of that application. All filing and grant fees, if any, paid to the FCC, shall be split equally by Purchaser and the Seller. None of the information contained in any filing made by Purchaser or Seller with the FCC with respect to the transaction contemplated by this Agreement shall contain any untrue statement of a material fact. (c) FCC APPLICATIONS TO TRANSFER CERTAIN FCC LICENSES. Seller and MMP shall cause the FCC Licensee Entities holding the FCC Licenses for Television Stations WKEF-TV in Dayton, Ohio, WEMT-TV in Greeneville, Tennessee, within five (5) Business Days following the date hereof, to file with the FCC the MMP II FCC Applications and take all reasonable steps necessary to expedite the processing of the MMP II FCC Applications to secure the Consent of the FCC to the transfer of control of the FCC Licenses from MMP to MTC. 9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit Seller (a) to have reasonable access to the books and records of Purchaser and those retained or maintained by the Company relating to the operation of the Business prior to the Closing or after the Closing to the extent related to transactions or events occurring prior to the Closing, and (b) to have reasonable access to employees of the Company and Purchaser to obtain information relating to such matters. Purchaser shall maintain such books and records for a period of four (4) years following the Closing. 9.7. EMPLOYEES AND EMPLOYEE BENEFITS. Purchaser is not planning or contemplating, and has not made or taken, any decisions or actions concerning the employees of the Stations after the Closing Date that would require the service of notice under the Worker Adjustment and Retraining Notification Act of 1988, as amended, (the so-called WARN Act) or any other similar law. 9.8. INTERRUPTION OF BROADCAST TRANSMISSION. (a) In the event of any loss, damage or impairment, confiscation or condemnation of any of the assets of the Stations prior to the completion of the Closing 46 that interferes with the normal operation of the Stations, MMP shall notify Purchaser of same in writing immediately, specifying with particularity the loss, damage or impairment, confiscation or condemnation incurred, the cause thereof, if known or reasonably ascertainable, and the insurance coverage. MMP shall apply the proceeds of any insurance policy, judgment or award with respect thereto and take such other commercially reasonable actions, as determined in its sole discretion, as are necessary to repair, replace or restore such assets of any Station so damaged to their prior condition as soon as possible after such loss, damages or impairment, confiscation or condemnation. (b) If before the Closing Date, due to damage or destruction of the assets of any Station (other than WMMP-TV in the Charleston, South Carolina market), the regular broadcast transmission of one (1) or more Television Stations or two (2) or more Radio Stations in the normal and usual manner is interrupted for a period of twelve (12) continuous hours or more, MMP shall give prompt written notice thereof to Purchaser. If on the Closing Date, due to damages or destruction of the assets of one (1) or more Television Stations (other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more Radio Stations the regular broadcast transmission of one (1) or more Television Stations (other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more Radio Stations in the normal and usual manner is interrupted such that the regular broadcast signal of any such Station (including its effective radiated power) is diminished in any material respect, then (i) MMP shall immediately give written notice thereof to Purchaser; and (ii) Purchaser shall have the right, by giving prompt written notice to the other, to postpone the Closing Date for a period of up to sixty (60) days provided, however, that the Closing shall occur no later than ten (10) Business Days after regular broadcast transmission has been restored. (c) In the event any one (1) or more Television Stations (other than WMMP-TV in Charleston, South Carolina market) or two (2) or more Radio Stations normal and usual transmission has not been resumed by the Closing Date as postponed pursuant to section (b) above, Purchaser may, pursuant to Section 14.1(e), terminate this Agreement by written notice to the Sellers' Agent. Notwithstanding the foregoing, however, Purchaser may, at its option, proceed to close this Agreement and complete the restoration and replacement of any damaged assets of the Station in question after the Closing Date, MMP shall deliver or assign to Purchaser all insurance or other proceeds received in connection therewith to the extent such proceeds are received by or payable to the Company or MMP and have not therefore been used in or committed to the restoration or replacement of the assets. (d) If before the Closing Date, due to damage or destruction of the assets the regular broadcast transmission of any Station (other than WMMP-TV in the Charleston, South Carolina market) in the normal and usual manner is interrupted for a 47 period of seven (7) continuous days or more, MMP shall give prompt written notice thereof (the "Interruption Notice") to Purchaser. Upon receipt of the Interruption Notice, Purchaser shall have the right, in its sole and absolute discretion, by giving prompt written notice thereof to Seller and MMP within two (2) Business Days of the date of the Interruption Notice, to terminate this Agreement with the effect specified in Section 14.2(b) hereof. (e) Until the Closing Date, MMP will maintain and cause MMP to maintain the existing insurance coverages listed on Schedule 5.3l to the MRI Agreement on the Stations and each Station's assets. 9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and is not relying on the specification of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agrees not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. 9.10. COLLECTION OF ACCOUNTS RECEIVABLE. (a) At the Closing, Sellers' Agents shall designate Purchaser as its agent solely for the purposes of collecting the MMP Accounts Receivable. Purchaser will collect the MMP Accounts Receivable during the period beginning on the Closing Date and ending on the 180th day after the Closing Date (the "Collection Period") with the same care and diligence Purchaser uses with respect to its own accounts receivable and hold all such MMP Accounts Receivable in trust for Sellers until remitted by Purchaser to the Indemnification Escrow Agent or the Collections Account pursuant hereto. Purchaser shall not make any referral or compromise of any of the MMP Accounts Receivable to a collection agency or attorney for collection and shall not settle or adjust the amount of any of the MMP Accounts Receivable without the written approval of Sellers' Agent. If, during the Collection Period, Purchaser receives monies from an account debtor of Purchaser that is also an account debtor of MMP with respect to any MMP Accounts Receivable, Purchaser shall credit the sums received to the oldest account due, except where an account is disputed by the account debtor as properly due, and the account debtor has so notified Purchaser in writing, in which case, payments received shall be applied in accordance with the account debtor's instructions; provided that upon resolution of such dispute if any amounts in dispute are received by Purchaser, Purchaser shall remit such amounts to the Indemnification Escrow Agent in accordance with the Indemnification Escrow Agreement up to the amount of the Additional Indemnification Amount Deposit and, thereafter, to the Collections Account. 48 (b) On the ninetieth (90th) day after the Closing Date and on or before the fifth Business Day after the end of each full fifteen (15) day period thereafter during the Collection Period, Purchaser shall deliver to Sellers' Agents a list of the amounts collected by Purchaser before the end of such period with respect to the Accounts Receivable. On or before the fifth Business Day after the end of the Collection Period, Purchaser shall deliver to Sellers' Agents a list of all of the Accounts Receivable that remain uncollected. (c) Sellers' Agents shall establish and maintain during the Collection Period (and for as long after the Collection Period as Sellers deem appropriate) a bank account (the "Collections Account") at a commercial bank in Norfolk, Virginia, as notified in writing by Sellers' Agents to Purchaser for the deposit of collections of the MMP Accounts Receivable in accordance with this Section 9.10. Sellers' Agents shall have sole disbursement authority over the Collections Account. On the ninetieth (90th) day after the Closing Date (or if such day is not a Business Day, on the next succeeding Business Day), Purchaser shall (i) deposit with the Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement all amounts collected with respect to any MMP Accounts Receivable, not to exceed the excess of $12,750,000 over the Initial Deposit (the "Additional Indemnification Amount Deposit"), and (ii) deposit in the Collections Account any other MMP Accounts Receivable collected by Purchaser as of such date. On and after the ninetieth (90th) day after the Closing Date until the expiration of the Collections Period, within five (5) Business Days of the end of each full fifteen (15) day period, Purchaser shall deposit all amounts collected with respect to the Accounts Receivable with the Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement until the total of all amounts deposited pursuant to the previous sentence and this sentence equals the Additional Indemnification Amount Deposit and, thereafter, in the Collections Account. Sellers' Agents shall be entitled to dispose of all amounts deposited in the Collections Account from time to time as it chooses, in its sole discretion, and Purchaser and the Indemnification Escrow Agent shall have no rights therein; provided, however, that Purchasers shall have no liability whatsoever to Sellers with respect to Sellers' Agents disposition of any amounts disbursed by Sellers' Agent from the Collections Account. (d) After the expiration of the Collection Period, Purchaser shall have no further obligation hereunder other than (1) so long as Sellers' Agents continue to maintain the Collections Account, to deposit in such account any payments with respect to any of the MMP Accounts Receivable that Purchaser subsequently receives, and (2) thereafter, to remit directly to Sellers' Agents any payments with respect to any of the MMP Accounts Receivable that Purchaser subsequently receives. 49 (e) Any MMP Accounts Receivable remaining uncollected 180 days after the Closing Date shall be transferred to Sellers' Agents, together with all files concerning the collection or attempt to collect such MMP Accounts Receivable hereunder, and Purchaser shall thereafter have no further responsibility with respect thereto. (f) Purchaser shall have no right to setoff any amounts collected for MMP Accounts Receivable against any amounts owed to Purchaser by Seller; provided that this Section 9.10 shall not be deemed to limit the right of Purchaser to make claims against the Indemnification Amount in accordance with, and subject to, the terms and conditions of this Agreement and the Indemnification Escrow Agreement. 9.11. OTHER ACQUISITIONS. Without limiting any other provisions of this Agreement, prior to the Closing, without the prior written consent of Sellers' Agents, neither Purchaser nor any of its subsidiaries or any party acting directly or indirectly by or on behalf of any of them shall acquire or enter into any agreement to acquire a television station or radio station in any markets in which any Television Station or Radio Station currently broadcasts, if such acquisition would materially delay the granting of the FCC Application; provided, however, that nothing in this Section 9.11 shall be construed to preclude Purchaser proceeding to closing with respect to any transaction pending as of the date hereof. 9.12. PAYMENT OF CERTAIN LIABILITIES PRIOR TO CLOSING. Seller and MMP shall comply in all respects with their obligations under Section 2.2(b) of this Agreement. 9.13. RESERVED 9.14. VALUE APPRECIATION RIGHTS AND INCENTIVE FEES. Before Closing, MMP shall make all payments, discharge all obligations and terminate any and all Value Appreciation Rights Agreements ("VARS"), and the Management Incentive Agreements ("Incentive Agreements"), including, but not limited to, the VARS and Incentive Agreements listed on Schedules 5.3j and 5.3m to the MRI Agreement. 50 SECTION 10 INDEMNIFICATION --------------- 10.1. INDEMNIFICATION OF PURCHASER BY SELLER. (a) Subject to Section 10.3 hereof after the Closing Date, Seller shall indemnify and hold Purchaser harmless from and against any and all Losses, however incurred, which arise out of or result from any breach by Seller of any representation or warranty of Seller in Section 5.1 of this Agreement. (b) Subject to Section 10.3 hereof after the Closing Date, Seller shall indemnify and hold Purchaser harmless from and against any and all Losses, howsoever incurred, which arise out of or result from: (i) any breach of any representation or warranty of Seller set forth in Sections 5.2, 5.3 or 5.4 of this Agreement; provided, however, for purposes of this Section 10.1(b)(i), the representation set forth in Sections 5.2c and 5.3d will be deemed not to include the requirement of a MMP Material Adverse Effect; (ii) the material failure by Seller to perform any covenant of Seller contained herein; (iii) breaches by Seller, MMP, MTR or any of the FCC License Entities of other agreements and certificates specifically contemplated hereby; (iv) any and all Taxes of MTR, MMP and the FCC Licensee Entities (including ay liability of MTR, MMP or the FCC Licensee Entities for Taxes of any other entity or person) for any Pre-Closing Tax Period except to the extent that such Taxes are specifically identified in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii); (v) RESERVED (vi) any liabilities under the Shareholder Settlement Agreements; or (vii) the Closing Date Liabilities, to the extent the Closing Date Liabilties exceed (A) the aggregate cash equivalents and other cash items retained as 51 provided by Section 2.2(b) and (B) payments made from the Indemnification Escrow as provided by Section 2.2(b)(iii). (c) For purposes of Section 10.1(b)(iv), Taxes of MTR for Pre-Closing Tax Periods shall be deemed to include Taxes payable by MTR, Purchaser, or Purchaser's Affiliates that are attributable to items of income, gain, loss, deduction, and credit of MMP and the FCC Licensee Entities accruing through the Closing Date, determined on the basis of a closing of the books of MMP and the FCC Licensee Entities as of that date, notwithstanding that such items may be reported in Taxable Periods ending after the Closing Date. 10.2. INDEMNIFICATION OF SELLER BY PURCHASER. Subject to Section 10.3 hereof after the Closing, Purchaser shall indemnify and hold Seller harmless from and against any and all Losses, howsoever incurred, which arises out of or results from: (a) any breach by Purchaser of any representation or warranty of Purchaser set forth in Section 6 of this Agreement; or (b) the material failure by Purchaser to perform any covenant of Purchaser contained herein. (c) any and all Taxes of MTR, MMP and the FCC Licensee Entities (including any liability of MTR, MMP or the FCC Licensee Entities for Taxes of any other persons) for any Post-Closing Tax Period except to the extent that (i) such Taxes should have been but were not specifically identified in the Closing Date Liabilities or are described in Section 10.1(c), or (ii) such Taxes arise out of, result from or are attributable to a breach of any representation, warranty or covenant of Sellers set forth in this Agreement. 10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION OBLIGATIONS. Seller's obligation to indemnify Purchaser pursuant to Section 10.1 shall be subject to all of the following limitations: (a) Notwithstanding anything contained in this Agreement or applicable law to the contrary, Purchaser agrees that the payment of any claim (whether such claim is framed in tort, contract, or otherwise) made by Purchaser for indemnification hereunder subsequent to the Closing Date, for whatever reason, shall be limited to, and shall only be made from, the Indemnification Amount in accordance with the Indemnification Escrow Agreement and, except for claims against the Indemnification Amount, Purchaser waives and releases, and shall have no recourse against, Seller as a result of the breach of any 52 representation, warranty, covenant or agreement of Seller contained herein, or otherwise arising out of or in connection with the transactions contemplated hereby or the operation of the Stations, and such indemnification shall be the sole and exclusive remedy for Purchaser with respect to any such claim for indemnification after the Closing Date; provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Sellers' fraud. The Indemnification Escrow shall be disbursed in accordance with the Indemnification Escrow Agreement. (b) Anything in this Agreement or any applicable law to the contrary notwithstanding, it is understood and agreed by Purchaser that, other than with respect to Seller (but not including any partner, director, officer, employee, agent or Affiliate Seller (including any shareholder, director, officer, employee, agent or Affiliate of the Seller)) as expressly provided for in Section 10.1, no partner, director, officer, employee, agent or Affiliate of Seller (including any shareholder, director, officer, employee, agent or Affiliate of Seller) shall have (i) any personal liability to Purchaser as a result of the breach of any representation, warranty, covenant or agreement of Sellers contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Stations, or (ii) any personal obligation to indemnify Purchaser for any of Purchaser's claims pursuant to Section 10.1 and Purchaser waives and releases and shall have no recourse against any of such parties described in this Section 10.3(c) as a result of the breach of any representation, warranty, covenant or agreement of Seller contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Stations; provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Seller's fraud. (c) Notwithstanding any other provision of this Agreement to the contrary, Seller shall not be liable to Purchaser in respect of any indemnification hereunder until the aggregate amount of Losses of Purchaser under this Agreement, the MRI Agreement, the Investors Agreement and the Management Agreement exceeds Two Hundred Fifty Thousand Dollars ($250,000.00) (the "Basket Amount"), and then only to the extent of the excess of Losses over the amount of One Hundred Twenty Five Thousand Dollars ($125,000.00); provided, however, that this paragraph shall not apply to (i) payments pursuant to Section 2.2(b)(iii), (ii) indemnification pursuant to Section 10.1(b)(iv), 10.1(b)(vi), and 10.1(b)(vii) (to the extent indemnification pursuant to Section 10.1(b)(vii) relates to an item disclosed on a Schedule and/or set forth on the Estimate Certificate or the Accountant's Certificate), or (iii) indemnification pursuant to Sections 10.1(b)(i) for breaches of the representations and warranties set forth in Sections 5.2m, 5.3r, and 5.41. (d) In determining the amount of any Tax or other Loss for which 53 indemnification is provided under this Agreement, such Loss shall be (i) net of any insurance recovery made by the indemnified party, (ii) reduced to take into account any net Tax benefit realized by the indemnified party arising from the deductibility of such Tax or Loss, and (iii) increased to take account of any net Tax cost incurred by the indemnified party arising from the receipt of indemnification payments hereunder. Any indemnification payment hereunder shall initially be made without regard to this paragraph and shall be reduced to reflect any net Tax benefit or increased to reflect any net Tax cost only after the indemnified party has actually realized such benefit or cost. For purposes of this Agreement, an indemnified party shall be deemed to have "actually realized" a net Tax benefit or net Tax cost to the extent that, and at such time as, the amount of Taxes payable by such indemnified party is (x) reduced below the amount of Taxes that such indemnified party would have been required to pay but for the deductibility of such Tax or Losses, and (y) increased above the amount of Taxes that such indemnified party would have been required to pay but for the receipt of such indemnification payments. The amount of any reduction hereunder shall be adjusted to reflect any final determination (which shall include the execution of Form 870-AD or successor form) with respect to the indemnified party's liability for Taxes. Any indemnity payments under this Agreement shall be treated as an adjustment to the Purchase Price for Tax purposes, unless a final determination with respect to the indemnified party or any of its affiliates causes any such payment not to be treated as an adjustment to the Purchase Price. (e) No claim for indemnification for Losses shall be made after expiration of the applicable period set forth in Section 7.1 hereof. (f) Anything to the contrary in this Section 10.3 notwithstanding, the terms, conditions and limitations set forth in this Section 10.3 do not apply to or limit Purchaser's rights under Section 14.2. 10.4. NOTICE OF CLAIM; DEFENSE OF ACTION. (a) An indemnified party shall promptly give the Sellers' Agent notice of any matter which an indemnified party has determined has given or could give rise to a right of indemnification under this Agreement, stating the nature and, if known, the amount of the Losses, and method of computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right to indemnification is claimed or arises; provided that the failure of any party to give notice promptly as required in this Section 10.4 shall not relieve any indemnifying party of its indemnification obligations except to the extent that such failure materially prejudices the rights of such indemnifying party. The indemnified party shall give continuing notice promptly thereafter of all developments coming to Sellers' Agent's attention materially 54 affecting any matter relating to any indemnification claims. (b) Except as otherwise provided in Section 10.5, the obligations and liabilities of an indemnifying party under this Section 10 with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Section 10, shall be governed by and contingent upon the following additional terms and conditions: (i) With respect to third party claims, promptly after receipt by an indemnified party of notice of the commencement of any action or the presentation or other assertion of any claim which could result in any indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified party shall give prompt notice thereof to Sellers' Agent and the indemnifying part(ies) shall be entitled to participate therein or, to the extent that it desires, assume the defense thereof with its own counsel. (ii) If the indemnifying part(ies) elects to assume the defense of any such action or claim, the indemnifying part(ies) shall not be liable to the indemnified party for any fees of other counsel or any other expenses, in each case incurred by such indemnified party in connection with the defense thereof. (iii) The indemnifying part(ies) shall be authorized, without consent of the indemnified party being required, to settle or compromise any such action or claim, provided that such settlement or compromise includes an unconditional release of the indemnified party from all liability arising out of such action or claim. (iv) Whether or not an indemnifying part(ies) elects to assume the defense of any action or claim, the indemnifying part(ies) shall not be liable for any compromise or settlement of any such action or claim effected without its consent, such consent not to be unreasonably withheld. (v) The parties agree to cooperate to the fullest extent possible in connection with any claim for which indemnification is or may be sought under this Agreement, including, without limitation, making available all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably requested by the other party. 10.5 TAX CONTESTS. (a) If any party receives written notice from any Taxing Authority of any Tax Proceeding with respect to any Tax for which the other party is obligated to provide indemnification under this Agreement, such party shall give prompt written notice thereof to the other party; provided, however, that the failure to give such notice shall not affect 55 the indemnification provided hereunder except to the extent that the failure to give such notice materially prejudices the indemnifying party. (b) Seller, acting through Sellers' Agents, shall have the right, at its own expense, to control and make all decisions with respect to any Tax Proceeding relating solely to Taxes of Seller and MTR for Taxable Periods ending on or before the Closing Date; provided, that Purchaser and counsel of its own choosing shall have the right, at Purchaser's own expense, to participate fully in all aspects of the prosecution or defense of such Tax Proceeding; and provided further that Seller shall not settle any such Tax Proceeding without the prior written consent of Purchaser if such settlements could increase the past, present or future Tax liability of Purchaser or any of its Affiliates, or any Tax Liability of MTR for any Post-Closing Tax Period by an amount greater than $25,000. (c) Seller, acting through Sellers' Agents, shall have the right, at its own expense, to jointly control and participate with Purchaser in all Tax Proceedings relating to Taxes of MTR for a Straddle Period. If Seller exercises such right, neither party shall settle any such Tax Proceeding without the prior written consent of the other. (d) If Seller, acting through Sellers' Agents, does not exercise its right to assume control of or participate in any Tax Proceeding as provided under this Section 10.5, Purchaser may, without waiving any rights to indemnification hereunder, defend or settle the same in such manner as it may deem appropriate in its sole and absolute discretion. (e) Purchaser shall control all Tax Proceedings relating to Taxes or Tax Returns of MMP and the FCC Licensee Entities. In the case of Tax Proceedings relating solely to Taxable Periods of MMP ending on or before the Closing Date and Straddle Periods of MMP, Purchaser shall keep Seller's Agents fully informed as to the status of any such Tax Proceeding and shall not settle such a Tax Proceeding without the prior written consent of Seller's Agents, which consent shall not be unreasonably withheld; provided that Seller's Agents' consent to a settlement shall only be required if such settlements could increase Sellers' Taxes or Taxes for which Seller has indemnification responsibility hereunder by an amount greater than $25,000. (f) In the event that the provisions of this Section 10.5 and the provisions of Section 10.4(b) conflict or otherwise each apply by the terms, this Section 10.5 shall exclusively govern all matters concerning Taxes. 56 SECTION 11 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE - ----------------------------------------------------------- 11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The obligation of Purchaser to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Seller shall have complied in all material respects with its agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Seller contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Purchaser shall have received a certificate of one of Sellers' Agents, dated as of the Closing Date and signed by Sellers' Agent, certifying as to the fulfillment of the condition set forth in this Section 11.1(a) ("Sellers' Bring-Down Certificate"). (b) No statute, rule or regulation, or order of any court or administrative agency shall be in effect which restrains or prohibits Purchaser from consummating the transactions contemplated hereby and no action or proceeding shall be pending wherein an unfavorable ruling would affect any right to own the Assets or the assets of the Station. (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) All consents identified on Schedules 5.2h hereto and Schedules 5.3e and 5.3m to the MRI Agreement as required consents shall have been received. (e) The Final Order approving the applications for transfer of control of the FCC Licenses (other than the MMP II Licenses) shall have been obtained. All the material conditions contained in the Final Order required to be satisfied on or prior to the Closing Date shall have been duly satisfied and performed. Notwithstanding the foregoing, other than conditions relating the broadcast industry generally, if the consent of the FCC is conditional or qualified in any manner that has a material adverse effect on Purchaser or requires Purchaser or any of its subsidiaries to divest any television or radio station owned, operated or programmed by Purchaser or any of its subsidiaries. Purchaser may, nevertheless, in its sole discretion, require the consummation of the transactions contemplated by this Agreement, but shall not be required to do so. (f) Seller shall have delivered to Purchaser at the Closing each document required by Section 12.1 hereof. 57 (g) Since the date of this Agreement through the Closing Date, there shall not have been either a Material Adverse Effect with respect to the Assets or a MMP Material Adverse Effect with respect to the business, operations, properties, assets, or condition of MMP, and no event shall have occurred or circumstance exist that reasonably could be expected to result in either a Material Adverse Effect or an MMP Material Adverse Effect. (h) The transfer of the FCC Licenses for Television Stations WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, Tennessee to MMP II and the distribution of MMP II to Seller shall have occurred pursuant to the Assignment and Assumption Agreement and the Distribution Agreement substantially in the form attached hereto as Exhibit C, and MMP and MMP II shall have entered into one or more Time Brokerage Agreements generally in the form (subject to such revisions, additions, and deletions as determined by counsel to MMP II and Purchaser prior to the Closing) attached hereto as Exhibit D. (i) The closings under the Investors Agreement, the MRI Agreement and the Management Agreement shall have occurred or will occur simultaneously with the Closing. (j) Seller or MMP, as the case may be, shall have complied with its obligations under Section 9.12. 11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER. The obligation of Seller to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Purchaser shall have complied in all material respects with its agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Purchaser contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Seller shall have received a certificate of Purchaser, dated as of the Closing Date and signed by an officer of Purchaser, certifying as to the fulfillment of the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down Certificate"). (b) No statute, rule or regulation or order of any court or administrative agency shall be in effect which restrains or prohibits Seller from consummating the transactions contemplated hereby. 58 (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) The issuance by the FCC of a Final Order approving the applications for transfer of control of the FCC Licenses contemplated by this Agreement shall have occurred, and there shall have been duly satisfied and performed on or prior to the Closing Date all the material conditions contained in the Final Order required to be so satisfied; provided, however, Purchaser, in its sole discretion, may waive the necessity of a "Final Grant" by the FCC and close following an "Initial Grant". (e) Purchaser shall have delivered to Seller at the Closing the Purchase Price and each document required by Section 12.2 hereof. (f) The closings under the Investors Agreement, the MRI Agreement and the Management Agreement shall have occurred or occur simultaneously with the Closing. SECTION 12 DELIVERIES AT THE CLOSING 12.1. DELIVERIES BY SELLERS. At the Closing, Seller will deliver or cause to be delivered at the Closing to Purchaser: (a) Seller's Bring-Down Certificate; (b) a legal opinion of Clark & Stant, P.C., counsel to Seller and MMP substantially in the form attached as Exhibit E hereto; (c) a legal opinion of counsel to the FCC Licensee Entities in the form attached hereto as Exhibit F; (d) a bill of sale, assignment and other transfer documents, dated as of the Closing Date and executed by the Seller, transferring the Assets to Purchaser; (e) [RESERVED]; (f) a certificate as to the existence of Seller issued by the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; (g) a certificate as to the existence and good standing of MMP issued by 59 the Secretary of the State Corporation Commission of the Commonwealth of Virginia not more than five (5) Business Days before the Closing Date and certificates issued by the appropriate governmental authorities in each jurisdiction in which MMP is qualified to do business and a certificate as to the existence for each of the FCC Licensee Entities of the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; (h) receipt for Purchase Price; (i) [RESERVED]; (j) the certificate(s) required by Section 8.6; (k) a copy of any instrument evidencing any consents received; (l) the Indemnification Escrow Agreement duly executed by Seller and Sellers' Agent; (m) a copy of any instrument evidencing any consent received, including, but not limited to, estoppel certificates from MMP's landlords with respect to the Real Property; (n) RESERVED; (o) the Estimate Certificate; (p) RESERVED (q) the amendments to the LMAs in a form reasonably satisfactory to Purchaser duly executed by the necessa ry parties thereto; and (r) evidence reasonably satisfactory to Purchaser that the Limited Partnership Agreements of the FCC Licensee Entities have been amended, and that sufficient actions have been taken by or with respect to MMP, to require allocation of items of income, gain, loss, deduction and credit with respect to transferred interests in the FCC Licensee Entities and MMP based on the interim closing of the books method authorized by Code Section 706 and the regulations promulgated thereunder; (s) release and indemnity agreements properly executed by Seller and the shareholders of Seller in a form reasonably satisfactory to Purchaser releasing MMP from all liabilities of Taxes of such persons under certain Assignment and Assumption 60 Agreements dated as of January 1, 1996, and indemnifying and holding harmless MMP from and against all such liabilities; and (t) such other documents as Purchaser shall reasonably request. 12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be delivered at the Closing to Seller, the Disbursing Agent or the Indemnification Escrow Agent, as the case may be: (a) Purchaser's Bring-Down Certificate; (b) a legal opinion of Thomas & Libowitz, P.A., counsel to Purchaser, substantially in the form attached as Exhibit G hereto; (c) the Purchase Price as required pursuant to Section 3.1 hereof; (d) the Indemnification Escrow Agreement duly executed by Purchaser; (e) a certificate as to the existence and good standing of the Purchaser issued by the Maryland Department of Assessments and Taxation of the State of Maryland dated as of the Closing Date; (f) one or more fully executed Time Brokerage Agreements as negotiated pursuant to Section 11.1(h); and (g) such other documents as Seller shall reasonably request. SECTION 13 EXPENSES Except as provided in Sections 9.4 and 9.5, each party will pay its own fees, expenses, and disbursements and those of its counsel in connection with the subject matter of this Agreement (including the negotiations with respect hereto and the preparation of any documents) and all other costs and expenses incurred by it in the performance and compliance with all conditions and obligations to be performed by it pursuant to this Agreement or as contemplated hereby. SECTION 14 TERMINATION 61 14.1 TERMINATION. This Agreement may be terminated: (a) At any time by mutual written consent of Purchaser and Seller; (b) By either Purchaser or Seller, if the terminating party is not in default or breach in any material respect of its obligations under this Agreement, if the Closing hereunder has not taken place on or before October 31, 1998, except where the Closing has been postponed pursuant to the provisions of Section 9.8, in which case the applicable date shall be upon the expiration of the period referred to in Section 9.8(b) (the "Termination Date"); (c) by Seller, if Seller's not in default or breach in any respect of their obligations under this Agreement, if all of the conditions in Section 11.2 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.8); (d) by Purchaser, if Purchaser is not in default or breach in any material respect of its obligations under this Agreement, if all of the conditions set forth in Section 11.1 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.8); (e) by Purchaser, pursuant to Section 9.8. 14.2 PROCEDURE AND EFFECT OF TERMINATION. (a) In the event of termination of this Agreement by either or both Purchaser and/or Seller pursuant to Sections 9.8 or 14.1 hereof, prompt written notice thereof shall forthwith be given to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any of the parties hereto, but subject to and without limiting any other rights of the parties specified herein in the event a party is in default or breach in any material respect of its obligations under this Agreement. If this Agreement is terminated as provided herein, all filings, applications and other submissions relating to the transactions contemplated hereby as to which termination has occurred shall, to the extent practicable, be withdrawn from the agency or other Person to which such filing is made. (b) If this Agreement is terminated pursuant to Section 14.1(d), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser and Purchaser shall have the right to pursue all remedies available hereunder at law or in equity, including, without limitation, the right to seek specific performance and/or actual monetary 62 damages, but excluding consequential and incidental damages. In recognition of the unique character of the property to be sold hereunder, and the damages which Purchaser will suffer in the event of a termination pursuant to the foregoing Sections of this Agreement, Seller hereby waives any defense that Purchaser has an adequate remedy at law for the breach of this Agreement by Seller. (c) If this Agreement is terminated pursuant to Section 14.1(c) and Purchaser shall be in breach in any material respect of its representations, warranties, covenants, agreements, or obligations set forth in this Agreement, then and in that event, Seller shall have the right to retain the amount delivered by Purchaser pursuant to Section 3.1(1) as liquidated damages, and as the sole and exclusive remedy of Seller as a consequence of Purchaser's default (which aggregate amount the parties agree is a reasonable estimate of the damages that will be suffered by Seller as a result of the default by Purchaser and does not constitute a penalty), the parties hereby acknowledging the inconvenience and nonfeasability of otherwise obtaining inadequate remedy. (d) If this Agreement is terminated pursuant to Sections 14.1(a), 14.1(b) and 14.1(e), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser. (e) A notice of termination made under any provision of Section 14.1 of this Agreement shall be deemed to be a notice of termination under the termination provisions of the Investor Agreement, the Management Agreement and the MRI Agreement. (f) In the event of a default by either party that results in a lawsuit or other proceeding for any remedy available under this Agreement, the prevailing party, to the extent it is the prevailing party, shall be entitled to reimbursement from the other party of its reasonable legal fees and expenses, whether incurred in arbitration, at trial, or on appeal. 63 SECTION 15 NOTICES All notices, requests, consents, payments, demands, and other communications required or contemplated under this Agreement shall be in writing and (a) personally delivered or sent via telecopy (receipt confirmed), or (b) sent by Federal Express or other reputable overnight delivery service (for next Business Day delivery), shipping prepaid, as follows: To Purchaser: SINCLAIR COMMUNICATIONS, INC. ------------ 2000 W. 41st Street Baltimore, Maryland 21211 Attention: David D. Smith Telecopy: (410) 467-5043 Telephone: (410) 662-1008 with copies Sinclair Communications, Inc. (which shall not constitute 2000 W. 41st Street notice) to: Baltimore, Maryland 21211 Attention: General Counsel Telecopy: (410) 662-4707 Telephone: (410) 662-1422 and Thomas & Libowitz, P.A. Suite 1100 100 Light Street Baltimore, Maryland 21202 Attention: Steven A. Thomas Telecopy: (410) 752-2046 Telephone: (410) 752-2468 64 To Sellers' Agents: Anthony R. Ignaczak ------------------ Quad-C, Inc. 230 East High Street Charlottesville, Virginia 22902 Telecopy: (804) 979-1145 Telephone: (804) 979-9227 Allen B. Rider, III Colonnade Capital, L.L.C. 13th Floor 901 East Byrd Richmond, Virginia 23219 Telecopy: (804) 782-6606 Telephone: (804) 782-3512 Stephen W. Burke Clark & Stant, P.C. Suite 900 One Columbus Center Virginia Beach, Virginia 23462 Telecopy: (757) 473-0395 Telephone: (757) 499-8800 or to such other Persons or addresses as any Person may request by notice given as aforesaid. Notices shall be deemed given and received at the time of personal delivery or completed telecopying, or, if sent by Federal Express or such other overnight delivery service one Business Day after such sending. SECTION 16 SELLERS' AGENTS --------------- 16.1. SELLERS' AGENTS. Seller hereby irrevocably appoints Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called the "Sellers' Agents") as his, her or its agent and attorney-in-fact to take any action required or permitted to be taken by Seller under the terms of this Agreement, including, without limiting, the generality of the foregoing, the payment of expenses relating to the transactions contemplated by the Agreement, and the right to waive, modify or amend any of the terms of this Agreement in any respect, whether or not material, and agrees to be bound by any and all actions taken by the Sellers' Agents on his or its behalf. Any action to be taken by the Sellers' Agents shall 65 be unanimous. In the event of the death, incapacity or liquidation of any of Sellers' Agents, such person or entity shall not be replaced, and the remaining Sellers' Agents shall continue in that capacity. Seller agrees to indemnify the Sellers' Agents from and against and in respect of any and all liabilities, damages, claims, costs, and expenses, including, but not limited to attorneys' fees, arising out of or due to any action by them as the Sellers' Agents and any and all actions, proceedings, demands, assessments, or judgments, costs, and expenses incidental thereto, except to the extent that the same result from bad faith or gross negligence on the part of the Sellers' Agents. Purchaser shall be entitled to rely exclusively upon any communications given by the Sellers' Agents on behalf of Seller, and shall not be liable for any action taken or not taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to disregard any notices or communications given or made by Seller unless given or made through the Sellers' Agents. SECTION 17 MISCELLANEOUS 17.1. HEADINGS. The headings contained in this Agreement (including, but not limited to, the titles of the Schedules and Exhibits hereto) have been inserted for the convenience of reference only, and neither such headings nor the placement of any term hereof under any particular heading shall in any way restrict or modify any of the terms or provisions hereof. Terms used in the singular shall be read in the plural, and vice versa, and terms used in the masculine gender shall be read in the feminine or neuter gender when the context so requires. 17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits attached to or referenced in this Agreement constitute an integral part of this Agreement as if fully rewritten herein. 17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. 17.4. ENTIRE AGREEMENT. This Agreement, the Investors Agreement, the Management Agreement, the MRI Agreement and the FCC Licensee Transfer Agreement, the Annexes, Schedules and Exhibits and the documents to be delivered hereunder and thereunder constitute the entire understanding and agreement between the parties hereto concerning the subject matter hereof. All negotiations and writings between the parties hereto are merged into this Agreement, the Investors Agreement, the Management Agreement, the MRI Agreement, the FCC Licensee Transfer Agreement, and there are no representations, warranties, covenants, understandings, or agreements, oral or otherwise, in 66 relation thereto between the parties other than those incorporated herein or to be delivered hereunder. 17.5. GOVERNING LAW. This Agreement is to be delivered in and should be construed in accordance with and governed by the laws of the Commonwealth of Virginia without giving effect to conflict of laws principles. 17.6. MODIFICATION. This Agreement cannot be modified or amended except in writing signed by each of the Purchaser and Seller's Agent. 17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights and obligations hereunder shall be assigned, delegated, sold, transferred, sublicensed, or otherwise disposed of by operation of law or otherwise, without the prior written consent of each of the other parties hereto; provided, however, that Purchaser may assign its rights and obligations hereunder to one or more subsidiaries so long as Purchaser is not relieved of its obligations hereunder; and provided further that any change of control in respect of Purchaser's parent, SBGI, shall not require the consent of Seller. In the event of such permitted assignment or other transfer, all of the rights, obligations, liabilities, and other terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against, the respective successors and assigns of the parties hereto, whether so expressed or not. 17.8. WAIVER. Any waiver of any provision hereof (or in any related document or instrument) shall not be effective unless made expressly and in a writing executed in the name of the party sought to be charged. The failure of any party to insist, in any one or more instances, on performance of any of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or of the future performance of any such term, covenant, or condition, but the obligations of the parties with respect hereto shall continue in full force and effect. 17.9. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and if any part of any provision is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, such provision may be changed, consistent with the intent of the parties hereto, to the extent reasonably necessary to make the provision, as so changed, legal, valid, binding, and enforceable. If any provision of this Agreement is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, and if such provision cannot be changed consistent with the intent of the parties hereto to make it fully legal, valid, binding and enforceable, then such provisions shall be stricken from this Agreement, and the remaining provisions of this Agreement shall not in any way be affected or impaired, but shall remain in full force and effect. 67 17.10. ANNOUNCEMENTS. From the date of this Agreement, all further public announcements relating to this Agreement or the transactions contemplated hereby will be made only as agreed upon jointly by the parties hereto, except that nothing herein shall prevent Seller or any Affiliate thereof or Purchaser from making any disclosure in connection with the transactions contemplated by this Agreement if required by applicable law or otherwise as a result of its, or its Affiliate's, being a public company, provided that prior notice of such disclosure is given to the other party hereto. 17.11. SPECIFIC PERFORMANCE. Sellers acknowledges that Purchaser will have no adequate remedy at law if Seller fails to perform its obligation to consummate the sale of Stock contemplated under this Agreement. In such event, Purchaser shall have the right, in addition to any other rights or remedies it may have, to specific performance of this Agreement. 17.12 FEES AND EXPENSES. Except as otherwise provided in this Agreement, each party shall pay their own expenses incurred in connection with the authorization, preparation, execution, and performance of this Agreement and the exhibits, Schedules, and other documentation, including all fees and expenses of counsel, accountants, and each party shall be responsible for all fees and commissions payable to any finder, broker, adviser, or other similar Person retained by or on behalf of such party; provided, however, that all transfer taxes, recordation taxes, sales taxes, and document stamps in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Seller and all other filing fees (including all FCC and H-S-R Act filing fees), and other charges levied by any governmental entity in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Seller. Purchaser hereby waives compliance with the provisions of any applicable bulk transfer law. 17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 17.14 INTERPRETATION. The Purchaser and Seller acknowledge and agree that the preparation and drafting of this Agreement and the Exhibits hereto are the result of the efforts of all parties to this Agreement and every covenant, term, and provision of this Agreement shall be construed according to its fair meaning and shall not be construed against any particular party as the drafter of such covenant, term, and/or provision. The 68 Purchaser and Seller agree that this Agreement is to be construed in a manner consistent with the terms of the Investors Agreement, the Management Agreement and the MRI Agreement. [SIGNATURE PAGES TO FOLLOW --REST OF PAGE LEFT INTENTIONALLY BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date and year first written above. MAX TELEVISION COMPANY, a Virginia corporation By _________________________________ its _____________________________ SINCLAIR COMMUNICATIONS, INC., a Maryland corporation By _________________________________ its _____________________________ 70 ANNEX 1 DEFINITIONS As used in the attached Asset Purchase Agreement, the following terms shall have the corresponding meaning set forth below: "Affiliate" of, or a Person "Affiliated" with, a specified Person, means a Person who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. "Agreement" has the meaning set forth in the preamble. "Allocable Portion" shall mean 0% in the case of each of Investors and MRI, 96.470% in the case of Seller and 3.530% in the case of Management. "Assets" has the meaning set forth in the Recitals. "Basket Amount" has the meaning set forth in Section 10.3(c). "Benefit Arrangement" shall mean any benefit arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Benefit Plan, including without limitation, employment agreements, severance agreements, executive compensation arrangements, including but not limited to stock options, restricted stock rights and performance unit awards, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discounts, employee loans, employee banking privileges, any plans subject to Section 125 of the code, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. "Benefit Plan" shall have the meaning given in Section 3(3) of ERISA. 71 "Broadcast Time Sales Agreement" shall mean all contracts and agreements pursuant to which MMP has sold commercial air time on the Stations for cash. "Business" means the business of owning and operating the Stations. "Business Day" means any day on which banks in New York City are open for business. "Cash Price" shall mean the excess of $252 million over the Funded Debt immediately prior to the Closing. "CERCLA" has the meaning set forth in Section 5.3q of the Agreement. "Closing" has the meaning set forth in Section 4 of the Agreement. "Closing Date Liabilities" has the meaning set forth in Section 2.2(b) of the Agreement. "Closing Date Tax Liabilities" shall have the meaning set forth in Section 2.2(b)(iv) of this Agreement. "Closing Date" has the meaning set forth in Section 4 of the Agreement. "Closing Date Estimated Accounts Receivable" has the meaning of an amount equal to the Seller's good faith estimate of Accounts Receivable of MMP as of the Closing Date, which have been outstanding for no more than 120 days, as set forth in the Certificate of Seller's Agent delivered to Purchaser five (5) days before the Closing Date. "Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time. "Company" refers to Seller in this Agreement. "Company Benefit Arrangement" shall mean any Benefit Arrangement sponsored or maintained by the Company or with respect to which the Company has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former directors, employees, or agents of the Company. 72 "Company Plan" shall mean, as of the Closing Date, any Benefit Plan for which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Benefit Plan maintained by the Company or to which the Company is obligated to make payments, in each case with respect to any present or former employees of the Company. Company Plan shall include any Qualified Plan terminated within the preceding six years. "Consents" means the consents, permits, or approvals of government authorities and other third parties necessary to lawfully and validly transfer the Stock and the Station assets to Purchaser to maintain the validity and effectiveness (any default or violation of the terms thereof) of any Material Contract and any licenses (including, without limitation, the FCC Licenses) to be transferred to Purchaser, or otherwise to consummate the transactions contemplated by this Agreement. "Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. "Disbursing Agent" means Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke. "Disbursement Agreement" means that certain Disbursement Agreement dated not later thirty (30) days prior to the Closing, among the Disbursing Agent and the Seller. "Environment" means any surface or subsurface physical medium or natural resource, including air, land, soil (surface or subsurface), surface waters, ground waters, wetlands, stream and river sediments, rock and biota. "Environmental Laws" means any federal, state, or local law, legislation, rule, regulation, ordinance or code of the United States or any subdivision thereof relating to the injury to, or the pollution or protection of, human health and safety or the Environment. "Environmental Liability" means any loss, liability, damage, cost or expense arising under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 73 "ERISA Affiliate" shall mean any Person that together with the Company or MMP, as applicable, would be or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any general partnership of which the Company or MMP, as applicable, is or has been a general partner. "Estimate Certificate" shall have the meaning set forth in Section 2.2(b)(i). "Excluded Assets" shall have the meaning set forth in Section 2.2. "FCC" has the meaning set forth in the recitals to the Agreement. "FCC Application" means the applications requesting approval and consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP II Transfers, and (ii) the transfer of control of the FCC Licenses to Purchaser or its assignee for those Television Stations and Radio Stations not included in the MMP II Transfers. "FCC Licenses" means those licenses, permits and authorizations issued by the FCC to the FCC Licensee Entities in connection with the business and operations of the Stations (together with any renewals, extensions, modifications or additions thereto between the date of this Agreement and the Closing Date. "FCC Licensee Entities" shall have the meaning set forth in the Recitals. "FCC Rules and Regulations" has the meaning set forth in Section 5.3h of the Agreement. "Final Order" means action by the FCC as to which no further steps (including those of appeal or certiorari) can be taken in any action or proceeding to review, modify or set the determination aside, whether under Section 402 or 405 of the Communications Act, or otherwise. "Financial Statements" means the unaudited balance sheet of Seller as of December 31, 1996 and the unaudited income statement for the year then ended. "Funded Debt" means indebtedness of MMP for borrowed money, including any and all fees, costs or other payments associated with its payoff or retirement other than (i) any indebtedness due after the Closing Date with respect to program contract liabilities, and (ii) Closing Date Liabilities. "GAAP" means generally accepted accounting principles. 74 "Hazardous Substances" means petroleum, petroleum products, petroleum-derived substances, radioactive materials, hazardous wastes, polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any materials containing asbestos, and any materials or substances regulated or defined as or included in the definition of "hazardous substances, "hazardous materials," "hazardous constituents," "toxic substances," "pollutants, "pollutants," "contaminants" or any similar denomination intended to classify substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or reactivity under any Environmental Laws. "H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Initial Deposit" means $12,750,000 less an amount equal to the lesser of $6,375,000 or ninety percent (90%) of the Closing Date Estimated Accounts Receivable. "Initial Grant" means the date of the publication of the FCC "Public Notice" announcing the grant of the "Assignment Applications" for the FCC License to be transferred hereunder which contain no conditions materially adverse to Purchaser. The term "Public Notice" and "Assignment Applications" have the same meaning herein as are generally given the same under existing FCC rules, regulation and procedures. "Intellectual Property" means the patents, patent applications, trademark registrations and applications therefor, service mark registrations and applications therefor, copyright registrations and applications therefor and trade names that are (i) owned by the Company and (ii) material to the continued operation of the Business. "IRS" means the Internal Revenue Service. "Incentive Agreements" has the meaning set forth in Section 9.14. "Indemnification Amount" means $12,750,000.00 deposited or collected pursuant to the Indemnification Escrow Agreement. "Indemnification Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. "Indemnification Escrow" has the meaning set forth in Section 3.1 of the Agreement. "Investors Agreement" has the meaning set forth in the Recitals. "Investors" has the meaning set forth in the Recitals. 75 "Knowledge or knowledge" shall mean with respect to Seller, MMP, MTR and the FCC Licensee Entities the actual knowledge (without any requirement of inquiry except as otherwise provided in the Agreement) of A. E. Loving, Jr., John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb, David J. Wilhelm and Jacquelyn D. Smullen, the general managers of the Stations, the managers and officers of MMP, and the officers and directors of Seller. "LMA Stations" shall have the meaning set forth in the Recitals. "Losses" means any loss, liability, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) but exclusive of incidental or consequential damages. "MMP Accounts Receivable" has the meaning given in Section 5.3s. "MMP's Benefit Arrangements" means any Benefit arrangement sponsored or maintained by MMP or by the FCC Licensee Entities or with respect to which MMP or the FCC Licensee Entities has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former director, employees, or agent of MMP or the FCC Licensee Entities. "MMP's Benefit Plan" means, as of the Closing Date, any Benefit Plan for which MMP or the FCC Licensee Entities is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Benefit Plan maintained by MMP or the FCC Licensee Entities or which MMP or the FCC Licensee Entities is obligated to make payments, in each case with respect to any present or former employees of MMP or the FCC Licensee Entities. MMP's Benefit Plan shall include any Qualified Plan terminated within the preceding six (6) years. "MMP II FCC Applications" means the application requesting the approval and consent of the FCC to the transfer of control of Television Stations WKEF-TV and WEMT-TV from MMP to MTC. "MMP Financial Statements" means the audited consolidated balance sheet of MMP at December 31, 1996, the audited consolidated statements of operations and cash flows for the year then ended, all notes thereto and the independent auditor's audit report thereon, together with the unaudited balance sheet of MMP at September 30, 1997 and the unaudited statement of operations for the nine (9) months then ended. "MMP Material Adverse Effect" shall mean a material adverse effect on the business, or financial condition of any Television Station with the exception of WMMP-TV 76 in the Charleston, South Carolina market or the Radio Stations taken as a whole. "MMP Real Property" means all real property owned or leased by MMP. "MRI" shall have the meaning set forth in the Recitals. "MRI Agreement" shall have the meaning set forth in the Recitals. "MTR" has the meaning set forth in the Recitals. "Management Agreement" shall have the meaning set forth in the Recitals. "Material Adverse Effect" shall mean a material adverse effect on the business, or financial condition of the Company taken as a whole. "Material Contract" means all agreements to which Seller or MMP is a party or by or to which it or its assets or properties are bound, except: (i) agreements for the cash sale of advertising time with a term of less than six months, (ii) agreements cancelable on no more than 90 days' notice without material penalty, or (iii) agreements which are otherwise immaterial to the Business and the Station. "Permitted Encumbrances" shall mean liens for taxes not yet due and payable; landlord's liens; liens for property taxes not delinquent; statutory liens that were created in the ordinary course of business; restrictions or rights required to be granted to governmental authorities or otherwise imposed by governmental authorities under applicable law; zoning, building or similar restrictions relating to or effecting property, including leasehold interests; all liens of record as of the date of this Agreement, but only if such liens do not materially effect the ownership or use of the MMP Real Property or leasehold interests and real property owned by others and operating leases for personal property and leased interests in property leased to others; liens and encumbrances on the MMP Real Property, currently of record as of the date hereof, and other liens or encumbrances on the MMP Real Property, in any case that individually or in the aggregate do not materially effect the current use and enjoyment thereof in the operation of any Station. "Person" means a natural person, a governmental entity, agency or representative (at any level of government), a corporation, partnership, joint venture or other entity or association, as the context requires. "Post-Closing Tax Period" means any Taxable Period or portion thereof beginning after the Closing Date. 77 "Pre-Closing Tax Period" means any Taxable Period or portion thereof that ends on or before the Closing Date. "Pro Rata Share" shall mean 26.9433% in the case of Investors, 1.6167% in the case of Management, 26.6519% in the case of MRI and 44.7881% in the case of Seller. "Purchase Price" shall mean the sum of (a) the Pro Rata Share of the excess of the Cash Price over 40% of the Step-Up, plus (b) the Allocable Portion of 40% of the Step-Up. "Purchaser" has the meaning set forth in the preamble to the Agreement. "Purchaser's Bring-Down Certificate" has the meaning set forth in Section 11.2(a) of the Agreement. "Purchaser's Knowledge" means the actual knowledge of the officers of Purchaser. "Qualified Plan" shall mean any Company Plan or MMP Plan that meets, purports to meet, or is intended to meet the requirements of Section 401(a) of the Code. "RLLP" shall have the meaning set forth in the Recitals. "Radio Stations" shall have the meaning set forth in the Recitals. "Real Property" means any real property owned or leased by Seller. "Related Agreement" means any document delivered at the Closing and any contract which is to be entered into at the Closing or otherwise pursuant to this Agreement, including the Escrow Agreement. "Seller" has the meaning set forth in the preamble to the Agreement. "Seller Interests" shall have the meaning set forth in Section 5.2q. "Sellers' Agents" shall have the meaning set forth in Section 16.1. "Seller's Bring-Down Certificate" has the meaning set forth in Section 11.1(a) of this Agreement. "Shareholder Settlement Agreements" shall have the meaning set forth in Section 2.2(b). 78 "Stations" has the meaning set forth in the recitals to the Agreement. "Step-Up" shall mean the amount of Code Section 754 basis step-up, calculated as the present value (determined using an 8.0% discount rate over a 15-year period assuming straight line amortization) of 45.812% of the Cash Price minus (or plus in the case of a negative) the aggregate tax basis capital accounts of Seller and Management in MMP immediately prior to the Closing. "Stock" has the meaning set forth in the recitals to the Agreement. "Straddle Period" shall have the meaning set forth in Section 8.2 of this Agreement. "Tax" or "Taxes" means all taxes, including, but not limited to, income (whether net or gross), excise, property, sales, transfer, gains, gross receipts, occupation, privilege, payroll, wage, unemployment, workers' compensation, social security, occupation, use, value added, franchise, license, severance, stamp, premium, windfall profits, environmental (including taxes under Code Sec. 59A), capital stock, withholding, disability, registration, alternative or add-on minimum, estimated or other tax of any kind whatsoever (whether disputed or not) imposed by any Tax Authority, including any related charges, fees, interest, penalties, additions to tax or other assessments. "Tax Authority" means any federal, national, foreign, state, municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body or other authority exercising any taxing or tax regulatory authority. "Tax Liability" means any liability for a Tax. "Taxable Period" means any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any applicable statute, rule or regulation. "Tax Proceeding" means any audit, examination, claim or other administrative or judicial proceeding relating to Taxes or Tax Returns. "Tax Returns" means all returns, reports, forms, estimates, information returns and statements (including any related or supporting information) filed or to be filed with any Tax Authority in connection with the determination, assessment, collection or administration of any Taxes. "Television Licensee" shall have the meaning set forth in the Recitals. 79 "Television Stations" shall have the meaning set forth in the Recitals. "Termination Date" shall have the meaning set forth in Section 14.1(b). "Trade-out Agreements" shall mean all contracts and agreements (excluding program contracts) pursuant to which MMP has sold, traded or bartered commercial air time on the Stations in consideration for any property or services in lieu of or in addition to cash. "VARS" has the meaning set forth in Section 9.14. EX-10.62 8 EXHIBIT 10.62 ASSET PURCHASE AGREEMENT BY AND BETWEEN SINCLAIR COMMUNICATIONS, INC. AND MAX TELEVISION COMPANY MAX MEDIA PROPERTIES LLC AND MAX MEDIA PROPERTIES II LLC TABLE OF CONTENTS 1. DEFINITIONS.................................................................3 2. SALE OF ASSETS/EXCLUDED ASSETS..............................................3 2.1. Sale of Assets.......................................................3 2.2. RESERVED.............................................................3 3. PURCHASE PRICE..............................................................4 3.1. Payment..............................................................4 4. CLOSING.....................................................................4 5. REPRESENTATIONS AND WARRANTIES OF SELLERS...................................4 5.1. RESERVED.............................................................4 5.2. Representations and Warranties as to the Company.....................4 5.3. Representations and Warranties as to the MMP and the FCC Licensee Entities......................4 a. Organization and Good Standing....................................5 b. Capitalization of MMP.............................................5 c. Organization and Capitalization of the FCC License Entities.......5 d. No Conflicts......................................................6 e. Real Property.....................................................6 f. Personal Property.................................................6 g. Financial Statements..............................................6 h. FCC...............................................................6 i. Intellectual Property.............................................7 j. Employee Benefit Plans............................................7 k. Labor.............................................................8 l. Insurance.........................................................8 m. Material Contracts................................................8 n. Compliance with Laws..............................................8 o. Litigation........................................................9 p. Consents..........................................................9 r. Tax Matters.......................................................9 s. Accounts Receivable..............................................11 t. RESERVED.........................................................11 5.4. RESERVED............................................................11 i 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER................................11 6.1. Organization and Good Standing......................................11 6.2. Execution and Effect of Agreement...................................12 6.3. No Conflicts........................................................12 6.4. Consents............................................................12 6.5. Litigation..........................................................12 6.6. No Brokers..........................................................12 6.7. Purchaser Qualifications............................................13 7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES.............13 7.1. Limitation; Survival................................................13 8. TAX MATTERS................................................................13 8.1. RESERVED............................................................13 8.2. Tax Returns.........................................................13 8.3. Apportionment.......................................................14 8.4. Cooperation in Tax Matters..........................................15 8.5. Certain Taxes.......................................................15 8.6. FIRPTA..............................................................15 8.7. [Section 754 Election...............................................15 8.8. Closing Date Actions................................................15 9. ADDITIONAL COVENANTS AND UNDERTAKINGS......................................16 9.1. Further Assurances and Assistance..................................16 9.2. Access to Information..............................................16 9.3. Conduct of Business Prior to Closing...............................16 9.4. H-S-R Act..........................................................19 9.5. FCC Application....................................................19 9.6. Books and Records..................................................20 9.7. RESERVED...........................................................20 9.8. RESERVED...........................................................20 9.9. Interpretation of Certain Provisions...............................20 9.10. RESERVED...........................................................20 9.11. RESERVED...........................................................20 9.12. RESERVED...........................................................20 9.13. RESERVED...........................................................20 9.14. RESERVED...........................................................20 ii 10. INDEMNIFICATION...........................................................21 10.1. Indemnification of Purchaser by Sellers.............................21 10.2. Indemnification of Sellers by Purchaser.............................21 10.3. Limitations and Other Provisions Regarding Indemnification Obligations.........................................................22 10.4. Notice of Claim Defense of Action...................................24 10.5 Tax Contests........................................................25 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE...............26 11.1. Conditions Precedent to the Obligation of Purchaser................26 12. DELIVERIES AT THE CLOSING.................................................29 12.1. Deliveries by Sellers..............................................29 12.2. Deliveries by Purchaser............................................30 13. EXPENSES..................................................................30 14. TERMINATION...............................................................31 14.1 Termination........................................................31 14.2 Procedure and Effect of Termination................................31 15. NOTICES...................................................................32 16. SELLERS' AGENTS...........................................................34 16.1. Sellers' Agents....................................................34 17. MISCELLANEOUS.............................................................35 17.1. Headings..........................................................35 17.2. Schedules and Exhibits............................................35 17.3. Execution in Counterparts.........................................35 17.4. Entire Agreement..................................................35 17.5. Governing Law.....................................................36 17.6. Modification......................................................36 17.7. Successors and Assigns............................................36 17.8. Waiver............................................................36 17.9. Severability......................................................36 17.10. Announcements.....................................................37 17.11. Specific Performance..............................................37 iii 17.12 Fees and Expenses.................................................37 17.13 Third Party Beneficiaries.........................................37 17.14 Interpretation....................................................37 ANNEX 1 - DEFINITIONS --------------------- ANNEX 2 - SELLERS ----------------- EXHIBITS A - MMP II Assignment and Assumption Agreement B - Opinion of Counsel, Clark & Stant, P.A. C - Opinion of Sellers' FCC Counsel D - Opinion of Counsel, Thomas & Libowitz, P.A. SCHEDULES 2.2 - 5.1 - Encumbrances on Stock 5.2 - Organization of Companies 5.3 - Capitalization of Companies 5.4 - Conflicts 5.5 List of Real Property; Permitted Exceptions 5.6 - Existing Liens and Security Interests 5.7 - Changes Since 1994 5.8 - FCC 5.9 - Exceptions to Intellectual Property 5.10 - Employee Benefits 5.11 - Employee Matters 5.12 - Insurance 5.13 - Material Contracts 5.14 - Compliance with Law 5.15 - Litigation 5.17 - Consents 5.18 - Environmental 5.19 - Taxes iv 6.3 - 6.4 - Consents 6.5 - 6.7 - 9.3 - Transactions Prior to Closing 9.7 - Employees v ASSET PURCHASE AGREEMENT ------------------------ THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of this _____ day of January, 1998, is entered into by and among Sinclair Communications, Inc., a Maryland corporation ("Purchaser"), Max Television Company, a Virginia corporation ("Seller"), Max Media Properties LLC, a Virginia limited liability company ("MMP"), and Max Media Properties II LLC, a Virginia limited liability company ("MMP II"). RECITALS: --------- WHEREAS, Seller owns 100% of the membership interests of MMP II (the "Assets"); and WHEREAS, Seller desires to sell, assign and transfer the Assets, and Purchaser desires to acquire the Assets, all on the terms described herein; and WHEREAS, on December 2, 1997, the Purchaser entered into a Stock Purchase Agreement (the "MRI Agreement") to acquire all of the issued and outstanding shares of Max Radio Inc. ("MRI"). MRI is the owner of 31% of the equity of MTR Holding Corp., a Virginia corporation ("MTR"), 3,069,000 Class A Membership Units (out of a total 11,631,431 Membership Units) of MMP, and a 2% limited partnership interest in Radio License L.P., a Virginia limited partnership ("RLLP"), the holder of the FCC Licenses of the Radio Stations (as defined below); and WHEREAS, on December 2, 1997, the Purchaser entered into a Stock Purchase Agreement (the "Investors Agreement") to acquire all of the issued and outstanding shares of Max Investors, Inc., a Virginia corporation ("Investors"). Investors is the owner of 3,133,897 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, on December 2, 1997, the Purchaser entered into an Asset Purchase Agreement (the "Management Agreement") to acquire from Max Management LLC, a Virginia limited liability company ("Management"), 188,034 Class C Membership Units (out of a total of 11,631,431 Membership Units) of MMP; and WHEREAS, on December 2, 1997, the Purchaser entered into an Asset Purchase Agreement to acquire from Seller 5,140,500 Class B Membership Units (out of a total of 11,631,431 Membership Units) of MMP, 69% of the equity of MTR and a 2% limited partnership interest in the Television Licensees (as defined below); and WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, MMP is the owner of the operating assets (other than the FCC Licenses) and operator of television stations WSYT-TV in the Syracuse, New York market, WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio market, WEMT-TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri and KETK-TV in the Tyler, Texas market (each a "Television Station" and collectively, the "Television Stations"); and WHEREAS, MMP is the owner of the operating assets (other than the FCC Licenses) and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina ("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro, North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG"; together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM, in Virginia Beach, Virginia ("WPTE"), and WFOG-FM, in Suffolk, Virginia ("WFOG"; together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio Station" and collectively, the "Radio Stations"); and WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky, pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA Stations" and for purposes of this Agreement, the LMA Stations, the Radio Stations and the Television Stations shall be collectively referred to as the "Stations"); and WHEREAS, MMP owns a 98% general partnership interest in RLLP; and WHEREAS, MMP owns a 98% general partnership interest in each of Max Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities LP"), Max Television of Charleston L.P. and Max Television of Tyler L.P. (each a "Television Licensee" and collectively, the "Television Licensees" and together with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a Television Station as indicated on Annex A hereto; and WHEREAS, Seller, MMP and MMP II, pursuant to the terms and conditions hereof, have agreed to file with the FCC an application to transfer (the "MMP II Transfers") all partnership interests MMP holds in Dayton LP (the licensee of WKEF-TV) and Tri-Cities LP (the licensee of WEMT-TV, collectively, "the MMP II Licensee Entities") to MMP II; and 2 WHEREAS, in connection with the MMP II Transfers, MMP and MMP II have agreed to enter into a Distribution Agreement and an Assignment and Assumption Agreement; and WHEREAS, the parties desire that, after the MMP II Transfers, but before the Closing, MMP distribute to MTC all of the Assets, which Assets Purchaser shall acquire pursuant to the terms of this Agreement. SECTION 1 DEFINITIONS ----------- As used in this Agreement, capitalized terms shall have the meaning specified in the text hereof on Annex 1 hereto which are incorporated herein by reference, and which meaning shall be applicable to both the singular and plural forms of the terms defined. SECTION 2 SALE OF ASSETS -------------- 2.1. SALE OF ASSETS. Upon and subject to the terms and conditions stated in this Agreement, on the Closing Date (as hereinafter defined), Seller hereby agrees to transfer, convey, assign and deliver to Purchaser, and Purchaser agrees to acquire, all of Seller's right, title and interest in the Assets, free and clear of any claims, liabilities, security interests, mortgages, liens, pledges, conditions, charges, or encumbrances of any nature whatsoever at the Closing (as defined below). 2.2. RESERVED 3 SECTION 3 PURCHASE PRICE -------------- 3.1. PAYMENT. At the Closing (as defined below), in consideration for the sale of the Assets, Purchaser shall pay to Seller the amount of $3,000,000.00 (the "Purchase Price"). SECTION 4 CLOSING ------- The closing of the transaction contemplated by this Agreement (the "Closing"), subject to fulfillment or waiver of the conditions set forth in Section 11 hereof, shall be held at the offices of Clark & Stant, P.C., One Columbus Center, Suite 900, Virginia Beach, Virginia 23462, at 10:00 A.M. local time (but shall be deemed to have occurred at the close of business on such day), on the later to occur of (a) five Business Days after, to the extent a filing is necessary under the H-S-R Act, all applicable waiting periods under the H-S-R Act shall have expired or terminated, or (b) five Business Days after the Final Order (the date of Closing being the "Closing Date"), unless (i) Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser shall give Sellers reasonable notice of the Closing, or (ii) the parties shall mutually agree upon a different date or location; provided, however, that in no event shall the Closing be held before the Closings under the MMP Acquisition Documents. In no event shall Closing occur after the Termination Date. SECTION 5 REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- 5.1. RESERVED 5.2. REPRESENTATIONS AND WARRANTIES AS TO SELLER. The representations and warranties set forth in Section 5.2 of the MTC Agreement are incorporated by reference herein as if fully set forth. 5.3. REPRESENTATIONS AND WARRANTIES AS TO MMP II AND MMP II LICENSEE ENTITIES. Seller and MMP, jointly and severally, hereby represent and warrant to Purchaser as to MMP II and the MMP II Licensee Entities as follows: 4 a. MMP II ORGANIZATION AND GOOD STANDING. MMP II is a limited liability company duly organized and validly existing under the laws of Virginia and has full power and authority to carry on its business. To the extent required by law, MMP II shall be, as of the Closing Date, qualified as a foreign limited liability company and shall be in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification. Seller owns 100% of the outstanding membership interests in MMP II. b. CAPITALIZATION OF MMP II. MMP owns 100% of the membership units of MMP II. All membership units have been validly issued and are fully paid and non-assessable and held of record by MMP. Except as described on Schedule 5.2b, (i) there are no other issued or outstanding equity securities of MMP II; (ii) there are no membership or value appreciation rights, phantom membership rights, profit participation rights or other similar rights with respect to membership units outstanding; and (iii) there are no other issued or outstanding membership units or securities of MMP II, convertible or exchangeable, at any time into equity securities of MMP II. MMP is not subject to any commitment or obligation that would require the issuance or sale of additional membership interests or membership units of MMP II at any time under options, subscriptions, warrants, rights or other obligations. Other than the MMP II Licensee Entities, MMP II has no other equity interests in any other corporation, partnership, limited liability company, joint venture or other entity. c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE ENTITIES. Each MMP II Licensee Entity is a limited partnership duly organized and validly existing under the laws of the Commonwealth of Virginia and has full partnership power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. Each MMP II Licensee Entity is qualified as a foreign limited partnership under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a material adverse effect. Neither of the MMP II License Entities own any direct or indirect subsidiaries. MMP II, as of the date hereof, is the sole general partner and owns ninety-eight percent (98%) of the partnership interests of each of the MMP Licensee Entities. Seller, as of the date hereof, is the sole limited partner and owns two percent (2%) of the partnership interests of each of the MMP II Licensee Entities. All such partnership interests have been validly issued and are fully paid and nonassessable and are held of record by the respective partners as set forth above. There are no (i) other issued or outstanding equity securities of the MMP II Licensee Entities, (ii) partnership or value appreciation rights, phantom partnership rights, profit participation rights, or other similar rights with respect to partnership interests outstanding and (iii) other issued or outstanding partnership interests or other securities of 5 either of the MMP II Licensee Entities convertible or exchangeable at any time into equity securities of such MMP II Licensee Entity. Neither MMP II Licensee Entity is subject to any commitment or obligation that would require the issuance or sale of additional partnership interests of either MMP II Licensee Entity at any time under options, subscriptions, warrants, rights or any other obligations. No MMP II Licensee Entity holds any equity interest in any corporation, partnership, limited liability company, joint venture or other entity. d. NO CONFLICTS. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of organization or operating agreement of MMP II or the limited partnership agreements of the MMP II Licensee Entities, (ii) other than with respect to the matters for which waivers are sought in the FCC Application from the FCC, violate any provision of applicable material law, rule and regulation, which violation would prevent or interfere with Seller's ability to perform hereunder, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any material agreement, indenture, mortgage or instrument to which either MMP II or either MMP II Licensee Entity is a party or to which any of their property is subject, or constitute a default thereunder. e. REAL PROPERTY. Other than the License Assets, neither MMP II nor the MMP II Licensee Entities own or lease any real property. f. PERSONAL PROPERTY. Other than the License Assets, neither MMP II nor either of the MMP Licensee Entities own nor lease personal property. g. FINANCIAL STATEMENTS. Neither MMP II nor the MMP II Licensee Entities prepare or maintain Financial Statements. h. FCC. MMP II and the MMP II Licensee Entities have been and currently are operated in material compliance with the terms of the FCC Licenses, the Communications Act of 1934, as amended, and applicable rules, regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC Licenses held by the MMP II Licensee Entities, a true and complete list of which is set forth on Schedule 5.3h to the MRI Agreement, and true and complete copies of each of which have been delivered to Purchaser, are valid and in full force and effect. Except as set forth on Schedule 5.3h to the MRI Agreement, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses and, to Seller's and MMP's Knowledge, there is not now before the FCC any investigation or complaint against MMP II or the MMP II Licensee Entities relating to the MMP II Stations, the unfavorable resolution of which 6 would impair the qualifications of the MMP II Licensee Entities to hold any FCC Licenses. Except as set forth on Schedule 5.3h to the MRI Agreement, there is no proceeding pending before the FCC, and there is no outstanding notice of violation from the FCC with respect to the MMP II Stations. Except as set forth on Schedule 5.3h to the MRI Agreement, no order or notice of violation has been issued by any governmental entity which permits, revocation, adverse modification or termination of any FCC License. Except as set forth on Schedule 5.3h to the MRI Agreement and except for those conditions or restrictions appearing on the face of the FCC Licenses, or other licenses, none of the FCC Licenses or other licenses is subject to any restriction or condition which would limit the operation of the MMP II Stations as currently operated. The FCC Licenses listed in Schedule 5.3h to the MRI Agreement are currently in effect and are not subject to any liens, or other encumbrances. No license renewal applications are pending with respect to any of the FCC Licenses. As of the date hereof, Seller, MMP, MMP II and the MMP II Licensee Entities have no reason to believe that the FCC would not renew the FCC Licenses in the ordinary course for a full license term without any adverse conditions, upon the timely filing of appropriate applications and payment of the required filing fee. Other than the waivers requested in the FCC Application, as of the date hereof, Seller, MMP II, MMP and the MMP II Licensee Entities have no reason to believe that the FCC would not grant the FCC Application in the ordinary course without any adverse conditions. All documents required by 47 C.F.R. Section 73.3526 to be kept in each of the MMP II Station's public inspection files are in such file, and such file will be maintained in proper order and complete up to and through the Closing Date. i. INTELLECTUAL PROPERTY. MMP II and the MMP II Licensee Entities do not own any Intellectual Property. j. BENEFIT PLANS. MMP II and the MMP II Licensee Entities do not and have not in the past maintained or contributed to Benefit Plans. Neither MMP II nor MMP II Licensee Entities, nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV or ERISA. Neither MMP II nor MMP II Licensee Entities, nor any ERISA Affiliate has ever made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37). MMP II and the MMP II Licensee Entities have no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement, and no facts exist that could reasonably be expected to result in such liability, as a result of termination, withdrawal, or funding waiver with respect to any such plan, program, or arrangement. k. LABOR. Other than the FCC Employees, neither MMP II nor the MMP II Licensee Entities have employed or currently employ employees. With respect 7 to employees of and service providers to MMP II and MMP II Licensee Entities: (i) MMP II and MMP II Licensee Entities have been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice. (ii) The employees of MMP II and MMP II Licensee Entities are not and have never been represented by any labor union, and no collective bargaining agreements are binding and in force against, or currently being negotiated by MMP II and MMP II Licensee Entities, and to MMP II and MMP II Licensee Entities' knowledge, no labor representation organization effort exists nor have there been any such activity within the past three years. (iii) All Persons classified by MMP II and MMP II Licensee Entities as independent contractors satisfy and have satisfied the requirement of law to be so classified, and MMP II and MMP II Licensee Entities have fully and accurately reported their compensation on IRS Forms 1099 when required to do so. (iv) There is no charge or compliance proceeding actually pending or threatened against MMP II and MMP II Licensee Entities before the Equal Employment Opportunity Commission or any state, local, or foreign agency responsible for the prevention of unlawful employment practices. l. INSURANCE. Other than insurance policies covering the License Assets, neither MMP II nor the MMP II Licensee Entities maintain insurance policies. m. MATERIAL CONTRACTS. There are no material contracts of MMP II or the MMP II Licensee Entities. n. COMPLIANCE WITH LAWS. MMP II and the MMP II Licensee Entities are in material compliance with all material applicable Federal, state and local laws, rules and regulations, and there are no actions pending or, to Seller's Knowledge, threatened alleging noncompliance therewith. o. LITIGATION. There is no suit, claim, action, proceeding or arbitration pending or, to Seller's Knowledge, threatened against MMP II or the MMP II Licensee Entities that seeks to enjoin or obtain damages in respect of MMP II's conduct of its 8 Business, or the transactions contemplated hereby. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency against or affecting the Business, MMP II or the MMP II Licensee Entities. p. CONSENTS. Except (a) as set forth on Schedule 5.3p, (b) for filings pursuant to the H-S-R Act (to the extent required by law), or (c) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of MMP II or the MMP II Licensee Entities is required in connection with the execution and delivery of this Agreement by Sellers or the consummation of any of the transactions contemplated hereby (including any consents required under any MMP II or MMP II Licensee Entities contract as a result of the change in control contemplated hereby). q. RESERVED r. TAX MATTERS. (a) Except as set forth on Schedule 5.3r(a) to the MRI Agreement hereto: (i) All Tax Returns required to be filed by or with respect to MMP II and the MMP II Licensee Entities have been filed when due in a timely fashion, and all Tax Returns, if any, required to be filed by or with respect to MMP II and the MMP II Licensee Entities for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to MMP II and the MMP II Licensee Entities, if any, are true, correct and complete in all material respects. (ii) MMP II and each of the MMP II Licensee Entities has paid in full on a timely basis all Taxes owed by it, whether or not shown on any Tax Return, and MMP II and each of the MMP II Licensee Entities will have paid prior to the Closing Date all Taxes payable with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) Neither MMP II nor the MMP II Licensee Entities have any liability for any unpaid Taxes. (iv) MMP II and each of the MMP II Licensee Entities has withheld and paid over to the proper governmental authorities all Taxes, if any, required to have been withheld and paid over, and complied with all information reporting and 9 backup withholding requirements, if any, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to MMP II or either of the MMP II Licensee Entities. Neither MMP II nor either of the MMP II Licensee Entities have received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is currently in effect or has been requested with respect to the assessment, collection or payment of Taxes of MMP II or the MMP II Licensee Entities, or for which MMP II or the MMP II Licensee Entities are liable. (vii) No extension of the time within which to file any Tax Return of MMP II or either of the MMP II Licensee Entities is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted or assessed against MMP II or either of the MMP II Licensee Entities. (ix) There are no liens on the assets of MMP II or the MMP II Licensee Entities relating or attributable to Taxes (except liens for Taxes not yet due). (x) Neither MMP II nor either of the MMP II Licensee Entities is or has ever been classified as an association or otherwise taxable as a corporation for United States federal income tax purposes. (xi) Neither MMP II nor either of the MMP II Licensee Entities has in effect an election under Section 754 of the Code. (xii) Neither MMP II nor either of the MMP II Licensee Entities has agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. (xiii) Neither MMP II nor either of the MMP II Licensee Entities is or has at any time been a party to a tax sharing, tax indemnity or tax allocation agreement. Neither MMP II nor either of the MMP II Licensee Entities has assumed the Tax Liability of any other entity or person under contract. (xiv) Neither MMP II nor either of the MMP II Licensee 10 Entities has any liability for the Taxes of another entity or person as a transferee or successor, or otherwise. (xv) Except for the MMP II Licensee Entities, neither MMP II nor either of the MMP II Licensee Entities is or has at any time been a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xvi)None of MMP II's assets and none of the assets of the MMP II Licensee Entities are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (b) To date, no Tax Returns have been filed by or with respect to MMP II or the MMP II Licensee Entities. There are no and have not been any examination reports, statements of deficiencies or closing agreements with respect to MMP II or the MMP II Licensee Entities relating to Taxes. (c) Schedule 5.3r(c) to the MRI Agreement contains complete and accurate descriptions of material Tax elections made by or with respect to MMP II and the MMP II Licensee Entities. s. ACCOUNTS RECEIVABLE. Neither MMP II nor the MMP II Licensee Entities have any accounts receivable. t. RESERVED 5.4 RESERVED SECTION 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER ------------------------------------------- Purchaser hereby represents and warrants to Seller, MMP and MMP II that: 6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland. Purchaser has full corporate power and authority to carry on its business as it is now being conducted. 6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate power 11 and authority to enter into this Agreement. The consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). 6.3. NO CONFLICTS. Except as described on Schedule 6.3 to the MRI Agreement hereof, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any of the provisions of the articles of incorporation or by-laws of Purchaser, (ii) violate any provision of applicable law, rule or regulation, which violation would prevent or interfere with Purchaser's ability to perform hereunder, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Purchaser is a party or to which its property is subject, or constitute a default thereunder, except where such conflict, breach, right of termination, acceleration or default would not have a material adverse effect on the business or financial condition of Purchaser or prevent or materially interfere with Purchaser's ability to perform hereunder. 6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 to the MRI Agreement hereto, (ii) for filings pursuant to the H-S-R Act (to the extent required by law), or (iii) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of Purchaser is required in connection with the execution and delivery of this Agreement by Purchaser or the consummation of any of the transactions contemplated hereby. 6.5. LITIGATION. Except as set forth on Schedule 6.5 to the MRI Agreement hereto, there is no suit, claim, action, proceeding or arbitration pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks to enjoin or obtain damages in respect of the transactions contemplated hereby. 6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the purchase of the Stock and the transactions contemplated by this Agreement. 6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on Schedule 6.7 to the MRI Agreement, Purchaser is legally and financially qualified to be the Licensee 12 of, acquire and own and operate the MMP II Stations under the Communications Act and the rules, regulations and policies of the FCC. Purchaser knows of no fact that would, under existing law and the existing rules, regulations, policies and procedures of the FCC, (a) disqualify Purchaser as an assignee of the FCC Licenses or as the owner and operator of the MMP II Stations, or (b) cause the FCC to fail to approve in a timely fashion the application for the FCC Consent. Except as described on Schedule 6.7 to the MRI Agreement, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Purchaser, nor will processing pursuant to any exception or rule or general applicability be requested or required in connection with the consummation of the transactions contemplated by this Agreement Purchaser will have on hand at the Closing, adequate financial resources to consummate the transactions contemplated by this Agreement and the MMP Acquisition Documents. SECTION 7 ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES ---------- 7.1. LIMITATION; SURVIVAL. The terms and conditions of Section 7 of the MTC Agreement are incorporated in this Section 7 as if fully set forth. SECTION 8 TAX MATTERS ----------- 8.1. RESERVED 8.2. TAX RETURNS. (a) Seller shall prepare or cause to be prepared and file or cause to be filed, within the time (including extensions) and manner provided by law, all Tax Returns of MMP II and the MMP II Licensee Entities, if any, that are required to be filed on or before the Closing Date. In addition, Seller shall prepare or cause to be prepared and file or cause to be filed prior to the Closing Date all Tax Returns, if any, required to be filed for Taxable Periods of MMP II and the MMP II Licensee Entities for Taxable Periods ending on or before December 31, 1997, even if such Tax Returns are not yet due. Each of MMP II and the MMP II Licensee Entities shall pay or cause to be paid all Taxes shown as due on its Tax Returns. Purchaser shall have an opportunity to review and consent to the filing of all such Tax Returns, which consent shall not be unreasonably withheld or delayed. 13 (b) Purchaser shall prepare or cause to be prepared and file or cause to be filed, within the time and manner provided by law, all Tax Returns of MMP II and the MMP II Licensee Entities, if any, required to be filed (i) for Taxable Periods ending on or before the Closing Date that are due after the Closing Date, except as described in Section 8.2(a), and (ii) for Taxable Periods beginning before and ending after the Closing Date ("Straddle Periods"). Purchaser shall pay or cause to be paid all Taxes shown as due on such Tax Returns; provided that this sentence shall not in any way limit or affect Purchaser's rights to any indemnification to which it may be entitled under other provisions of this Agreement or under the MMP Acquisition Documents. Purchaser shall provide Seller a reasonable opportunity to review and consent to the filing of such Tax Returns, which consent shall not be unreasonably withheld or delayed. Purchaser shall not file amended Tax Returns with respect to Taxable Periods ending on or before the Closing Date or Straddle Periods without Seller's consent; provided, however, that Purchaser may file amended Tax Returns for such Taxable Periods without Seller's consent if (i) such amended Tax Returns are filed to correct errors or omissions in previously filed Tax Returns that either constitute or are related to a breach of any representation or warranty set forth in Sections 5.2 or 5.3r (determined without regard to the limitation on the survival of such representations and warranties set forth in Section 7.1), or (ii) the filing of such amended Tax Return would not increase the Taxes of Seller or Taxes for which Seller has indemnification responsibility hereunder or under the MMP Acquisition Documents by more than $25,000. (c) All Tax Returns prepared and filed pursuant to this Section 8.2 shall be prepared and filed in accordance with applicable law and in a manner consistent with past practices of MMP II and the MMP II Licensee Entities (to the extent consistent with applicable law). 8.3. APPORTIONMENT. The parties agree to cause MMP II and the MMP II Licensee Entities to file all Tax Returns for any Taxable Period that would otherwise be a Straddle Period on the basis that the relevant Taxable Period consists of two periods, one ending as of the close of business on the Closing Date and one beginning the day after the Closing Date, unless the relevant Tax Authority will not accept a Tax Return filed on that basis. For purposes of apportioning any Tax to the portion of any Straddle Period that ends on the Closing Date, the determination shall be made assuming that there was a closing of the books as of the close of business on the Closing Date and that the taxable years of MMP II and the MMP II Licensee Entities ended on that date, except that real, personal and intangible property Taxes shall be apportioned ratably on a daily basis between the portions of the Straddle Period in question. 8.4. COOPERATION IN TAX MATTERS. Seller and Purchaser shall (a) cooperate 14 fully, as reasonably requested, in connection with the preparation and filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make available to the other, as reasonably requested, all information, records or documents with respect to Tax matters pertinent to MMP II and the MMP II Licensee Entities for all Taxable Periods ending on or before the Closing Date and Straddle Periods; and (c) preserve information, records or documents relating to Tax matters pertinent to MMP II and the MMP II Licensee Entities that is in their possession or under their control until the expiration of any applicable statute of limitations. 8.5. CERTAIN TAXES. Seller shall timely pay all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees arising from or relating to the sale and transfer of the Assets, and Seller shall at its own expense file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees. If required by applicable law, Purchaser will join in the execution of any such Tax Returns and other documentation. 8.6. FIRPTA. Seller shall deliver to Purchaser at the Closing a certificate or certificates in form and substance satisfactory to Purchaser, duly executed and acknowledged, certifying all facts necessary to exempt the transactions contemplated hereunder from withholding under Section 1445 of the Code. 8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing Date, in its sole and absolute discretion, cause the MMP II Licensee Entities to make a Code Section 754 Election with respect to the Taxable Period in which the Closing occurs or later Taxable Periods. 8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not cause MMP II or the MMP II Licensee Entities to take any actions on the Closing Date other than in the ordinary course of their business, except (i) such actions as are expressly contemplated by this Agreement, and (ii) such actions as would not increase Taxes of Seller or Taxes for which Seller has indemification responsibility hereunder. 15 SECTION 9 ADDITIONAL COVENANTS AND UNDERTAKINGS ------------------------------------- 9.1. FURTHER ASSURANCES AND ASSISTANCE. Each of Purchaser, Seller and MMP II will (and MMP II shall cause the MMP II Licensee Entities to) execute and deliver to the other any and all documents, in addition to those expressly provided for herein, that may be necessary or appropriate to implement the provisions of this Agreement, whether before, at, or after the Closing. The parties agree to cooperate with each other to any extent reasonably required in order to accomplish fully the transactions herein contemplated. 9.2. ACCESS TO INFORMATION. Seller and MMP II, from and after the date of this Agreement and until the Closing Date or termination pursuant to Section 14.1, shall give Purchaser and Purchaser's employees and counsel full and complete access upon reasonable notice during normal business hours, to all officers, employees, offices, properties, agreements, records and affairs of Seller, MMP II, the MMP II Licensee Entities or otherwise relating to the Business, shall provide Purchaser with all financial statements of Seller, the MMP II Licensee Entities and MMP II, if any, prepared in the future, and shall provide copies of such information concerning Seller, MMP II, the MMP II Licensees and the Business as Purchaser may reasonably request. Seller will use its commercially reasonable efforts to obtain the consent of its auditors to permit inclusion of financial statements, if any, in applicable securities filings of Sinclair Broadcast Group, Inc. ("SBGI"). 9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by this Agreement or as consented to by Purchaser (which consent shall not unreasonably be withheld), from and after the date hereof, Seller and MMP II shall act and cause the MMP II Licensee Entities to act, as follows: (a) MMP II will not adopt or cause the MMP II Licensee Entities to adopt any change in any method of accounting or accounting practice, except as contemplated or required by GAAP; (b) Seller shall not change or amend its charter or by-laws and MMP II shall not change or amend the operating agreement or cause or allow any of the MMP II Licensee Entities to change or amend any limited partnership agreement; (c) Neither MMP II nor the MMP II Licensee Entities shall sell, mortgage, pledge or otherwise dispose of any assets or properties owned, leased or used in the operation of the Business other than in the ordinary course of business; 16 (d) Neither Seller nor MMP II or the MMP II Licensee Entities will merge or consolidate with, agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity; (e) RESERVED; (f) Neither MMP II nor the MMP II Licensee Entities will authorize for issuance, issue or sell any additional shares of its capital stock, membership units, or partnership interests, as the case may be, or any securities or obligations convertible or exchangeable into shares of its capital stock, partnership interests or membership units or issue or grant any option, warrant or other right to purchase any shares of its capital stock, partnership, or membership units; (g) Neither MMP II nor the MMP II Licensee Entities will incur, or agree to incur, any debt for borrowed money; (h) Neither MMP II nor the MMP II Licensee Entities will change its historical practices concerning the payment of accounts payable; (i) Neither MMP II nor the MMP II Licensee Entities will declare, issue, or otherwise approve the payment of dividends or distributions of any kind in respect of its stock or membership units, as the case may be, or redeem, purchase or otherwise acquire any of its stock or membership units. (j) Seller and MMP II shall maintain the existing insurance coverages on the License Assets. (k) Seller and MMP II will not permit any increases in the compensation of any of the FCC Employees of Seller or MMP II except (i) as required by law, or (ii) in the ordinary course of business. (l) Other than the Time Brokerage Agreement, neither Seller nor MMP II nor the MMP II Licensee Entities shall enter into or renew any contract or commitment relating to the FCC Licenses or the MMP II Stations, or incur any obligation that will be binding on Purchaser after Closing. (m) Neither MMP II nor the MMP II Licensee Entities shall enter into any transactions with any Affiliate of Seller binding upon or affecting MMP II or the MMP II Licensee Entities. 17 (n) Seller and MMP II shall use all commercially reasonable efforts to maintain the assets of MMP II or the MMP II Licensee Entities or replacements thereof in good operating condition and adequate repair, normal wear and tear excepted. (o) Other than permitted or contemplated by the Time Brokerage Agreement, MMP II shall not make any expenditures except to maintain the FCC Licenses and the License Assets. (p) Neither Seller nor MMP II nor the MMP II Licensee Entities shall make or change any material Tax election, amend any Tax Return, or take or omit to take any other action (other than in the ordinary course of business and consistent with past practice) that would have the effect of increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of MMP II or the MMP II Licensee Entities for any Post-Closing Tax Period. (q) MMP II and the MMP II Licensee Entities shall not make distributions to its members or general or limited partners, respectively, other than of cash. (r) RESERVED (s) RESERVED (t) MMP II shall not acquire or enter into or renew any Local Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network Affiliation Agreement, without the prior consent of Purchaser (which consent shall not be unreasonably withheld) other than as contemplated by this Agreement or the MMP Acquisition Documents. (u) MMP II shall not enter into or become subject to any employment, labor, union or professional service contract not terminable at will, or any bonus, pension, insurance, profit sharing, incentive, deferred compensation, severance pay, retirement, hospitalization, employee benefit, or other similar plans, or increase the compensation payable or to become payable to any FCC Employee except as required by law. (v) Neither Seller nor MMP II or the MMP II Licensee Entities shall take any action which may jeopardize the validity or enforceability of or rights under the FCC Licenses. (w) Neither Seller nor MMP II or the MMP II Licensee Entities shall 18 breach of cause any other person to breach any provision of the Time Brokerage Agreement required as a condition of closing under the MMP Acquisition Documents and attached thereto as Exhibit D. 9.4. H-S-R ACT. To the extent required by law, each of Purchaser and Seller shall, within ten Business Days following the date hereof, file duly completed and executed Pre-Merger Notification and Report Forms as required under the H-S-R Act and shall otherwise use their respective best efforts to comply promptly with any requests made by the Federal Trade Commission ("FTC") or the Department of Justice ("DOJ") pursuant to the H-S-R Act or the regulations promulgated thereunder. Seller shall cause MMP II, to the extent required by law, to join in or provide information in connection with such filing, including, but not limited to, any response to any request by the FTC or DOJ. All filing fees and other similar payments in connection with the H-S-R Act shall be split equally by Purchaser and the Seller. 9.5. FCC APPLICATION. (a) Each of Purchaser, MMP II and Seller shall, within two (2) Business Days following the date hereof, file with the FCC the FCC Application; provided that the parties shall cooperate with each other in the preparation of the FCC Application and shall in good faith and with due diligence take all reasonable steps necessary to expedite the processing of the FCC Application and to secure such consents or approvals as expeditiously as practicable; and provided further that MMP II shall and shall cause the MMP II Licensee Entities, to the extent deemed reasonably necessary by counsel to Purchaser to join in and provide information in connection with the FCC Application and comply with the immediately preceding provisions and 9.5(b) below. If the Closing shall not have occurred for any reason within the initial effective periods of the granting of FCC approval of the FCC Application, and no party shall have terminated this Agreement under Section 14, the parties shall jointly request and use their respective best efforts to obtain one or more extensions of the effective periods of such grants. No party shall knowingly take, or fail to take, any action the intent or reasonably anticipated consequence of which would be to cause the FCC not to grant approval of the FCC Application. (b) Seller and MMP II, as the case may be, shall publish (and cause the MMP II Licensee Entities to publish) the notices required by the FCC Rules and Regulations relative to the filing of the FCC Application. Copies of all applications, documents and papers filed after the date hereof and prior to the Closing, or filed after the Closing with respect to the transaction under this Agreement, by Purchaser, Seller, MMP II, or the MMP II Licensee Entities with the FCC shall be mailed to the other simultaneously with the filing of the same with the FCC. Each party shall bear its own costs and expenses 19 (including the fees and disbursements of its counsel) in connection with the preparation of the portion of the application to be prepared by it and in connection with the processing of that application. All filing and grant fees, if any, paid to the FCC, shall be split equally by Purchaser and the Seller. None of the information contained in any filing made by Purchaser or Seller with the FCC with respect to the transaction contemplated by this Agreement shall contain any untrue statement of a material fact. (c) RESERVED 9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit Seller (a) to have reasonable access to the books and records of Purchaser and those retained or maintained by Seller relating to the operation of the Business prior to the Closing or after the Closing to the extent related to transactions or events occurring prior to the Closing, and (b) to have reasonable access to employees of Purchaser to obtain information relating to such matters. Purchaser shall maintain such books and records for a period of four (4) years following the Closing. 9.7. RESERVED 9.8. RESERVED 9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and is not relying on the specification of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agrees not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. 9.10. RESERVED 9.11. RESERVED 9.12. RESERVED 9.13. RESERVED 9.14. RESERVED 20 SECTION 10 INDEMNIFICATION --------------- 10.1. INDEMNIFICATION OF PURCHASER BY SELLER. (a) Subject to Section 10.3 of this Agreement, after the Closing Date, Seller shall indemnify and hold Purchaser harmless from and against any and all Losses, howsoever incurred, which arise out of or result from: (i) any breach of any representation or warranty of Seller set forth in Sections 5.2 or 5.3 of this Agreement; provided, however, for purposes of this Section 10.1(a)(i), the representation set forth in Section 5.2c of the MTC Agreement (as incorporated by reference herein) will be deemed not to include the requirement of a Material Adverse Effect; (ii) the material failure by Seller to perform any covenant of Seller contained herein; (iii) breaches by Seller, MMP II or the MMP II Licensee Entities of other agreements and certificates specifically contemplated hereby; (iv) any and all Taxes of Seller, MMP II and the MMP II Licensee Entities (including any liability of Seller, MMP II or the MMP II Licensee Entities for Taxes of any other entity or person) for any Pre-Closing Tax Period; (v) RESERVED; (vi) RESERVED; (vii) RESERVED. (b) RESERVED. 10.2. INDEMNIFICATION OF SELLER BY PURCHASER. Subject to Section 10.3 of this Agreement after the Closing, Purchaser shall indemnify and hold Seller harmless from and against any and all Losses, howsoever incurred, which arise out of or result from: (a) any breach by Purchaser of any representation or warranty of Purchaser set forth in Section 6 of this Agreement; (b) the material failure by Purchaser to perform any covenant of Purchaser contained herein; or 21 (c) any and all Taxes of MMP II and the MMP II Licensee Entities (including any liability of MMP or the MMP II Licensee Entities for Taxes of any other persons) for any Post-Closing Tax Period except to the extent that such Taxes arise out of, result from or are attributable to a breach of any representation, warranty or covenant of Sellers set forth in this Agreement. 10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION OBLIGATIONS. Seller's obligation to indemnify Purchaser pursuant to Section 10.1 shall be subject to all of the following limitations: (a) Notwithstanding anything contained in this Agreement or applicable law to the contrary, Purchaser agrees that the payment of any claim (whether such claim is framed in tort, contract, or otherwise) made by Purchaser for indemnification hereunder subsequent to the Closing Date, for whatever reason, shall be limited to, and shall only be made from, the Indemnification Amount in accordance with the Indemnification Escrow Agreement and, except for claims against the Indemnification Amount, Purchaser waives and releases, and shall have no recourse against, Seller as a result of the breach of any representation, warranty, covenant or agreement of Seller contained herein, or otherwise arising out of or in connection with the transactions contemplated hereby, or the operation or the business of MMP II or the MMP II Licensee Entities prior to the Closing, and such indemnification shall be the sole and exclusive remedy for Purchaser with respect to any such claim for indemnification after the Closing Date; provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Sellers' fraud. The Indemnification Escrow shall be disbursed in accordance with the Indemnification Escrow Agreement. (b) Anything in this Agreement or any applicable law to the contrary notwithstanding, it is understood and agreed by Purchaser that, other than with respect to Seller (but not including any partner, director, officer, employee, agent or Affiliate Seller (including any shareholder, director, officer, employee, agent or Affiliate of the Seller)) as expressly provided for in Section 10.1, no partner, director, officer, employee, agent or Affiliate of Seller (including any shareholder, director, officer, employee, agent or Affiliate of Seller) shall have (i) any personal liability to Purchaser as a result of the breach of any representation, warranty, covenant or agreement of Seller contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby, or the operations or the business of MMP II or the MMP II Licensee Entities prior to the Closing, or (ii) any personal obligation to indemnify Purchaser for any of Purchaser's claims pursuant to Section 10.1 and Purchaser waives and releases and shall 22 have no recourse against any of such parties described in this Section 10.3(b) as a result of the breach of any representation, warranty, covenant or agreement of Seller contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations or the business of MMP II or the MMP II Licensee Entities prior to the Closing; provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Seller's fraud. (c) Notwithstanding any other provision of this Agreement to the contrary, Seller shall not be liable to Purchaser in respect of any indemnification hereunder until the aggregate amount of Losses of Purchaser under this Agreement and the MMP Acquisition Documents exceeds Two Hundred Fifty Thousand Dollars ($250,000.00) (the "Basket Amount"), and then only to the extent of the excess of Losses over the amount of One Hundred Twenty Five Thousand Dollars ($125,000.00); provided, that this paragraph shall not apply to indemnification pursuant to Section 10.1(a)(iv) and indemnification pursuant to Section 10.1(a)(i) for breaches of the representations and warranties set forth in Section 5.3r of this Agreement and Section 5.2m of the MTC Agreement as incorporated by reference herein. (d) In determining the amount of any Tax or other Loss for which indemnification is provided under this Agreement, such Loss shall be (i) net of any insurance recovery made by the indemnified party, (ii) reduced to take into account any net Tax benefit realized by the indemnified party arising from the deductibility of such Tax or Loss, and (iii) increased to take account of any net Tax cost incurred by the indemnified party arising from the receipt of indemnification payments hereunder. Any indemnification payment hereunder shall initially be made without regard to this paragraph and shall be reduced to reflect any net Tax benefit or increased to reflect any net Tax cost only after the indemnified party has actually realized such benefit or cost. For purposes of this Agreement, an indemnified party shall be deemed to have "actually realized" a net Tax benefit or net Tax cost to the extent that, and at such time as, the amount of Taxes payable by such indemnified party is (x) reduced below the amount of Taxes that such indemnified party would have been required to pay but for the deductibility of such Tax or Losses, and (y) increased above the amount of Taxes that such indemnified party would have been required to pay but for the receipt of such indemnification payments. The amount of any reduction hereunder shall be adjusted to reflect any final determination (which shall include the execution of Form 870-AD or successor form) with respect to the indemnified party's liability for Taxes. Any indemnity payments under this Agreement shall be treated as an adjustment to the Purchase Price for Tax purposes, unless a final determination with respect to the indemnified party or any of its affiliates causes any such payment not to be treated as an adjustment to the Purchase Price. 23 (e) No claim for indemnification for Losses shall be made after expiration of the applicable period set forth in Section 7.1 of the MTC Agreement as incorporated by reference herein; provided that if Closing hereunder takes place after expiration of all applicable periods referenced in Section 7.1 of the MTC Agreement as incorporated by reference herein, no party hereunder shall have any right of indemnification. (f) Anything to the contrary in this Section 10.3 notwithstanding, the terms, conditions and limitations set forth in this Section 10.3 do not apply to or limit Purchaser's rights under Section 14.2. 10.4. NOTICE OF CLAIM; DEFENSE OF ACTION. (a) An indemnified party shall promptly give the indemnifying party notice of any matter which an indemnified party has determined has given or could give rise to a right of indemnification under this Agreement, stating the nature and, if known, the amount of the Losses, and method of computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right to indemnification is claimed or arises; provided that the failure of any party to give notice promptly as required in this Section 10.4 shall not relieve any indemnifying party of its indemnification obligations except to the extent that such failure materially prejudices the rights of such indemnifying party. The indemnified party shall give continuing notice to the indemnifying party promptly thereafter of all developments coming to such indemnified part(ies)' attention materially affecting any matter relating to any indemnification claims. (b) Except as otherwise provided in Section 10.5, the obligations and liabilities of an indemnifying party under this Section 10 with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Section 10, shall be governed by and contingent upon the following additional terms and conditions: (i) With respect to third party claims, promptly after receipt by an indemnified party of notice of the commencement of any action or the presentation or other assertion of any claim which could result in any indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified party shall give prompt notice thereof to the indemnifying part(ies) and the indemnifying part(ies) shall be entitled to participate therein or, to the extent that it desires, assume the defense thereof with its own counsel. (ii) If the indemnifying part(ies) elects to assume the defense of any such action or claim, the indemnifying part(ies) shall not be liable to the indemnified 24 party for any fees of other counsel or any other expenses, in each case incurred by such indemnified party in connection with the defense thereof. (iii) The indemnifying part(ies) shall be authorized, without consent of the indemnified party being required, to settle or compromise any such action or claim, provided that such settlement or compromise includes an unconditional release of the indemnified party from all liability arising out of such action or claim. (iv) Whether or not an indemnifying part(ies) elects to assume the defense of any action or claim, the indemnifying part(ies) shall not be liable for any compromise or settlement of any such action or claim effected without its consent, such consent not to be unreasonably withheld. (v) The parties agree to cooperate to the fullest extent possible in connection with any claim for which indemnification is or may be sought under this Agreement, including, without limitation, making available all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably requested by the other party. 10.5 TAX CONTESTS. (a) If any party receives written notice from any Taxing Authority of any Tax Proceeding with respect to any Tax for which the other party is obligated to provide indemnification under this Agreement, such party shall give prompt written notice thereof to the other party; provided, however, that the failure to give such notice shall not affect the indemnification provided hereunder except to the extent that the failure to give such notice materially prejudices the indemnifying party. (b) Seller shall have the right, at its own expense, to control and make all decisions with respect to any Tax Proceeding relating solely to Taxes of MMP II and the MMP II Licensee Entities for Taxable Periods ending on or before the Closing Date; provided, that Purchaser and counsel of its own choosing shall have the right, at Purchaser's own expense, to participate fully in all aspects of the prosecution or defense of such Tax Proceeding; and provided further that Seller shall not settle any such Tax Proceeding without the prior written consent of Purchaser if such settlements could increase the past, present or future Tax liability of Purchaser or any of its Affiliates, or any Tax Liability of MMP II or the MMP II Licensee Entities for any Post-Closing Tax Period by an amount greater than $25,000. (c) Seller shall have the right, at its own expense, to jointly control and participate with Purchaser in all Tax Proceedings relating to Taxes of MMP II and the 25 MMP II Licensee Entities for a Straddle Period. If Seller exercises such right, neither party shall settle any such Tax Proceeding without the prior written consent of the other. (d) If Seller does not exercise its right to assume control of or participate in any Tax Proceeding as provided under this Section 10.5, Purchaser may, without waiving any rights to indemnification hereunder, defend or settle the same in such manner as it may deem appropriate in its sole and absolute discretion. (e) RESERVED. (f) In the event that the provisions of this Section 10.5 and the provisions of Section 10.4(b) conflict or otherwise each apply by the terms, this Section 10.5 shall exclusively govern all matters concerning Taxes. SECTION 11 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE ----------------------------------------------------------- 11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The obligation of Purchaser to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Seller shall have complied in all material respects with its agreements and covenants contained herein and in the Time Brokerage Agreement to be performed at or prior to the Closing, and the representations and warranties of Seller contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Purchaser shall have received a certificate of one of Sellers' Agents, dated as of the Closing Date and signed by Sellers' Agent, certifying as to the fulfillment of the condition set forth in this Section 11.1(a) ("Sellers' Bring-Down Certificate"). (b) No statute, rule or regulation, or order of any court or administrative agency shall be in effect which restrains or prohibits Purchaser from consummating the transactions contemplated hereby and no action or proceeding shall be pending wherein an unfavorable ruling would affect any right to own the Assets. (c) In the event the parties are required to file a Pre-merger Notification and Report Form under the H-S-R Act, all applicable waiting periods under the H-S-R Act shall have expired or been terminated. 26 (d) The Final Order approving the applications for transfer of control of the FCC Licenses shall have been obtained. All the material conditions contained in the Final Order required to be satisfied on or prior to the Closing Date shall have been duly satisfied and performed. Notwithstanding the foregoing, other than conditions relating the broadcast industry generally, if the consent of the FCC is conditional or qualified in any manner that has a material adverse effect on Purchaser or requires Purchaser or any of its subsidiaries to divest any television or radio station owned, operated or programmed by Purchaser or any of its subsidiaries (other than those acquired pursuant to the MMP Acquisition Documents), Purchaser may, nevertheless, in its sole discretion, require the consummation of the transactions contemplated by this Agreement, but shall not be required to do so. (e) Seller shall have delivered to Purchaser at the Closing each document required by Section 12.1 hereof. (f) Since the date of this Agreement through the Closing Date, there shall not have been a material adverse effect with respect to the Assets. (g) The transfer of the FCC Licenses for Television Stations WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, Tennessee to MMP II and the distribution of MMP II to Seller shall have occurred pursuant to the Assignment and Assumption Agreement and the Distribution Agreement substantially in the form attached to the MTC Agreement as Exhibit C, and MMP and MMP II shall have entered into one or more Time Brokerage Agreements generally in the form (subject to such revisions, additional and deletions as determined by counsel to MMP II and Purchaser prior to the Closing) attached to the MTC Agreement as Exhibit D. (h) The closings under the MMP Acquisition Documents shall have occurred or occur simultaneously with the Closing. (i) RESERVED 27 11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER. The obligation of Seller to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Purchaser shall have complied in all material respects with its agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Purchaser contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Seller shall have received a certificate of Purchaser, dated as of the Closing Date and signed by an officer of Purchaser, certifying as to the fulfillment of the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down Certificate"). (b) No statute, rule or regulation or order of any court or administrative agency shall be in effect which restrains or prohibits Seller from consummating the transactions contemplated hereby. (c) In the event the parties are required to file a Pre-merger Notification and Report Form under the H-S-R Act, all applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) The issuance by the FCC of a Final Order approving the applications for transfer of control of the FCC Licenses contemplated by this Agreement shall have occurred, and there shall have been duly satisfied and performed on or prior to the Closing Date all the material conditions contained in the Final Order required to be so satisfied; provided, however, Purchaser, in its sole discretion, may waive the necessity of a "Final Grant" by the FCC and close following an "Initial Grant". (e) Purchaser shall have delivered to Seller at the Closing the Purchase Price and each document required by Section 12.2 hereof. (f) The closings under the MMP Acquisition Documents shall have occurred or occur simultaneously with the Closing. 28 SECTION 12 DELIVERIES AT THE CLOSING ------------------------- 12.1. DELIVERIES BY SELLERS. At the Closing, Seller will deliver or cause to be delivered at the Closing to Purchaser: (a) Sellers' Bring-Down Certificate; (b) a legal opinion of Clark & Stant, P.C., counsel to Seller and MMP II substantially in the form attached as Exhibit B to the MTC Agreement; (c) a legal opinion of FCC counsel to the MMP II Licensee Entities in the form attached hereto as Exhibit C to the MTC Agreement; (d) a bill of sale, assignment and other transfer documents, dated as of the Closing Date and executed by Seller transferring the Assets to Purchaser; (e) RESERVED; (f) a certificate as to the existence and good standing of Seller issued by the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; (g) a certificate as to the existence of MMP II issued by the Secretary of the State Corporation Commission of the Commonwealth of Virginia not more than five (5) Business Days before the Closing Date and certificates issued by the appropriate governmental authorities in each jurisdiction in which MMP II is qualified to do business and a certificate as to the existence for each of the MMP II Licensee Entities of the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; (h) receipt for Purchase Price; (i) RESERVED; (j) RESERVED; (k) RESERVED; 29 (l) RESERVED; (m) RESERVED; (n) RESERVED; (o) RESERVED (p) RESERVED; (q) RESERVED; (r) such other documents as Purchaser shall reasonably request. 12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be delivered at the Closing to Seller or MMP II, as the case may be: (a) Purchaser's Bring-Down Certificate; (b) a legal opinion of Thomas & Libowitz, P.A., counsel to Purchaser, substantially in the form attached as Exhibit D to the MTC Agreement hereto; (c) the Purchase Price as required pursuant to Section 3.1 hereof; (d) RESERVED; (e) a certificate as to the existence and good standing of the Purchaser issued by the Maryland Department of Assessments and Taxation of the State of Maryland dated as of the Closing Date; (f) RESERVED; (g) such other documents as Seller shall reasonably request. SECTION 13 EXPENSES -------- Except as provided in Sections 9.4, 9.5 and 17.12, each party will pay its own fees, expenses, and disbursements and those of its counsel in connection with the subject matter of this Agreement (including the negotiations with respect hereto and the 30 preparation of any documents) and all other costs and expenses incurred by it in the performance and compliance with all conditions and obligations to be performed by it pursuant to this Agreement or as contemplated hereby. SECTION 14 TERMINATION ----------- 14.1 TERMINATION. This Agreement shall terminate upon a termination of any of the MMP Acquisition Documents. In addition, this Agreement may be terminated: (a) At any time by mutual written consent of Purchaser and Seller; (b) By either Purchaser or Seller, if the terminating party is not in default or breach in any material respect of its obligations under this Agreement, if the Closing hereunder has not taken place on or before December 31, 2000 (the "Termination Date"); (c) by Seller, if Seller's not in default or breach in any material respect of their obligations under this Agreement, if all of the conditions in Section 11.2 have not been satisfied or waived by the date scheduled for the Closing; (d) by Purchaser, if Purchaser is not in default or breach in any material respect of its obligations under this Agreement, if all of the conditions set forth in Section 11.1 have not been satisfied or waived by the date scheduled for the Closing; (e) RESERVED 14.2 PROCEDURE AND EFFECT OF TERMINATION. (a) In the event of termination of this Agreement by either or both Purchaser and/or Seller pursuant to Section14.1 hereof, prompt written notice thereof shall forthwith be given to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any of the parties hereto, but subject to and without limiting any other rights of the parties specified herein in the event a party is in default or breach in any material respect of its obligations under this Agreement. If this Agreement is terminated as provided herein, all filings, applications and other submissions relating to the transactions contemplated hereby as to which termination has occurred shall, to the extent practicable, be withdrawn from the agency or other Person to which such filing is made. (b) If this Agreement is terminated pursuant to Section 14.1(d), 31 Purchaser shall have the right to pursue all remedies available hereunder at law or in equity, including, without limitation, the right to seek specific performance and/or actual monetary damages, but excluding consequential and incidental damages. In recognition of the unique character of the property to be sold hereunder, and the damages which Purchaser will suffer in the event of a termination pursuant to the foregoing Sections of this Agreement, Seller hereby waives any defense that Purchaser has an adequate remedy at law for the breach of this Agreement by Seller. (c) If this Agreement is terminated pursuant to Section 14.1(c) Seller shall have the right to pursue all remedies available hereunder at law or in equity, including, without limitation, the right to seek specific performance and/or actual monetary damages, but excluding consequential and incidental damages. In recognition of the unique character of the property to be sold hereunder, and the damages which Seller will suffer in the event of a termination pursuant to the foregoing Sections of this Agreement, Purchaser hereby waives any defense that Purchaser has an adequate remedy at law for the breach of this Agreement by Seller. (d) RESERVED (e) Prior to the First Closing, a notice of termination made under any provision of Section 14.1 of this Agreement shall be deemed to be a notice of termination under the termination provisions of the MMP Acquisition Documents. (f) In the event of a default by either party that results in a lawsuit or other proceeding for any remedy available under this Agreement, the prevailing party, to the extent it is the prevailing party, shall be entitled to reimbursement from the other party of its reasonable legal fees and expenses, whether incurred in arbitration, at trial, or on appeal. SECTION 15 NOTICES ------- All notices, requests, consents, payments, demands, and other communications required or contemplated under this Agreement shall be in writing and (a) personally delivered or sent via telecopy (receipt confirmed), or (b) sent by Federal Express or other reputable overnight delivery service (for next Business Day delivery), shipping prepaid, as follows: 32 To Purchaser: SINCLAIR COMMUNICATIONS, INC. 2000 W. 41st Street Baltimore, Maryland 21211 Attention: David D. Smith Telecopy: (410) 467-5043 Telephone: (410) 662-1008 with copies Sinclair Communications, Inc. (which shall not 2000 W. 41st Street constitute notice) to: Baltimore, Maryland 21211 Attention: General Counsel Telecopy: (410) 662-4707 Telephone: (410) 662-1422 and Thomas & Libowitz, P.A. Suite 1100 100 Light Street Baltimore, Maryland 21202 Attention: Steven A. Thomas Telecopy: (410) 752-2046 Telephone: (410) 752-2468 To MMP: Anthony R. Ignaczak Quad C, Inc. 230 East High Street Charlottesville, Virginia 22902 Telecopy: (804) 979-1145 Telephone: (804) 979-9227 Allen B. Rider, III Colonade Capital, L.L.C. 13th Floor 901 East Byrd Richmond, Virginia 23219 Telecopy: (804) 782-6606 Telephone: (804) 782-3512 33 Stephen W. Burke Clark & Stant, P.C. Suite 900 One Columbus Center Virginia Beach, Virginia 23462 Telecopy: (757) 473-0395 Telephone: (757) 499-8800 Telephone: (757) 499-880 If to Seller and Max Television Company MMP II: 900 Laskin Road Virginia Beach, Virginia 23451 Telecopy: (757) 437-0034 Telephone: (757) 437-9000 Stephen W. Burke Clark & Stant, P.C. Suite 900 One Columbus Center Virginia Beach, Virginia 23462 Telecopy: (757) 473-0395 Telephone: (757) 499-8800 or to such other Persons or addresses as any Person may request by notice given as aforesaid. Notices shall be deemed given and received at the time of personal delivery or completed telecopying, or, if sent by Federal Express or such other overnight delivery service one Business Day after such sending. SECTION 16 SELLERS' AGENTS --------------- 16.1. SELLERS' AGENTS. Seller hereby irrevocably appoints Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called the "Sellers' Agents") as his, her or its agent and attorney-in-fact to take any action required or permitted to be taken by Seller under the terms of this Agreement, including, without limiting, the generality of the foregoing, the payment of expenses relating to the transactions contemplated by the Agreement, and the right to waive, modify or amend any of the terms of this Agreement in any respect, whether or not material, and agrees to be bound by any and all actions taken by the Sellers' Agents on his or its behalf. Any action to be taken by the Sellers' Agents shall 34 be unanimous. In the event of the death, incapacity or liquidation of any of Sellers' Agents, such person or entity shall not be replaced, and the remaining Sellers' Agents shall continue in that capacity. Seller agrees to indemnify the Sellers' Agents from and against and in respect of any and all liabilities, damages, claims, costs, and expenses, including, but not limited to attorneys' fees, arising out of or due to any action by them as the Sellers' Agents and any and all actions, proceedings, demands, assessments, or judgments, costs, and expenses incidental thereto, except to the extent that the same result from bad faith or gross negligence on the part of the Sellers' Agents. Purchaser shall be entitled to rely exclusively upon any communications given by the Sellers' Agents on behalf of Seller, and shall not be liable for any action taken or not taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to disregard any notices or communications given or made by Seller unless given or made through the Sellers' Agents. SECTION 17 MISCELLANEOUS ------------- 17.1. HEADINGS. The headings contained in this Agreement (including, but not limited to, the titles of the Schedules and Exhibits hereto) have been inserted for the convenience of reference only, and neither such headings nor the placement of any term hereof under any particular heading shall in any way restrict or modify any of the terms or provisions hereof. Terms used in the singular shall be read in the plural, and vice versa, and terms used in the masculine gender shall be read in the feminine or neuter gender when the context so requires. 17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits attached to or referenced in this Agreement or incorporated by reference in this Agreement constitute an integral part of this Agreement as if fully rewritten herein. 17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. 17.4. ENTIRE AGREEMENT. This Agreement, the MMP Acquisition Documents, and the FCC Licensee Transfer Agreement, the Annexes, Schedules and Exhibits and the documents to be delivered hereunder and thereunder constitute the entire understanding and agreement between the parties hereto concerning the subject matter hereof. All negotiations and writings between the parties hereto are merged into this Agreement, the MMP Acquisition Documents, the FCC Licensee Transfer Agreement, and there are no representations, warranties, covenants, understandings, or agreements, oral or otherwise, 35 in relation thereto between the parties other than those incorporated herein or to be delivered hereunder. 17.5. GOVERNING LAW. This Agreement is to be delivered in and should be construed in accordance with and governed by the laws of the Commonwealth of Virginia without giving effect to conflict of laws principles. 17.6. MODIFICATION. This Agreement cannot be modified or amended except in writing signed by each of the Seller, MMP, Purchaser and MMP II. 17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights and obligations hereunder shall be assigned, delegated, sold, transferred, sublicensed, or otherwise disposed of by operation of law or otherwise by Seller, MMP or MMP II, without the prior written consent of Purchaser. Purchaser may assign its rights and obligations hereunder to any Person without the prior written consent of any other party hereto so long as Purchaser is not relieved of its obligations hereunder. Purchaser shall promptly notify Seller of any assignment. In the event of such permitted assignment or other transfer, all of the rights, obligations, liabilities, and other terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against, the respective successors and assigns of the parties hereto, whether so expressed or not. 17.8. WAIVER. Any waiver of any provision hereof (or in any related document or instrument) shall not be effective unless made expressly and in a writing executed in the name of the party sought to be charged. The failure of any party to insist, in any one or more instances, on performance of any of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or of the future performance of any such term, covenant, or condition, but the obligations of the parties with respect hereto shall continue in full force and effect. 17.9. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and if any part of any provision is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, such provision may be changed, consistent with the intent of the parties hereto, to the extent reasonably necessary to make the provision, as so changed, legal, valid, binding, and enforceable. If any provision of this Agreement is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, and if such provision cannot be changed consistent with the intent of the parties hereto to make it fully legal, valid, binding and enforceable, then such provisions shall be stricken from this Agreement, and the remaining provisions of this Agreement shall not in any way be affected or impaired, but shall remain in full force and effect. 36 17.10. ANNOUNCEMENTS. From the date of this Agreement, all further public announcements relating to this Agreement or the transactions contemplated hereby will be made only as agreed upon jointly by the parties hereto, except that nothing herein shall prevent Seller or any Affiliate thereof or Purchaser from making any disclosure in connection with the transactions contemplated by this Agreement if required by applicable law or otherwise as a result of its, or its Affiliate's, being a public company, provided that prior notice of such disclosure is given to the other party hereto. 17.11. SPECIFIC PERFORMANCE. Sellers acknowledges that Purchaser will have no adequate remedy at law if Seller fails to perform its obligation to consummate the sale of Stock contemplated under this Agreement. In such event, Purchaser shall have the right, in addition to any other rights or remedies it may have, to specific performance of this Agreement. 17.12 FEES AND EXPENSES. Except as otherwise provided in this Agreement, each party shall pay their own expenses incurred in connection with the authorization, preparation, execution, and performance of this Agreement and the exhibits, Schedules, and other documentation, including all fees and expenses of counsel, accountants, and each party shall be responsible for all fees and commissions payable to any finder, broker, adviser, or other similar Person retained by or on behalf of such party; provided, however, that all transfer taxes, recordation taxes, sales taxes, and document stamps in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Seller and all other filing fees (including all FCC and H-S-R Act filing fees), and other charges levied by any governmental entity in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Seller. Purchaser hereby waives compliance with the provisions of any applicable bulk transfer law. 17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 17.14 INTERPRETATION. The parties hereto acknowledge and agree that the preparation and drafting of this Agreement and the Exhibits hereto are the result of the efforts of all parties to this Agreement and every covenant, term, and provision of this Agreement shall be construed according to its fair meaning and shall not be construed against any particular party as the drafter of such covenant, term, and/or provision. The 37 parties agree that this Agreement is to be construed in a manner consistent with the terms of the MMP Acquisition Documents; provided, however, that in the event the terms and conditions of this Agreement vary or are inconsistent with the terms and conditions of the Time Brokerage Agreement as executed by the parties thereto and in effect, the terms and conditions of the Time Brokerage Agreement shall prevail over the terms and conditions of this Agreement. [SIGNATURE PAGES TO FOLLOW --REST OF PAGE LEFT INTENTIONALLY BLANK] 38 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date and year first written above. MAX TELEVISION COMPANY, a Virginia corporation By ------------------------------------- its ---------------------------- MAX MEDIA PROPERTIES LLC By ------------------------------------- its ---------------------------- MAX MEDIA PROPERTIES II LLC, a Virginia limited liability company By ------------------------------------- its ---------------------------- SINCLAIR COMMUNICATIONS, INC., a Maryland corporation By ------------------------------------- its ---------------------------- ANNEX 1 DEFINITIONS As used in the attached Asset Purchase Agreement, the following terms shall have the corresponding meaning set forth below: "Affiliate" of, or a Person "Affiliated" with, a specified Person, means a Person who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. "Agreement" has the meaning set forth in the preamble. "Assets" has the meaning set forth in the Recitals. "Basket Amount" shall have the meaning set forth in Section 10.3(c). "Benefit Arrangement" shall mean any benefit arrangement, obligations, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Benefit Plan, including without limitation, employment agreements, severance agreements, executive compensation arrangements, including but not limited to stock options, restricted stock rights and performance unit awards, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discounts, employee loans, employee banking privileges, any plans subject to Section 125 of the code, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, agents. "Benefit Plan" shall have the meaning given in Section 3(3) of ERISA. "Business" means the business of owning the FCC Licenses. "Business Day" means any day on which banks in New York City are open for business. "Closing" has the meaning set forth in Section 4 of the Agreement. "Closing Date Tax Liabilities" shall have the meaning set forth in Section 2.2(b)(iv) of this Agreement. "Closing Date" has the meaning set forth in Section 4 of the Agreement. "Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time. "Company" refers to Seller in this Agreement. "Company Interests" shall have the meaning set forth in Section 5.3t. "Consents" means the consents, permits, or approvals of government authorities and other third parties necessary to lawfully and validly transfer the Assets to Purchaser to maintain the validity and effectiveness (any default or violation of the terms thereof) of any Material Contract and any licenses (including, without limitation, the FCC Licenses) to be transferred to Purchaser, or otherwise to consummate the transactions contemplated by this Agreement. "Environment" means any surface or subsurface physical medium or natural resource, including air, land, soil (surface or subsurface), surface waters, ground waters, wetlands, stream and river sediments, rock and biota. "Environmental Laws" means any federal, state, or local law, legislation, rule, regulation, ordinance or code of the United States or any subdivision thereof relating to the injury to, or the pollution or protection of, human health and safety or the Environment. "Environmental Liability" means any loss, liability, damage, cost or expense arising under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean any Person that together with MMP II, as applicable, would be or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any general partnership of which the Company or MMP, as applicable, is or has been a general partner. 2 "FCC" has the meaning set forth in the recitals to the Agreement. "FCC Application" means the applications requesting approval and consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP II Transfers, and (ii) the transfer of control or the FCC Licenses to Purchaser or its assignee for those Television Stations and Radio Stations not included in the MMP II Transfers. "FCC Employees" means those employees employed by Seller, MMP II and the MMP II Licensee Entities necessary for each of those entities to discharge its obligations under the Time Brokerage Agreement. "FCC Licenses" means those licenses, permits and authorizations issued by the FCC to the FCC Licensee Entities in connection with the business and operations of the Stations (together with any renewals, extensions, modifications or additions thereto between the date of this Agreement and the Closing Date. "FCC Rules and Regulations" has the meaning set forth in Section 5.3f of the Agreement. "Final Order" means action by the FCC as to which no further steps (including those of appeal or certiorari) can be taken in any action or proceeding to review, modify or set the determination aside, whether under Section 402 or 405 of the Communications Act, or otherwise. "First Closing" means the closing under the MMP Acquisition Documents. "GAAP" means generally accepted accounting principles. "Hazardous Substances" means petroleum, petroleum products, petroleum-derived substances, radioactive materials, hazardous wastes, polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any materials containing asbestos, and any materials or substances regulated or defined as or included in the definition of "hazardous substances, "hazardous materials," "hazardous constituents," "toxic substances," "pollutants, "pollutants," "contaminants" or any similar denomination intended to classify substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or reactivity under any Environmental Laws. "H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 3 "Initial Grant" means the date of the publication of the FCC "Public Notice" announcing the grant of the "Assignment Applications" for the FCC License to be transferred hereunder which contain no conditions materially adverse to Purchaser. The term "Public Notice" and "Assignment Applications" have the same meaning herein as are generally given the same under existing FCC rules, regulation and procedures. "Intellectual Property" means the patents, patent applications, trademark registrations and applications therefor, service mark registrations and applications therefor, copyright registrations and applications therefor and trade names that are (i) owned by the Company and (ii) material to the continued operation of the Business. "IRS" means the Internal Revenue Service. "Investors Agreement" has the meaning set forth in the Recitals. "Investors" has the meaning set forth in the Recitals. "Knowledge or knowledge" shall mean with respect to Seller, MMP, MMP II and the MMP II FCC Licensee Entities the actual knowledge (without any requirement of inquiry except as otherwise provided in the Agreement) of A. E. Loving, Jr., John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb, David J. Wilhelm and Jacquelyn D. Smullen, the managers and officers of MMP II, and the officers and directors of Seller. "LMA Stations" shall have the meaning set forth in the Recitals. "License Assets" means those assets maintained by MTC, MMP II and the MMP II Licensee Entities in order for those entities to comply with their obligations under the Time Brokerage Agreement. "Losses" means any loss, liability, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) but exclusive of incidental or consequential damages. "MMP Acquisition Documents" shall mean collectively the MRI Agreement, the MTC Agreement, the Investors Agreement, and the Management Agreement. "MMP II Licensee Entities" shall have the meaning set forth in the Recitals. "MMP II FCC Applications" means the application requesting the approval and 4 consent of the FCC to the transfer of control of Television Stations WKEF-TV and WEMT-TV from MMP to MTC. "MMP II Stations" means television broadcast stations WKEF-TV and WEMT-TV. "MMP Real Property" means all real property owned or leased by MMP. "MRI" shall have the meaning set forth in the Recitals. "MRI Agreement" shall have the meaning set forth in the Recitals. "MTC Agreement" shall have the meaning set forth in the Recitals. "MTR" has the meaning set forth in the Recitals. "Management Agreement" shall have the meaning set forth in the Recitals. "Material Adverse Effect" shall mean a material adverse effect on the business, or financial condition of MMP II or either of the MMP II Licensee Entities. "Material Contract" means all agreements to which MMP II is a party or by or to which it or its assets or properties are bound, except: (i) agreements for the cash sale of advertising time with a term of less than six months, (ii) agreements cancelable on no more than 90 days' notice without material penalty, or (iii) agreements which are otherwise immaterial to the Business and the MMP II Stations. "Permitted Encumbrances" shall mean liens for taxes not yet due and payable; landlord's liens; liens for property taxes not delinquent; statutory liens that were created in the ordinary course of business; restrictions or rights required to be granted to governmental authorities or otherwise imposed by governmental authorities under applicable law; zoning, building or similar restrictions relating to or effecting property, including leasehold interests; all liens of record as of the date of this Agreement, but only if such liens do not materially effect the ownership or use of the MMP Real Property or leasehold interests and real property owned by others and operating leases for personal property and leased interests in property leased to others; liens and encumbrances on the MMP Real Property, currently of record as of the date hereof, and other liens or encumbrances on the MMP Real Property, in any case that individually or in the aggregate do not materially effect the current use and enjoyment thereof in the operation of any Station. "Person" means a natural person, a governmental entity, agency or representative 5 (at any level of government), a corporation, partnership, joint venture or other entity or association, as the context requires. "Pre-Closing Tax Period" means any Taxable Period or portion thereof that ends on or before the Closing Date. "Post-Closing Tax Period" means any Taxable Period or portion thereof beginning after the Closing Date. "Purchase Price" has the meaning set forth in Section 3.1 of the Agreement. "Purchaser" has the meaning set forth in the preamble to the Agreement. "Purchaser's Bring-Down Certificate" has the meaning set forth in Section 11.2(a) of the Agreement. "Purchaser's Knowledge" means the actual knowledge of the officers of Purchaser. "Qualified Plan" shall mean any MMP II Benefit Plan that meets, purports to meet, or is intended to meet the requirements of Section 401(a) of the Code. "RLLP" shall have the meaning set forth in the Recitals. "Radio Stations" shall have the meaning set forth in the Recitals. "Real Property" means any real property owned or leased by Seller. "Related Agreement" means any document delivered at the Closing and any contract which is to be entered into at the Closing or otherwise pursuant to this Agreement, including the Escrow Agreement. "Seller" has the meaning set forth in the preamble to the Agreement. "Sellers' Bring-Down Certificate" has the meaning set forth in Section 11.1(a) of this Agreement. "Stations" has the meaning set forth in the recitals to the Agreement. "Stock" has the meaning set forth in the recitals to the Agreement. "Straddle Period" shall have the meaning set forth in Section 8.2 of this 6 Agreement. "Tax" or "Taxes" means all taxes, including, but not limited to, income (whether net or gross), excise, property, sales, transfer, gains, gross receipts, occupation, privilege, payroll, wage, unemployment, workers' compensation, social security, occupation, use, value added, franchise, license, severance, stamp, premium, windfall profits, environmental (including taxes under Code Sec. 59A), capital stock, withholding, disability, registration, alternative or add-on minimum, estimated or other tax of any kind whatsoever (whether disputed or not) imposed by any Tax Authority, including any related charges, fees, interest, penalties, additions to tax or other assessments. "Tax Authority" means any federal, national, foreign, state, municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body or other authority exercising any taxing or tax regulatory authority. "Tax Liability" means any liability for a Tax. "Taxable Period" means any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any applicable statute, rule or regulation. "Tax Proceeding" means any audit, examination, claim or other administrative or judicial proceeding relating to Taxes or Tax Returns. "Tax Returns" means all returns, reports, forms, estimates, information returns and statements (including any related or supporting information) filed or to be filed with any Tax Authority in connection with the determination, assessment, collection or administration of any Taxes. "Television Licensee" shall have the meaning set forth in the Recitals. "Television Stations" shall have the meaning set forth in the Recitals. "Termination Date" shall have the meaning set forth in Section 14.1(b). 7 "Time Brokerage Agreement" means that agreement entered into by Purchaser, MMP II and the MMP II Licensee Entities at the First Closing. "Trade-out Agreements" shall mean all contracts and agreements (excluding program contracts) pursuant to which MMP has sold, traded or bartered commercial air time on the Stations in consideration for any property or services in lieu of or in addition to cash. 8 EX-10.63 9 EXHIBIT 10.63 ASSET PURCHASE AGREEMENT BY AND AMONG TUSCALOOSA BROADCASTING, INC., WPTZ LICENSEE, INC., WNNE LICENSEE, INC. AS SELLERS AND STC BROADCASTING OF VERMONT, INC. AS BUYER DATED AS OF FEBRUARY 3, 1998 TABLE OF CONTENTS Page ---- ARTICLE 1. DEFINITIONS AND REFERENCES........................................2 ARTICLE 2. SALE AND PURCHASE OF ASSETS.......................................2 2.1. Asset Sale and Purchase of Assets.................................2 2.1.1. FCC Licenses............................................3 2.1.2. Real and Leased Property Interests......................3 2.1.3. Tangible Personal Property..............................3 2.1.4. Intellectual Property...................................4 2.1.5. Program Contracts.......................................4 2.1.6. Trade-out Agreements....................................4 2.1.7. Broadcast Time Sales Agreement..........................4 2.1.8. Network Affiliation Agreements..........................4 2.1.9. Operating Contracts.....................................5 2.1.10. Vehicles................................................5 2.1.11. Files and Records.......................................5 2.1.12. Auxiliary Facilities....................................5 2.1.13. Permits and Licenses....................................5 2.1.14. Goodwill................................................5 2.1.15. Other Assets............................................6 2.2. Excluded Assets...................................................6 2.2.1. Cash....................................................6 2.2.2. Accounts Receivable.....................................6 2.2.3. Personal Property Disposed Of...........................6 2.2.4. Insurance...............................................6 2.2.5. Employee Plans and Assets...............................7 2.2.6. Right to Tax Refunds....................................7 2.2.7. Certain Books and Records...............................7 2.2.8. Third-Party Claims......................................7 2.2.9. Rights Under this Agreement and the Heritage Agreement..7 2.2.10. Names...................................................7 2.2.11. Deposit and Prepaid Expenses............................7 2.2.12. WFFF Licenses...........................................7 2.2.13. Miscellaneous Excluded Assets...........................8 2.3. Escrow Deposit....................................................8 2.4. Purchase Price....................................................8 2.5. Payment of Purchase Price.........................................8 2.6. Proration Amount..................................................8 TABLE OF CONTENTS (continued) Page ---- 2.7. Allocation of Base Purchase Price................................10 2.8. Assumption of Liabilities........................................11 ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY SELLERS........................12 3.1. Organization and Standing........................................12 3.2. Authorization....................................................12 3.3. Compliance with Laws.............................................12 3.4. Consents and Approvals; No Conflicts.............................13 3.5. Financial Statements; Undisclosed Liabilities....................13 3.6. Absence of Certain Changes or Events.............................14 3.7. Absence of Litigation............................................14 3.8. Assets...........................................................14 3.9. FCC Matters......................................................15 3.10. Real Property....................................................15 3.11. Intellectual Property............................................16 3.12. Station Contracts................................................17 3.13. Taxes............................................................17 3.14. Employee Benefit Plans...........................................18 3.15. Labor Relations..................................................20 3.16. Environmental Matters............................................21 3.17. Insurance........................................................21 3.18. Reports..........................................................21 ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY BUYER..........................22 4.1. Organization and Standing........................................22 4.2. Authorization....................................................22 4.3. Consents and Approvals; No Conflicts.............................22 4.4. Availability of Funds............................................23 4.5. Qualification of Buyer...........................................23 4.6. WARN Act.........................................................24 4.7. No Outside Reliance..............................................24 4.8. Interpretation of CertainProvisions..............................24 ARTICLE 5. PRE-CLOSING FILINGS..............................................25 5.1. Applications for FCC Consent.....................................25 5.2. Hart-Scott-Rodino................................................25 5.3. Non-Required Actions.............................................25 ARTICLE 6. COVENANTS AND AGREEMENTS OF SELLERS..............................25 6.1. Negative Covenants...............................................25 6.1.1. Dispositions; Mergers..................................26 -ii- TABLE OF CONTENTS (continued) Page ---- 6.1.2. Accounting Principles and Practices....................26 6.1.3. Trade-out Agreements...................................26 6.1.4. Broadcast Time Sales Agreements........................26 6.1.5. Network Affiliation Agreements and LMAs................26 6.1.6. Additional Agreements..................................26 6.1.7. Breaches...............................................27 6.1.8. Employee Matters.......................................27 6.1.9. Actions Affecting FCC Licenses.........................27 6.1.10. Programming............................................27 6.1.11. Encumbrances...........................................28 6.1.12. Transactions With Affiliates...........................28 6.2. Affirmative Covenants............................................28 6.2.1. Preserve Existence.....................................28 6.2.2. Normal Operations......................................28 6.2.3. Maintain FCC Licenses..................................29 6.2.4. Network Affiliation....................................29 6.2.5. Station Contracts......................................29 6.2.6. Taxes..................................................29 6.2.7. Access.................................................29 6.2.8. Insurance..............................................30 6.2.9. Financial Statements...................................30 6.2.10. Consents...............................................31 6.2.11. Corporate Action.......................................32 6.2.12. Environmental Audit....................................32 6.2.13. Heritage Agreement.....................................32 6.3. Confidentiality..................................................32 6.4. Heritage Acquisition.............................................33 ARTICLE 7. COVENANTS AND AGREEMENTS OF BUYER................................33 7.1. Confidentiality..................................................33 7.2. Corporate Action.................................................34 7.3. Access...........................................................34 7.4. Collection of Receivables........................................35 ARTICLE 8. MUTUAL COVENANTS AND UNDERSTANDINGS OF SELLERS AND BUYER........35 8.1. Possession and Control...........................................35 8.2. Risk of Loss.....................................................35 8.3. Public Announcements.............................................36 8.4. Employee Matters.................................................37 -iii- 8.5. Disclosure Schedules.............................................38 8.6. Bulk Sales Laws..................................................39 8.7. Tax Matters......................................................39 8.8. Preservation of Books and Records................................39 8.9. TBA Agreement....................................................39 ARTICLE 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER....................40 9.1. Closing Under the Heritage Agreement.............................40 9.2. Representations and Covenants....................................40 9.3. No Transmission Defects..........................................40 9.4. Delivery of Documents............................................41 9.5. FCC Order........................................................41 9.6. Hart-Scott-Rodino................................................41 9.7. Legal Proceedings................................................41 ARTICLE 10. CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS...................41 10.1. Closing Under the Heritage Agreement.............................41 10.2. Representations and Covenants....................................42 10.3. Delivery by Buyer................................................42 10.4. FCC Order........................................................42 10.5. Hart-Scott-Rodino................................................42 10.6. Legal Proceedings................................................42 ARTICLE 11. CLOSING; NON-LICENSE TRANSFER....................................43 11.1. Closing..........................................................43 11.2. Non-License Transfer.............................................44 11.3. Time and Place of Non-License Transfer and Closing...............44 11.4. Deliveries by Sellers............................................44 11.4.1. Agreements and Instruments.............................44 11.4.2. Consents...............................................45 11.4.3. Certified Resolutions..................................45 11.4.4. Officers' Certificates.................................45 11.4.5. Good Standing Certificates.............................45 11.5. Deliveries by Buyer..............................................46 11.5.1. Purchase Price Payment.................................46 11.5.2. Agreements and Instruments.............................46 11.5.3. Certified Resolutions..................................46 11.5.4. Officers' Certificate..................................46 ARTICLE 12. SURVIVAL; INDEMNIFICATION.........................................46 -iv- TABLE OF CONTENTS (continued) Page ---- 12.1. Survival of Representations......................................47 12.2. Indemnification By Sellers.......................................47 12.3. Indemnification By Buyer.........................................47 12.4. Limitations on Indemnification...................................48 12.5. Conditions of Indemnification....................................49 12.6. Cure of Breach...................................................50 ARTICLE 13. TERMINATION......................................................51 13.1. Termination by the Parties.......................................51 13.2. Automatic Termination............................................51 13.3. Effect ofTermination.............................................51 ARTICLE 14. REMEDIES.........................................................52 14.1. Default by Buyer.................................................52 14.2. Liquidated Damages...............................................52 14.3. Specific Performance.............................................52 ARTICLE 15. GENERAL PROVISIONS...............................................53 15.1. Additional Actions, Documents and Information....................53 15.2. Brokers..........................................................53 15.3. Expenses and Taxes...............................................53 15.4. Notices..........................................................54 15.5. Waiver...........................................................56 15.6. Benefit and Assignment...........................................56 15.7. Entire Agreement; Amendment......................................56 15.8. Severability.....................................................57 15.9. Headings.........................................................57 15.10. Governing Law....................................................57 15.11. Signature in Counterparts........................................57 -v- SCHEDULES Schedule 2.1.1 FCC Licenses Schedule 2.1.2 Real Property Interests Schedule 2.1.3 Tangible Personal Property Schedule 2.1.5 Program Contracts Schedule 2.1.6 Trade-out Agreements Schedule 2.1.8 Network Affiliation Agreements Schedule 2.1.9 Operating Contracts Schedule 2.1.10 Vehicles Schedule 2.2.13 Excluded Assets Schedule 3.4 Consents Schedule 3.6 Absence of Certain Changes or Events Schedule 3.7 Litigation Schedule 3.8 Encumbrances on Assets Schedule 3.9 FCC Matters Schedule 3.14 Employee Benefit Plans Schedule 3.15 Employee Matters Schedule 3.16 Environmental Matters Schedule 3.17 Insurance Schedule 4.5.1 Buyer Stations Schedule I License Assets -vi- EXHIBITS EXHIBIT A Form of Bill of Sale and Assignment of Assets EXHIBIT B Form of Assignment of FCC Licenses EXHIBIT C Form of Assignment of Contracts and Leases EXHIBIT D Form of Assumption Agreement EXHIBIT E Form of TBA Agreement -vii- ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of this 3rd day of February, 1998, by and among STC BROADCASTING OF VERMONT, INC., a Delaware corporation ("Buyer"), TUSCALOOSA BROADCASTING, INC., a Maryland corporation ("Tuscaloosa"), WPTZ LICENSEE, INC., a Maryland corporation ("WPTZ Licensee"), and WNNE LICENSEE, INC., a Maryland corporation ("WNNE Licensee") (Tuscaloosa, WPTZ Licensee and WNNE Licensee, collectively, the "Sellers" and, individually a "Seller"). WHEREAS, pursuant to an Asset Purchase Agreement dated as of July 16, 1997 (the "Heritage Agreement"), by and among Sinclair Broadcast Group, Inc., a Maryland corporation ("Sinclair") and certain indirect subsidiaries of Heritage Media Corporation, a Delaware corporation ("HMC"), Sinclair has agreed to buy, and such subsidiaries have agreed to sell, certain broadcast stations owned, controlled or operated by such subsidiaries, including (i) television broadcast station WPTZ-TV, Channel 5, North Pole, New York ("WPTZ"); (ii) certain assets and rights relating to television broadcast station WFFF-TV, Channel 44, Burlington, Vermont ("WFFF"); and (iii) television broadcast station WNNE-TV, Channel 31, Hartford, Vermont ("WNNE") (WPTZ, WFFF and WNNE each, individually, a "Station" and, collectively, the "Stations") (such subsidiaries of HMC transferring assets related to the Stations pursuant to the Heritage Agreement are referred to herein as the "Heritage Subsidiaries"); WHEREAS, each Seller is a wholly-owned indirect subsidiary of Sinclair, and Sinclair has assigned to Sellers Sinclair's rights to acquire the Stations, subject to and in accordance with the terms and conditions of the Heritage Agreement; WHEREAS, pursuant to a Transfer Agreement dated as of May 2, 1997, among William G. Evans (the "Trustee"), HMC, The News Corporation Limited, a South Australia corporation and Heritage Media Services, Inc., a Iowa corporation and wholly-owned subsidiary of HMC ("HMSI"), on August 20, 1997, HMSI transferred to the Trustee to hold in trust for the benefit of HMSI, all of the outstanding capital stock of HMI Broadcasting Corp., a Delaware corporation and owner of all of the outstanding capital stock of the Heritage Subsidiaries; WHEREAS, pursuant to a guaranty given as of the date hereof by Sinclair to Buyer, Sinclair has guaranteed to Buyer the prompt and complete performance of the obligations of Sellers arising under this Agreement and the other Seller Documents; WHEREAS, Buyer is a wholly-owned indirect subsidiary of STC Broadcasting, Inc., a Delaware corporation ("STC"); WHEREAS, pursuant to a guaranty given as of the date hereof by STC to Sellers, STC has guaranteed to Sellers the prompt and complete performance of the obligations of Buyer arising under this Agreement and the other Buyer Documents; WHEREAS, the parties hereto desire to enter into this Agreement to provide for the sale, assignment and transfer by Sellers to Buyer of the assets of the Stations, all subject to the terms described in this Agreement; and WHEREAS, upon the satisfaction of certain conditions set forth herein, the parties desire to enter into operating agreements pursuant to which Buyer will commence operating the Stations, subject to compliance with all requirements of the FCC. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows: ARTICLE 1. DEFINITIONS AND REFERENCES Capitalized terms used herein without definition shall have the respective meanings assigned thereto in Annex I attached hereto and incorporated herein for all purposes of this Agreement (such definitions to be equally applicable to both the singular and plural forms of the terms defined). Unless otherwise specified, all references herein to "Articles" or "Sections" are to Articles or Sections of this Agreement. ARTICLE 2. SALE AND PURCHASE OF ASSETS 2.1. ASSET SALE AND PURCHASE OF ASSETS. Subject to the terms and conditions hereof and in reliance upon the representations, warranties and agreements contained herein, Sellers shall sell, assign, transfer, convey and deliver to Buyer free and clear of any Encumbrances other than Permitted Encumbrances, and Buyer shall purchase, acquire, pay for and accept from Sellers, all right, title and interest of Sellers in, to and under all real, personal and mixed assets, rights, benefits and privileges, both tangible and -2- intangible, owned, leased, used or useful by Sellers in connection with the business and operations of the Stations (collectively, the "Assets"); but excluding the Excluded Assets described in Section 2.2. The Assets shall include, without limitation, all right, title and interest of Sellers in, to and under the following: 2.1.1. FCC LICENSES. All licenses, permits and other authorizations issued by the FCC to any Seller or any Heritage Subsidiary for the operation of the Stations (the "FCC Licenses"), including without limitation those listed in Schedule 2.1.1, and all applications therefor, together with any renewals, extensions or modifications thereof and additions thereto. 2.1.2. REAL AND LEASED PROPERTY INTERESTS. (a) All the real property owned by any Seller or any Heritage Subsidiary including, without limitation, all land, fee interests, easements and other interests of every kind and description in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon owned by any Seller or any Heritage Subsidiary used or useful in connection with the business and operations of the Stations ("Real Property"), including, without limitation, all of those items listed in Schedule 2.1.2. (b) All the real property leasehold interests of any Seller or any Heritage Subsidiary including, without limitation, leases and subleases of any land, easements and other real property leasehold interests of every kind and description in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon leased by any Seller or any Heritage Subsidiary in connection with the business and operations of the Stations ("Leased Property"), including, without limitation, all of those items listed in Schedule 2.1.2. 2.1.3. TANGIBLE PERSONAL PROPERTY. All of the furniture, fixtures, furnishings, machinery, computers, equipment, inventory, spare parts, supplies, office materials and other tangible property of every kind and description owned, leased or used by any Seller or any Heritage Subsidiary in connection with the business and operations of the Stations, together with any replacements thereof and additions thereto made before the Closing Date, and less any retirements or dispositions thereof made before the Closing Date in the Ordinary Course of Business, including, without limitation, those items which have a book value in excess of Five Thousand Dollars ($5,000), -3- all of which as of the date of the Heritage Agreement are set forth and identified in Schedule 2.1.3. 2.1.4. INTELLECTUAL PROPERTY. All of the service marks, copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes and other similar intangible assets maintained, owned, leased or used by any Seller or any Heritage Subsidiary in connection with the business and operations of the Stations (including any and all applications, registrations, extensions and renewals relating thereto) (the "Intellectual Property"), and all of the rights, benefits and privileges associated therewith including, without limitation, the right to use the call letters for the Stations. 2.1.5. PROGRAM CONTRACTS. The program licenses and contracts under which any Seller or Heritage Subsidiary is authorized to broadcast programs on the Stations (collectively the "Program Contracts") including, without limitation, (a) all program (cash and non-cash) licenses and contracts listed on Schedule 2.1.5, and (b) any other such program contracts that are entered into between the date of this Agreement and the Closing Date in accordance with the terms of this Agreement. 2.1.6. TRADE-OUT AGREEMENTS. All contracts and agreements (excluding Program Contracts) pursuant to which any Seller or Heritage Subsidiary has sold, traded or bartered commercial air time on the Stations in consideration for any property or services in lieu of or in addition to cash (collectively, the "Trade-out Agreements") including, without limitation, those set forth and identified in Schedule 2.1.6. 2.1.7. BROADCAST TIME SALES AGREEMENT. All contracts and agreements pursuant to which any Seller or Heritage Subsidiary has sold commercial air time on the Stations for cash (collectively the "Time Sales Agreements"). 2.1.8. NETWORK AFFILIATION AGREEMENTS. All network affiliation agreements or other contracts of the Stations with any television broadcast network (collectively, the "Network Agreements") including, without limitation, those listed on Schedule 2.1.8. -4- 2.1.9. OPERATING CONTRACTS. All other operating contracts and agreements relating to the business or operations of the Stations, all material such contracts as of the date of the Heritage Agreement being listed on Schedule 2.1.9 (including, without limitation, any LMA, all employment agreements and talent contracts, all leases and subleases relating to the Leased Property, all agreements relating to any motor vehicles, and all national and local advertising representation agreements for the Stations), together with all contracts and agreements that are entered into between the date of the Heritage Agreement and the Closing Date in accordance with the terms of this Agreement (collectively, the "Operating Contracts" and together with the Program Contracts, Trade-out Agreements, Time Sales Agreements and the Network Agreements, the "Station Contracts"). 2.1.10. VEHICLES. All automotive equipment and motor vehicles maintained, owned, leased or otherwise used by any Seller or any Heritage Subsidiary in connection with the business and operations of the Stations, including, without limitation, those set forth and described in Schedule 2.1.10. 2.1.11. FILES AND RECORDS. All engineering, business and other books, papers, logs, files and records pertaining to the business and operations of the Stations, but not the organizational documents and records described in Section 2.2.7. 2.1.12. AUXILIARY FACILITIES. All translators, earth stations, and other auxiliary facilities, and all applications therefor owned, leased or otherwise used or useful by any Seller or any Heritage Subsidiary in connection with the business and operations of the Stations. 2.1.13. PERMITS AND LICENSES. All permits, approvals, orders, authorizations, consents, licenses, certificates, franchises, exemptions of, or filings or registrations with, any court or Governmental Authority (other than the FCC) in any jurisdiction, which have been issued or granted to or are owned or used or useful by any Seller or any Heritage Subsidiary in connection with the business and operations of the Stations and all pending applications therefor. -5- 2.1.14. GOODWILL. The business of the Stations as a "going concern", customer relationships and goodwill. 2.1.15. OTHER ASSETS. All other real, personal and mixed assets, rights, benefits and privileges, both tangible and intangible, acquired by Sellers pursuant to the Heritage Agreement that are owned, leased, used or useful in connection with the business and operations of the Stations. 2.2. EXCLUDED ASSETS. Notwithstanding anything to the contrary in this Agreement, there shall be excluded from the Assets and retained by Sellers, to the extent in existence as of the Closing Date, the following assets (collectively, the "Excluded Assets"). 2.2.1. CASH. All cash, cash equivalents or deposits held by Sellers, all interest payable in connection with any such cash, cash equivalents or deposits or short term investments, bank balances and rights in and to bank accounts, marketable and other securities of Sellers. 2.2.2. ACCOUNTS RECEIVABLE. All Accounts Receivable arising out of the business and operations of the Stations. 2.2.3. PERSONAL PROPERTY DISPOSED OF. All tangible personal property disposed of or consumed in the Ordinary Course of Business as permitted by this Agreement. 2.2.4. INSURANCE. All contracts of insurance and all insurance plans and the assets thereof. 2.2.5. EMPLOYEE PLANS AND ASSETS. All Plans, Benefit Arrangements (except for any Station Contracts, Proration Items or other matters which are specifically assumed by -6- Buyer pursuant to the terms hereof), Qualified Plans and Welfare Plans and the assets thereof. 2.2.6. RIGHT TO TAX REFUNDS. Any and all claims of Sellers with respect to any Tax refunds. 2.2.7. CERTAIN BOOKS AND RECORDS. All of each Seller's (a) organizational documents, corporate books and records (including minute books and stock ledgers and records), and originals of account books of original entry, (b) duplicated copies of any books, records, accounts, checks, payment records, Tax records (including payroll, unemployment, real estate and other Tax records) and other similar books, records and information relating to such Seller's operation of the business of the Stations prior to the Closing Date, (c) records prepared by or on behalf of such Seller in connection with the sale of the Stations, and (d) records and documents relating to any Excluded Assets. 2.2.8. THIRD-PARTY CLAIMS. All rights and claims of Sellers whether mature, contingent or otherwise, against third parties relating to the Assets or the Stations, whether in tort, contract, or otherwise. 2.2.9. RIGHTS UNDER THIS AGREEMENT AND THE HERITAGE AGREEMENT. All rights of Sellers under or pursuant to this Agreement and the Heritage Agreement or any other rights in favor of Sellers pursuant to the other agreements contemplated hereby or thereby. 2.2.10. NAMES. All rights to the names "Sinclair Broadcasting", "Heritage Broadcasting" and "Heritage Media" and any logo or variation thereof and the goodwill associated therewith. 2.2.11. DEPOSIT AND PREPAID EXPENSES. All deposits and prepaid expenses of Sellers, provided, however, any deposit and prepaid expenses shall be included in the Assets conveyed pursuant hereto to the extent that any Seller receives a credit therefor in the calculation of the Proration Amount pursuant to Section 2.6. -7- 2.2.12. WFFF LICENSES. All licenses, permits and other authorizations issued by the FCC for the operation of WFFF (all of such licenses, permits and authorizations being issued to Champlain Valley Telecasting). 2.2.13. MISCELLANEOUS EXCLUDED ASSETS. The assets listed and identified on Schedule 2.2.13. 2.3. ESCROW DEPOSIT. For and in partial consideration of the execution and delivery of this Agreement, simultaneously with the execution and delivery of this Agreement, Buyer is depositing in escrow with the Deposit Escrow Agent an original, irrevocable letter of credit (the "Letter of Credit") issued for the benefit of Sellers and the Deposit Escrow Agent by The Chase Manhattan Bank for an amount equal to SEVEN MILLION TWO HUNDRED THOUSAND DOLLARS ($7,200,000) (the "Deposit"), such Letter of Credit to be held in accordance with the terms and conditions of the Deposit Escrow Agreement. Buyer and Sellers shall cause the Letter of Credit to be returned to Buyer on the Transfer Date. 2.4. PURCHASE PRICE. For and in consideration of the conveyances and assignments of the Assets described herein and in addition to the assumption of Liabilities as set forth in Section 2.8, Buyer agrees to pay to Sellers, and Sellers agree to accept from Buyer, an amount equal to SEVENTY TWO MILLION DOLLARS ($72,000,000) (the "Base Purchase Price"), plus or minus (as the case may be) the Proration Amount (collectively, the "Purchase Price"). 2.5. PAYMENT OF PURCHASE PRICE. 2.5.1. At the Non-License Transfer pursuant to Section 11.2, Buyer shall pay to Sellers by wire transfer of immediately available funds to an account which will be identified by Sellers not less than two (2) days prior to the Non-License Transfer Date, an amount equal to SEVENTY MILLION DOLLARS ($70,000,000) of the Base Purchase Price (plus or minus, as the case may be, the Proration Amount). 2.5.2. The Purchase Price (less any amounts paid to Sellers at a Non-License Transfer) shall be payable to Sellers at the Closing by wire transfer of -8- immediately available federal funds to an account which will be identified by Sellers not less than two (2) days prior to the Closing Date. 2.6. PRORATION AMOUNT. 2.6.1. At least five (5) days prior to the Transfer Date, Sellers shall make a good faith estimate of the adjustments to the Base Purchase Price customary in television broadcast station transactions for Proration Items (the "Proration Amount") to reflect that all Proration Items of the Stations shall be apportioned between Buyer and Sellers in accordance with the principle that Sellers shall receive the benefit of all revenues, refunds, deposits (other than deposits for Program Contracts which shall be prorated based on the percentage of the term that the film or program was aired on the Stations before the Transfer Date and the percentage available to be aired on and after the Transfer Date) and prepaid expenses, and shall be responsible for all expenses, costs and liabilities allocable to the conduct of the businesses or operations of the Stations for the period prior to the Transfer Date, and Buyer shall receive the benefit of all revenues, refunds, deposits and prepaid expenses, and shall be responsible for all expenses, costs and liabilities allocable to the conduct of the businesses or operations of the Stations from and after the Transfer Date; provided, however, that there shall be no adjustment or proration for any negative or positive net trade balance except to the extent that the negative trade balance (i.e., the amount by which the value of goods or services to be received is less than the value of any advertising time remaining to be run) for any Station exceeds Fifty Thousand Dollars ($50,000) as of the Transfer Date; provided, further, that if there shall be a Non-License Transfer, then prorations and adjustments for Proration Items related to the License Assets shall be made pursuant to this Section 2.6 as of the Closing Date. Determinations pursuant to this Section 2.6.1 shall be made in accordance with generally accepted accounting principles consistently applied for the period prior to the Non-License Transfer Date or the Closing Date, as applicable. 2.6.2 Within ninety (90) days after the Transfer Date, Buyer shall deliver to Sellers in writing and in reasonable detail a good faith final determination of the Proration Amount determined as of the Transfer Date under Section 2.6.1 ("Final Proration Amount"). Sellers shall assist Buyer in making such determination, and Buyer shall provide Sellers with reasonable access to the properties, books and records relating to the Stations for the purpose of determining the Final Proration Amount. Sellers shall have the right to review the computations and workpapers used in connection with Buyer's preparation of the Final Proration Amount. If Sellers disagree with the amount of the Final Proration Amount determined by Buyer, Sellers shall so notify Buyer in writing within thirty (30) days after the date of receipt of Buyer's Final Proration Amount, specifying in detail any point of disagreement; provided, however, that if Sellers fail to notify -9- Buyer in writing of Sellers' disagreement within such thirty (30) day period, Buyer's determination of the Final Proration Amount shall be final, conclusive and binding on Sellers and Buyer. After the receipt of any notice of disagreement, Buyer and Sellers shall negotiate in good faith to resolve any disagreements regarding the Final Proration Amount. If any such disagreement cannot be resolved by Sellers and Buyer within thirty (30) days after Buyer has received notice from Sellers of the existence of such disagreement, Buyer and Sellers shall jointly select a nationally recognized independent public accounting firm (the "Accounting Firm"), to review Buyer's determination of the Final Proration Amount and to resolve as soon as possible all points of disagreement raised by Sellers. All determinations made by the Accounting Firm with respect to the Final Proration Amount shall be final, conclusive and binding on Buyer and Sellers. The fees and expenses of the Accounting Firm incurred in connection with any such determination shall be shared one-half by Buyer and one-half by Sellers. If the Final Proration Amount is such that Buyer's payment of the Proration Amount was an underpayment to Sellers, then Buyer shall pay such underpayment amount to Sellers in cash, within two (2) business days following the final determination of the Final Proration Amount. If the Final Proration Amount is such that Buyer's payment of the Proration Amount was an overpayment to Sellers, then Sellers shall pay such overpayment amount to Buyer in cash within two (2) business days following the final determination of the Final Proration Amount. Any amounts paid pursuant to this Section 2.6.2 shall be by wire transfer of immediately available funds for credit to the recipient at a bank account identified by such recipient in writing. Buyer and Sellers agree that prior to the date of the final determination of the Final Proration A mount pursuant to this Section 2.6.2 (by the Accounting Firm or otherwise), neither party will destroy any records pertaining to, or necessary for, the final determination of the Final Proration Amount. Each Seller hereby appoints Sinclair as its attorney-in-fact with power and authority to act for and on behalf of each Seller in connection with all matters arising under this Section 2.6. Buyer shall be entitled to rely on such appointment and treat Sinclair as the duly appointed attorney-in-fact of each Seller. 2.7. ALLOCATION OF BASE PURCHASE PRICE. Each party hereto represents, warrants, covenants and agrees with each other party hereto that the Base Purchase Price shall be allocated among the classes of Assets for each Station as agreed by the parties within sixty (60) days after the date hereof; provided, however, that if the parties are unable to agree on such allocation within such sixty (60) day period, each party shall have the right to -10- allocate the classes of Assets for each Station based upon its own determination. The parties agree, pursuant to Section 1060 of the Code, that the Base Purchase Price shall be allocated in accordance with this Section 2.7, and that all Tax returns and reports shall be filed consistent with such allocation. The parties acknowledge and agree that the payment of the Purchase Price as contemplated herein does not reflect the allocation among the classes of Assets for each Station as determined pursuant to this Section 2.7. Notwithstanding any other provision of this Agreement, the provisions of this Section 2.7 shall survive the Closing Date without limitation. 2.8. ASSUMPTION OF LIABILITIES. 2.8.1. At the Non-License Transfer, Buyer shall assume, pay, perform, discharge and indemnify and hold Sellers harmless from and against (a) all Liabilities arising out of events occurring on or after the Non-License Transfer Date related to the businesses or operations of the Stations by Buyer or Buyer's ownership of the Non-License Assets, (b) all Liabilities arising on or after the Non-License Transfer Date under the Station Contracts (including, without limitation, Trade-out Agreements) pursuant to their terms (except for Liabilities for any breaches thereunder by any Seller occurring prior to the Non-License Transfer Date), (c) all Liabilities for which there is a downward adjustment to the Base Purchase Price in connection with the calculation of the Proration Amount, and (d) all Liabilities to employees of the Stations to be assumed by Buyer in accordance with Section 8.4 hereof. 2.8.2. To the extent not assumed by Buyer at the Non-License Transfer, at the Closing, Buyer shall assume, pay, perform, discharge and indemnify and hold Sellers harmless from and against (a) all Liabilities arising out of events occurring on or after the Closing Date related to the businesses or operations of the Stations or Buyer's ownership of the Assets, (b) all Liabilities arising out of events occurring on or after the Closing Date with respect to the FCC Licenses, (c) all Liabilities arising on or after the Closing Date under the Station Contracts (including, without limitation, Trade-out Agreements) pursuant to their terms (except for Liabilities for any breaches thereunder by any Seller occurring prior to the Closing Date), (d) all Liabilities for which there is a downward adjustment to the Base Purchase Price in connection with the calculation of the Proration Amount, and (e) all Liabilities to employees of the Stations to be assumed by Buyer in accordance with Section 8.4 hereof. 2.8.3. Except for the Assumed Liabilities, Buyer assumes no other Liabilities of any kind or description including, without limitation, any obligations under or pursuant to the Heritage Agreement. -11- ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY SELLERS Each Seller, jointly and severally with the other Sellers, represents and warrants to Buyer as follows: 3.1. ORGANIZATION AND STANDING. Each Seller is duly organized, validly existing and in good standing under the laws of the state of its organization and will at Closing be duly qualified to do business and is in good standing in any jurisdiction where such qualification is necessary in order to consummate the transactions contemplated under this Agreement, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Prior to the Transfer Date, each Seller will have the corporate power and authority to own, lease and otherwise to hold and operate such Seller's Assets, and to carry on the business of the Stations as now conducted. Each Seller has the corporate power and authority to enter into and perform the terms of this Agreement, the other Seller Documents and the transactions contemplated hereby and thereby. 3.2. AUTHORIZATION. The execution, delivery and performance of this Agreement and of the other Seller Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action (none of which actions has been modified or rescinded and all of which actions are in full force and effect). This Agreement and the Deposit Escrow Agreement constitute, and upon execution and delivery each other Seller Document to which it is a party will constitute, valid and binding agreements and obligations of each Seller, enforceable against it in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and by the application of general principles of equity. 3.3. COMPLIANCE WITH LAWS. To the knowledge of Sellers and the Heritage Subsidiaries, Sellers and the Heritage Subsidiaries are in material compliance with all Laws applicable to the Assets and to the business and operations of the Stations. The Heritage Subsidiaries have obtained and hold (and Sellers will obtain and hold prior to the Transfer Date) all material permits, licenses and approvals (none of which has been modified or rescinded and all of which are in full force and effect) from all -12- Governmental Authorities necessary in order to conduct the operations of the Stations as presently conducted. 3.4. CONSENTS AND APPROVALS; NO CONFLICTS. 3.4.1. The execution and delivery of this Agreement, and the performance of the transactions contemplated herein by Sellers, will not require any consent, approval, authorization or other action by, or filing with or notification to, any Person or Governmental Authority, except as follows: (a) filings required under Hart-Scott-Rodino, (b) consents to the assignment of the FCC Licenses to Buyer by the FCC, (c) filings, if any, with respect to real estate transfer taxes, (d) filings with the Securities and Exchange Commission, and (e) certain of the Station Contracts may be assigned only with the consent of third parties, as specified in Schedule 3.4. 3.4.2. Assuming all consents, approvals, authorizations and other actions described in Section 3.4.1 have been obtained and all filings and notifications described in Section 3.4.1 have been made, the execution, delivery and performance of this Agreement and the other Seller Documents by each Seller do not and will not (a) conflict with or violate in any material respect any Law applicable to such Seller, the Assets or Stations or by which any of the Assets or Stations is subject or affected, (b) conflict with or result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) of any Station Contract or other material agreement to which such Seller is a party or by which such Seller is bound or to which any of the Assets or Stations is subject or affected, (c) result in the creation of any Encumbrance upon the Assets, or (d) conflict with or violate the organizational documents of such Seller. 3.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. 3.5.1. Seller has provided to Buyer an unaudited balance sheet of the Stations as of December 31, 1997 (the "Balance Sheet"), and an unaudited statement of income and operating cash flows for the Stations for the twelve (12) month period ending December 31, 1997. The financial statements referred to in this Section 3.5.1 (a) present fairly in all material respects the financial condition of the Stations as of the date and the results of operations and operating cash flows for the period indicated, and (b) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except that the financial statements referred to in this Section 3.5.1 do not contain all footnotes and cash flow information from investing and financing activities required under generally accepted accounting principles and are subject to customary year-end adjustments). -13- 3.5.2. There exist no Liabilities of the Stations relating to, or arising out of, the business or operations of the Stations, contingent or absolute, matured or unmatured, known or unknown, except (a) as reflected on the Balance Sheet and (b) for Liabilities that (i) were incurred after December 31, 1997 (the "Current Balance Sheet Date") in the Ordinary Course of Business, or (ii) were not required to be reflected on the Balance Sheet in accordance with generally accepted accounting principles applied on a consistent basis. 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth and described in Schedule 3.6, since the Current Balance Sheet Date, there has been no Material Adverse Effect. Since the Current Balance Sheet Date, the business of the Stations has been conducted in the Ordinary Course of Business, and neither any Seller nor any Heritage Subsidiary has (a) incurred any extraordinary loss of, or injury to, any of the Assets as the result of any fire, explosion, flood, windstorm, earthquake, labor trouble, riot, accident, act of God or public enemy or armed forces, or other casualty; (b) incurred, or become subject to, any Liability, except current Liabilities incurred in the Ordinary Course of Business; (c) discharged or satisfied any Encumbrance or paid any Liability other than current Liabilities shown in the Balance Sheet, current Liabilities incurred since the Current Balance Sheet Date in the Ordinary Course of Business, and Liabilities (including, without limitation, partial and complete prepayments) arising under any credit or loan agreement between any Seller and its lenders; (d) mortgaged, pledged or subjected to any Encumbrance any of the Assets (except for Permitted Encumbrances); (e) made any material change in any method of accounting or accounting practice; (f) sold, leased, assigned or otherwise transferred any of the material Assets other than obsolete Assets which have been replaced by suitable replacements; (g) made any material increase in compensation or benefits payable to any employee other than in the Ordinary Course of Business; or (h) made any agreement to do any of the foregoing. 3.7. ABSENCE OF LITIGATION. Except as set forth on Schedule 3.7, as of the date of the Heritage Agreement, there is no material or, to the knowledge of Sellers and the Heritage Subsidiaries, immaterial action, suit, investigation, claim, arbitration, litigation or similar proceeding, nor any order, decree or judgment pending or, to the knowledge of Sellers and the Heritage Subsidiaries, threatened against any Seller, any Heritage Subsidiary, the Assets or Stations before any Governmental Authority. -14- 3.8. ASSETS. Except for the Excluded Assets, the Assets include all of the assets or property used or useful in the businesses of the Stations as presently operated and all of the assets or property acquired by Sellers under the Heritage Agreement. Except for leased or licensed Assets, the Heritage Subsidiaries are (and Sellers will be prior to the Transfer Date) the owner of, and have (and Sellers will have prior to the Transfer Date) good title to, the Assets free and clear of any Encumbrances, except for Permitted Encumbrances (including, without limitation, those items set forth on Schedule 3.8). At the Non-License Transfer and the Closing, Buyer shall acquire good title to, and all right, title and interest in and to the Assets being transferred at the Non-License Transfer and the Closing, respectively, free and clear of all Encumbrances, except for the Permitted Encumbrances. 3.9. FCC MATTERS. The Heritage Subsidiaries hold (and Sellers will hold prior to the Transfer Date) the FCC Licenses listed as held by the Heritage Subsidiaries on Schedule 2.1.1. Such FCC Licenses constitute all of the licenses, permits and authorizations from the FCC which have been issued to the Heritage Subsidiaries or the Sellers that are required for the business and operations of the Stations. Except as set forth on Schedule 3.9, such FCC Licenses are valid and in full force and effect through the dates set forth on Schedule 2.1.1, unimpaired by any condition, other than as set forth in the FCC Licenses. Except as set forth on Schedule 3.9, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses, and, except for actions or proceedings affecting television broadcast stations generally, no application, complaint, action or proceeding is pending or, to the knowledge of Sellers and the Heritage Subsidiaries, threatened that may result in the (a) the revocation, modification, non-renewal or suspension of any of the FCC Licenses, or (b) the issuance of a cease-and-desist order. Except as set forth in Schedule 3.9, no Seller or Heritage Subsidiary has knowledge of any facts, conditions or events relating to any Seller, any Heritage Subsidiary or the Stations that would reasonably be expected to cause the FCC to revoke any FCC License or not to grant any pending applications for renewal of the FCC Licenses or to deny the assignment of the FCC Licenses to a qualified Buyer as provided for in this Agreement. 3.10. REAL PROPERTY. 3.10.1. The Heritage Subsidiaries have (and Sellers will have prior to the Transfer Date) good and marketable fee simple title to all fee estates included in the Real Property and good title to all other owned Real Property, in each case free and clear of all Encumbrances, except for Permitted Encumbrances. -15- 3.10.2. The Heritage Subsidiaries have (and Sellers will have prior to the Transfer Date) a valid leasehold interest in all Leased Property listed as leased by the Heritage Subsidiaries or Sellers in Schedule 2.1.2. Schedule 2.1.2 lists all leases and subleases pursuant to which any of the Leased Property is leased by the Heritage Subsidiaries and Sellers in connection with the business and operations of the Stations. The Heritage Subsidiaries are (and Sellers will be prior to the Transfer Date) the owner and holder of all the Leased Property purported to be granted by such leases and subleases. Each such lease and sublease is valid as to the lessee and sublessee thereunder and, to the knowledge of Sellers and the Heritage Subsidiaries, valid as to any other party thereto, and is in full force and effect and, to the knowledge of Sellers and the Heritage Subsidiaries, constitutes a legal and binding obligation of, and is legally enforceable against the lessee or sublessee thereunder and each other party thereto and grants the leasehold interest it purports to grant, including any rights to nondisturbance and peaceful and quiet enjoyment that may be contained therein. The lessees and sublessees are, and to the knowledge of Sellers and the Heritage Subsidiaries all other parties are, in compliance in all material respects with the provisions of such leases and subleases. 3.10.3. The Real Property and the Leased Property listed in Schedule 2.1.2 constitute all of the real property owned, leased or used by Sellers or the Heritage Subsidiaries in the business and operations of the Stations which is material to the business and operations of the Stations. 3.10.4. No portion of the Real Property or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or, to the knowledge of Sellers and the Heritage Subsidiaries, threatened. To the knowledge of Sellers and the Heritage Subsidiaries and to the extent that such documents are in the possession of Sellers or a Heritage Subsidiary, Sellers have delivered to Buyer true, correct and complete copies of the following documents with respect to the Real Property and Leased Property: (a) deeds, by which the current owner has received a fee interest in any of the Real Property; (b) leases for all of the Leased Property; (c) title insurance policies or commitments; (d) surveys; and (e) inspection reports or other instruments or reports, including, without limitation, any phase I or phase II environmental reports or other similar environmental reports, surveys or assessments (including any and all amendments and other modifications of such instruments). 3.11. INTELLECTUAL PROPERTY. The Heritage Subsidiaries possess (and Sellers will possess prior to the Transfer Date) adequate rights, licenses and authority to use all Intellectual Property necessary to conduct the business of the Stations as presently conducted. -16- The Heritage Subsidiaries have (and Sellers will have prior to the Transfer Date) good title to all Intellectual Property that the Heritage Subsidiaries or Sellers own in connection with the business and operations of the Stations, free and clear of any Encumbrances, except for Permitted Encumbrances. No Heritage Subsidiary is (and no Seller will be as of the Transfer Date) obligated to pay any royalty or other fees to anyone with respect to the Intellectual Property. Neither Seller nor any Heritage Subsidiary has received any written notice to the effect that any service rendered by any Seller or any Heritage Subsidiary relating to the business of the Stations may infringe, or that any Seller or any Heritage Subsidiary is otherwise infringing, on any Intellectual Property right or other legally protectable right of another. No director, officer or employee of any Seller or any Heritage Subsidiary has any interest in any Intellectual Property. 3.12. STATION CONTRACTS. Complete and correct copies of the Station Contracts set forth in Schedules 2.1.5, 2.1.6, 2.1.8 and 2.1.9 (which schedules, to Sellers' knowledge are and which have been represented to Sellers by the Heritage Subsidiaries making such representations to be, true and correct in all material respects) have been made available to Buyer and (a) each such material Station Contract and, to the knowledge of Sellers and the Heritage Subsidiaries, each such immaterial Station Contract, is in full force and effect and constitutes a legal, valid and binding obligation of the owner of the Station that is a party thereto, and, to the knowledge of Sellers and the Heritage Subsidiaries, of each other party thereto; (b) no owner of a Station is in breach or default in any material respect of the terms of any Station Contract; (c) none of the material rights of the owner of a Station under any such Station Contract will be subject to termination, nor will a default occur, as a result of the consummation of the transactions contemplated hereby, except to the extent that failure to obtain the prior consent to assignment thereof of any party thereto shall or could be interpreted to constitute a termination or modification of or a default under any such Station Contract; and (d) to the knowledge of Sellers and the Heritage Subsidiaries, no other party to any such Station Contract is in breach or default in any material respect of the terms thereunder. 3.13. TAXES. The Heritage Subsidiaries have (or, in the case of returns becoming due after the date hereof and on or before the Transfer Date, the Heritage Subsidiaries or Sellers will have prior to the Transfer Date) duly filed all material Seller Tax Returns required to be filed by them on or before the Transfer Date with respect to all material applicable Taxes. In the case of any Seller Tax Returns which receive an extension for their date of filing, such Seller Tax Returns will be considered due on, and not considered required to be filed before, the extended due -17- date. To the knowledge of Sellers and the Heritage Subsidiaries, all Seller Tax Returns are (or, in the case of returns becoming due after the date hereof and on or before the Transfer Date, will be) true and complete in all material respects. The Heritage Subsidiaries or Sellers have: (a) paid all Taxes due to any Governmental Authority as indicated on the Seller Tax Returns; or (b) established (or, in the case of amounts becoming due after the date hereof, prior to the Transfer Date will have established) adequate reserves (in conformity with generally accepted accounting principles consistently applied) for the payment of such Taxes. 3.14. EMPLOYEE BENEFIT PLANS. 3.14.1. Schedule 3.14 lists all Plans and Benefit Arrangements (exclusive of severance arrangements and retention agreements) maintained by or contributed to for the benefit of the employees of the Stations (collectively, the "Benefit Plans"). Each Benefit Plan has been maintained in material compliance with its terms and with ERISA, the Code and other applicable Laws. 3.14.2. Schedule 3.14 sets forth a list of all Qualified Plans maintained by or contributed to for the benefit of the employees of the Stations. All such Qualified Plans and any related trust agreements or annuity agreements (or any other funding document) have been maintained in material compliance with ERISA and the Code (including, without limitation, the requirements for tax qualification described in Section 401 thereof), other than any Multiemployer Plan. To the knowledge of Sellers and the Heritage Subsidiaries, any trusts established under such Plans are exempt from federal income taxes under Section 501(a) of the Code. 3.14.3. Schedule 3.14 lists all funded Welfare Plans that provide benefits to current or former employees of the Stations or their beneficiaries. To the knowledge of Sellers, the funding under each such Welfare Plan does not exceed and has not exceeded the limitations under Sections 419A(b) and 419A(c) of the Code. To the knowledge of Sellers and the Heritage Subsidiaries, no Seller Party is subject to taxation on the income of any such Welfare Plan's welfare benefit fund (as such term is defined in Section 419(e) of the Code) under Section 419A(g) of the Code. 3.14.4. There are no post-retirement medical, life insurance or other benefits promised, provided or otherwise due now or in the future to current, former or retired employees of the Stations. 3.14.5. To the knowledge of Sellers and the Heritage Subsidiaries, except as set forth in Schedule 3.14, the Seller Parties have (a) filed or caused to be filed all returns and reports on the Plans that they are required to file and (b) paid -18- or made adequate provision for all fees, interest, penalties, assessments or deficiencies that have become due pursuant to those returns or reports or pursuant to any assessment or adjustment that has been made relating to those returns or reports. All other fees, interest, penalties and assessments that are payable by or for the Seller Parties have been timely reported, fully paid and discharged. There are no unpaid fees, penalties, interest or assessments due from any Seller Party or from any other person that are or could become an Encumbrance on any of the Assets or could otherwise adversely affect the businesses of the Stations or the Assets. To the knowledge of Sellers and the Heritage Subsidiaries, the Seller Parties have collected or withheld all amounts that are required to be collected or withheld by them to discharge their obligations, and all of those amounts have been paid to the appropriate Governmental Authority or set aside in appropriate accounts for future payment when due. Sellers have furnished to Buyer true and complete copies of all documents setting forth the terms and funding of each Plan. 3.14.6. Except as set forth in Schedule 3.14, neither any Seller Party nor any ERISA Affiliate has ever sponsored or maintained, had any obligation to sponsor or maintain, or had any liability (whether actual or contingent, with respect to any of its assets or otherwise) with respect to any Plan subject to Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan). Neither any Seller Party nor any ERISA Affiliate (since January 1, 1989) has terminated or withdrawn from or sought a funding waiver with respect to any plan subject to Title IV of ERISA, and no facts exist that could reasonably be expected to cause such actions in the future; no accumulated funding deficiency (as defined in Code Section 412), whether or not waived, exists with respect to any such plan; no reportable event (as defined in ERISA Section 4043) has occurred with respect to any such plan (other than events for which reporting is waived); all costs of any such plans have been provided for on the basis of consistent methods in accordance with sound actuarial assumptions and practices, and the assets of each such plan, as of its last valuation date, exceeded its "Benefit Liabilities" (as defined in ERISA Section 4001(a)(16)); and, since the last valuation date for each such plan, no such plan has been amended or changed to increase the amounts of benefits thereunder and, to the knowledge of Sellers and the Heritage Subsidiaries, there has been no event that would reduce the excess of assets over benefit liabilities; and except as set forth in Schedule 3.14, neither any Seller Party nor any ERISA Affiliate has ever made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any Multiemployer Plan. 3.14.7. No claims or lawsuits are pending or, to the knowledge of Sellers and the Heritage Subsidiaries, threatened by, against, or relating to any Benefit Plan. To the knowledge of Sellers and the Heritage Subsidiaries, the Benefit Plans are not presently under audit or examination (nor has notice been -19- received of a potential audit or examination) by the IRS, the Department of Labor, or any other governmental agency or entity and no matters are pending with respect to any Qualified Plan under the IRS's Voluntary Compliance Resolution program, its Closing Agreement Program, or other similar programs. 3.14.8. With respect to each Plan, there has occurred no non-exempt "prohibited transaction" (within the meaning of Section 4975 of the Code) or transaction prohibited by Section 406 of ERISA or breach of any fiduciary duty described in Section 404 of ERISA that would, if successful, result in any liability for any of the Seller Parties. 3.14.9. No Seller Party has any liability (whether actual, contingent, with respect to any of its Assets or otherwise) with respect to any employee benefit plan that is not a Benefit Plan (exclusive of severance arrangements and retention agreements) or with respect to any employee benefit plan sponsored or maintained (or which has been or should have been sponsored or maintained) by any ERISA Affiliate. 3.14.10. All group health plans of the Seller Parties and the ERISA Affiliates covering any current or former employees of the Stations have been operated in material compliance with the requirements of Sections 4980B (and its predecessor) and 5000 of the Code, and the Seller Parties have provided, or will have provided before the Transfer Date, to individuals entitled thereto all required notices and coverage pursuant to Section 4980B with respect to any "qualifying event" (as defined therein) occurring before or on the Transfer Date. 3.15. LABOR RELATIONS. Sellers have made available to Buyer a true and complete list of all employees of the Heritage Subsidiaries and Sellers engaged in the business or operations of the Stations as of the date set forth on the list, together with such employee's position, salary and date of hire. Schedule 3.15 lists all written employment contracts with any such employees and all written agreements, plans, arrangements, commitments and understandings pursuant to which any of the Seller Parties have severance obligations or retention obligations with respect to such employees. No labor union or other collective bargaining unit represents or, to the knowledge of Sellers and the Heritage Subsidiaries, claims to represent, any of the employees of the Stations. There are no strikes, work stoppages, grievance proceedings, union organization efforts, or other controversies pending between any Seller or any Heritage Subsidiary and any union or collective bargaining unit representing (or, to the knowledge of Sellers and the Heritage Subsidiaries, claiming to represent) any employees of the Stations. The Heritage Subsidiaries are (and Sellers will be as of the Transfer Date) in compliance with all Laws -20- relating to the employment of employees of the Stations or the workplace of the Stations, including, without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, immigration and the withholding of income taxes, unemployment compensation, worker's compensation, employee privacy and right to know and social security contributions, except for any noncompliance which would not have a Material Adverse Effect. There are no collective bargaining agreements relating to the Stations or the business and operations thereof. 3.16. ENVIRONMENTAL MATTERS. 3.16.1. Except as set forth in Schedule 3.16, to the knowledge of Sellers and the Heritage Subsidiaries (which knowledge is based on the items set forth on Schedule 3.16), the Heritage Subsidiaries are (and Sellers will be as of the Transfer Date) in material compliance with, and the Real Property and all improvements thereon are in material compliance with, all Environmental Laws. 3.16.2. Except as set forth in Schedule 3.16, there are no pending or, to the knowledge of Sellers and the Heritage Subsidiaries, threatened actions, suits, claims, or other legal proceedings based on (and neither any Seller nor any of the Heritage Subsidiaries has received any written notice of any complaint, order, directive, citation, notice of responsibility, notice of potential responsibility, or information request from any Governmental Authority arising out of or attributable to): (a) the current or past presence at any part of the Real Property of Hazardous Materials; (b) the current or past release or threatened release into the environment from the Real Property (including, without limitation, into any storm drain, sewer, septic system or publicly owned treatment works) of any Hazardous Materials; (c) the off-site disposal of Hazardous Materials originating on or from the Real Property or the Assets or businesses of the Stations; (d) any facility operations or procedures of the Stations which do not conform to requirements of the Environmental Laws; or (e) any violation of Environmental Laws at any part of the Real Property arising from activities of the Stations involving Hazardous Materials. To the knowledge of Sellers and the Heritage Subsidiaries, the Heritage Subsidiaries have been (and Sellers will have been prior to the Transfer Date) duly issued all material permits, licenses, certificates and approvals required under any Environmental Law. 3.17. INSURANCE. Schedule 3.17 contains a true and complete list and brief summary of all policies of title, property, fire, casualty, liability, life, workmen's compensation, libel and slander, and other forms of insurance of any kind relating to the Assets or the business and operations of the Stations. All such policies: (a) are in full force -21- and effect; (b) are sufficient for compliance in all material respects with all requirements of Law and of all material agreements to which any Station owner is a party; and (c) to the knowledge of Sellers and the Heritage Subsidiaries, are valid, outstanding, and enforceable policies and the policy holder is not in default in any material respect thereunder. 3.18. REPORTS. All material returns, reports and statements that the Stations are currently required to file with the FCC or any governmental agency have been timely filed, and all reporting requirements of the FCC and other governmental authorities having jurisdiction thereof have been complied with by Sellers and the Heritage Subsidiaries in all material respects. All of such reports, returns and statements are complete and correct in all material respects as filed. To the knowledge of Sellers and the Heritage Subsidiaries, all documents required by the FCC to be deposited by the owners of the Stations in their public files (as defined in the rules and regulations of the FCC) during the period of operation of the Stations by the Heritage Subsidiaries and Sellers have been deposited therein. ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY BUYER Buyer represents, warrants and covenants to Sellers as follows: 4.1. ORGANIZATION AND STANDING. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and by the Transfer Date will be duly qualified to do business as a foreign corporation in the State of New York and the State of Vermont. Buyer has the full corporate power and corporate authority to enter into and perform the terms of this Agreement and the other Buyer Documents and to carry out the transactions contemplated hereby and thereby. 4.2. AUTHORIZATION. The execution, delivery and performance of this Agreement and of the other Buyer Documents, and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary actions of Buyer (none of which actions has been modified or rescinded and all of which actions are in full force and effect). This Agreement and the Deposit Escrow Agreement constitute, and upon execution and delivery each such other Buyer Document will constitute, a valid and binding agreement and -22- obligation of Buyer, enforceable against Buyer in accordance with its respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and by the application of general principles of equity. 4.3. CONSENTS AND APPROVALS; NO CONFLICTS. 4.3.1. The execution and delivery of this Agreement, and the performance of the transactions contemplated herein by Buyer, will not require any consent, approval, authorization or other action by, or filing with or notification to, any Person or Governmental Authority, except as follows: (a) filings required under Hart-Scott-Rodino, (b) approvals of the assignment of the FCC Licenses to Buyer by the FCC, (c) filings, if any, with respect to real estate transfer taxes and (d) filings with the Securities and Exchange Commission. 4.3.2. Assuming all consents, approvals, authorizations and other actions described in Section 4.3.1 have been obtained and all filings and notifications described in Section 4.3.1 have been made, the execution, delivery and performance of this Agreement and the other Buyer Documents by Buyer do not and will not (a) conflict with or violate any material Law applicable to Buyer, (b) conflict with or result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) of any material contract or material agreement to which Buyer is a party or by which Buyer is bound, or (c) conflict with or violate the organizational documents of Buyer. 4.4. AVAILABILITY OF FUNDS. Buyer will have available on the Non-License Transfer Date and the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby. 4.5. QUALIFICATION OF BUYER. 4.5.1. Except as disclosed in Schedule 4.5.1, Buyer is, and pending Closing will remain legally, financially and otherwise qualified under the Communications Act and all rules, regulations and policies of the FCC to acquire and operate the Stations. There are no facts or proceedings which would reasonably be expected to disqualify Buyer under the Communications Act or otherwise from acquiring or operating any of the Stations or would cause the FCC not to approve the assignment of the FCC Licenses to Buyer. Except as disclosed in Schedule 4.5.1, Buyer has no knowledge of any fact or circumstance relating to -23- Buyer or any of Buyer's Affiliates that would reasonably be expected to (a) cause the filing of any objection to the assignment of the FCC Licenses to Buyer, or (b) lead to a delay in the processing by the FCC of the applications for such assignment. Except for existing waivers pertaining to the Stations, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Buyer, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. 4.5.2. As of the date hereof and through the later to occur of the HSR Filing and the filing of the FCC Applications, except as set forth on Schedule 4.5.1, neither Buyer nor any Affiliate of Buyer (a) owns, controls or operates any television or radio station located in the Burlington DMA; (b) has any direct or indirect interest, including, without limitation, any equity, debt, security or any other financial interest, whether or not "attributable" (as defined in the rules and regulations of the FCC), or management interest, in (i) any television or radio station located in the Burlington DMA, or (ii) any applicant seeking to construct or acquire, by assignment of license or transfer of control, any such television or radio station (an "Applicant"); or (c) is a party to any TBA with a television or radio station located in the Burlington DMA, or with any Applicant. Buyer acknowledges and agrees that the representations set forth in this Section 4.5.2 shall take into account and include (a) the consummation of any proposed or pending acquisition (as of the date hereof and through the later to occur of the HSR Filing and the filing of the FCC Applications) of television or radio stations (including the acquisition of the Stations) by Buyer or any Affiliate of Buyer or any Applicant, and (b) any TBA or proposed or pending TBA (as of the date hereof and through the later to occur of the HSR Filing and the filing of the FCC Applications) to which Buyer or any Affiliate of Buyer is or may become a party. 4.6. WARN ACT. Buyer is not planning or contemplating, and has not made or taken, any decisions or actions concerning the employees of the Stations after the Transfer Date that would require the service of notice under the Worker Adjustment and Retraining Act of 1988, as amended. 4.7. NO OUTSIDE RELIANCE. Buyer has not relied and is not relying on any statement, representation or warranty not made in this Agreement, any Schedule hereto or any certificate to be delivered to Buyer at the Non-License Transfer or the Closing pursuant to this Agreement. Buyer is not relying on any projections or other predictions contained or referred to in materials (other than the Schedules) that -24- have been or may hereafter be provided to Buyer or any of its Affiliates, agents or representatives, and Sellers make no representations or warranties with respect to any such projections or other predictions. 4.8. INTERPRETATION OF CERTAIN PROVISIONS. Buyer has not relied and is not relying on the specification of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agrees not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. ARTICLE 5. PRE-CLOSING FILINGS 5.1. APPLICATIONS FOR FCC CONSENT. Within five (5) business days following the execution of this Agreement, Sellers and Buyer (or any permitted assignee of Buyer under Section 15.6.1) shall jointly file applications for the Stations with the FCC requesting consent to the assignment of the FCC Licenses for the Stations from Sellers to Buyer (the "FCC Applications"). Sellers and Buyer will diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested in order to obtain promptly the requested consents and approvals of the FCC Applications by the FCC. 5.2. HART-SCOTT-RODINO. Within five (5) business days following the execution of this Agreement, Sellers and Buyer shall complete any filing that may be required pursuant to Hart-Scott-Rodino (each an "HSR Filing"). Sellers and Buyer shall diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested in order to comply with, the requirements of Hart-Scott-Rodino. 5.3. NON-REQUIRED ACTIONS. Neither Buyer nor any Seller shall have any obligation to take any steps pursuant to Section 5.1 or Section 5.2 which would be reasonably expected to -25- result in the incurrence of a material cost or other liability or which would require the divestiture of any business or assets of any party hereto or any Affiliate thereof. ARTICLE 6. COVENANTS AND AGREEMENTS OF SELLERS Each Seller covenants and agrees with Buyer as follows: 6.1. NEGATIVE COVENANTS. Pending and prior to the Non-License Transfer and the Closing, such Seller will not, and will use its commercially reasonable efforts to enforce such rights under the Heritage Agreement to cause the Heritage Subsidiaries not to, without the prior written consent of Buyer (which consent will not be unreasonably withheld, delayed or conditioned, except in the case of matters referred to in Sections 6.1.6(b), 6.1.7, 6.1.9 and 6.1.11, with respect to which Buyer's consent may be withheld in its sole and absolute discretion), do or agree to do any of the following insofar as such actions (or failure to act) relate to the Stations: 6.1.1. DISPOSITIONS; MERGERS. Sell, assign, lease or otherwise transfer or dispose of any of the Assets other than at substantially fair market value and in the Ordinary Course of Business; or merge or consolidate with or into any other entity or enter into any contracts or agreements relating thereto. 6.1.2. ACCOUNTING PRINCIPLES AND PRACTICES. Change or modify any accounting principles or practices or any method of applying such principles or practices. 6.1.3. TRADE-OUT AGREEMENTS. Enter into or renew any Trade-out Agreement that would be binding on Buyer after the Non-License Transfer Date or the Closing Date, except in the Ordinary Course of Business and which requires the provision of broadcast time having a value of less than (a) Twenty-Five Thousand Dollars ($25,000) individually, and (b) together with existing Trade-out Agreements still in effect as of the Non-License Transfer Date or the Closing Date, as the case may be, Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate as of the Non-License Transfer Date or the Closing Date, as the case may be. -26- 6.1.4. BROADCAST TIME SALES AGREEMENTS. Enter into or renew any Time Sales Agreement except in the Ordinary Course of Business and which are for cash at prevailing rates for a term not exceeding twelve (12) months. 6.1.5. NETWORK AFFILIATION AGREEMENTS AND LMAS. Except for the TBA Agreement, acquire or enter into or renew any LMA or network affiliation agreement. 6.1.6. ADDITIONAL AGREEMENTS. (a) Acquire or enter into any new Station Contracts not referred to in Sections 6.1.3, 6.1.4 or 6.1.5 above, or renew, extend, amend, alter, modify or otherwise change any existing Station Contract, except in the Ordinary Course of Business (collectively, "Additional Agreements"); provided, however, such Seller shall not, and shall use its commercially reasonably efforts to cause each Seller Party not to, enter into (a) any Program Contract for any Station which will be binding on Buyer after the Non-License Transfer Date or the Closing Date, or (b) any other Station Contract requiring payments by a Seller Party under each Station Contract in excess of Fifty Thousand Dollars ($50,000). For purposes of clause (a) above, each Seller acknowledges that it shall not be unreasonable for Buyer to withhold its consent to approve of any Program Contract where Buyer, acting in good faith, has reason to conclude that it can acquire such programming on better terms. (b) From and after the Sellers' acquisition of the Stations from the Heritage Subsidiaries, Sellers shall not, without the prior written consent of Buyer, acquire or enter into any new Station Contract or renew, extend, amend, alter, modify or otherwise change any existing Station Contract, which in any case requires payments by a Seller Party under any such Station Contract in excess of Twenty-Five Thousand Dollars ($25,000). 6.1.7. BREACHES. Do or omit to do any act which will cause a material breach of any Station Contract. 6.1.8. EMPLOYEE MATTERS. Enter into or become subject to any employment, labor, union, or professional service contract not terminable at will, or any bonus, pension, insurance, profit sharing, incentive, deferred compensation, severance pay, -27- retirement, hospitalization, employee benefit, or other similar plan; or increase the compensation payable or to become payable to any employee, or pay or arrange to pay any bonus payment to any employee, except in the Ordinary Course of Business. 6.1.9. ACTIONS AFFECTING FCC LICENSES. Take any action which may jeopardize the validity or enforceability of or rights under the FCC Licenses. 6.1.10. PROGRAMMING. Program or broadcast any Program Contract or syndicated program, except in the Ordinary Course of Business. 6.1.11. ENCUMBRANCES. Create, assume or permit to exist any Encumbrances upon any of the Assets except for Permitted Encumbrances and Encumbrances that will be discharged prior to or on the Transfer Date. 6.1.12. TRANSACTIONS WITH AFFILIATES. Enter into any transaction with any Affiliate of a Seller Party that will be binding upon Buyer, the Assets or any Station on or after the Non-License Transfer Date or the Closing Date, except for transactions not otherwise prohibited by this Section 6.1 and transactions between and among Stations operating in the same DMA in the Ordinary Course of Business, in each case on arm's length terms. 6.2. AFFIRMATIVE COVENANTS. Pending and prior to the Non-License Transfer and the Closing, each Seller will, and will use its commercially reasonable efforts to enforce such rights under the Heritage Agreement to cause the Heritage Subsidiaries to take the following actions insofar as such actions relate to the Stations: 6.2.1. PRESERVE EXISTENCE. Preserve its corporate existence and business organization intact, maintain its existing franchises and licenses, use commercially reasonable efforts to preserve for Buyer the relationships of the Stations with suppliers, customers, employees and others with whom the Stations have business -28- relationships, and keep all of the Assets substantially in their present condition, ordinary wear and tear excepted. 6.2.2. NORMAL OPERATIONS. Subject to the terms and conditions of this Agreement (including, without limitation, Section 6.1) and the TBA Agreement, (a) carry on the businesses and activities of the Stations, including without limitation, promotional activities, the sale of advertising time, entering into other contracts and agreements, or purchasing and scheduling of programming, in the Ordinary Course of Business; (b) pay or otherwise satisfy all obligations (cash and barter) of the Stations in the Ordinary Course of Business; provided, however, each Seller shall cause to be brought current as of the Transfer Date all payments that are due and payable under Program Contracts as originally contracted; (c) maintain books of account, records, and files with respect to the business and operations of the Stations in substantially the same manner as heretofore; and (d) maintain the Assets in customary repair, maintenance and condition, except to the extent of normal wear and tear, and repair or replace, consistently with the Ordinary Course of Business, any Asset that may be damaged or destroyed; notwithstanding the foregoing, Buyer acknowledges that no Seller shall be obligated to spend any funds on capital expenditures after the date hereof, except for the repair or replacement of Assets that may be damaged or destroyed. 6.2.3. MAINTAIN FCC LICENSES. Maintain the validity of the FCC Licenses, and comply in all material respects with all requirements of the FCC Licenses and the rules and regulations of the FCC. 6.2.4. NETWORK AFFILIATION. Use commercially reasonable efforts to maintain in full force and effect the present network affiliation agreements for the Stations (and any and all modifications and renewals thereof). 6.2.5. STATION CONTRACTS. Pay and perform obligations in the Ordinary Course of Business under the Station Contracts and under any Additional Agreements that shall be entered into pursuant to Section 6.1.6, in accordance with the respective terms and conditions of such Station Contracts and in accordance with the TBA Agreement. -29- 6.2.6. TAXES. Pay or discharge all Taxes when due and payable. 6.2.7. ACCESS. Subject to the cooperation of the Trustee and the Heritage Subsidiaries, cause to be afforded to representatives of Buyer reasonable access during normal business hours to offices, properties, assets, books and records, contracts and reports of the Stations, as Buyer shall from time to time reasonably request; provided, however, that (a) such investigation shall only be upon reasonable notice and shall not unreasonably disrupt the personnel or operations of any Seller Party or the Stations, and (b) under no circumstances shall any Seller Party be required to provide access to Buyer or any representative of Buyer (i) any information or materials subject to confidentiality agreements with third parties required to be kept confidential by applicable Laws, or (ii) any privileged attorney-client communications or attorney work product. All requests for access to the offices, properties, assets, books and records, contracts and reports of the Stations shall be made to such representatives as Sellers shall designate in writing, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. Buyer acknowledges and agrees that neither Buyer nor its representatives shall contact any of the employees, customers, suppliers, partners, or other associates or Affiliates of any Seller Party or the Stations, in connection with the transactions contemplated hereby, whether in person or by telephone, mail or other means of communication, without the specific prior written authorization of such representatives of Sellers. Subject to and in accordance with the terms of this Section 6.2.7, each Seller shall, and shall use its commercially reasonable efforts to enforce such rights under the Heritage Agreement to cause each other Seller Party to, cooperate in all reasonable respects with Buyer's request to conduct an audit of any financial information of the Stations as Buyer may reasonably determine is necessary to satisfy any public company reporting requirements pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934 including, without limitation, (a) using commercially reasonable efforts to obtain the consent of auditors to permit Buyer, any Affiliate of Buyer and their respective auditors to have access to such auditors' work papers, and (b) consenting to such access by Buyer. Under no circumstance shall the preparation of any financial statements pursuant to such audit: (a) require any Seller Party to change or modify any accounting policy, (b) cause any unreasonable disruption in the business or operations of any Station, or (c) cause any delay that is more than de minimis in any internal reporting requirements of any Seller Party. All costs and expenses incurred in connection with the preparation of (and assimilation of relevant information for) any such financial statements shall be paid by Buyer. -30- 6.2.8. INSURANCE. Maintain in full force and effect all of its existing casualty, liability, and other insurance in amounts not less than those in effect on the date hereof. 6.2.9. FINANCIAL STATEMENTS. Prior to Sellers' acquisition of the Stations from the Heritage Subsidiaries, provide Buyer with, to the extent received by Seller in connection with the Heritage Agreement (a) unaudited monthly statements of assets and liabilities relating to the business and operations of the Stations, and monthly statements of revenues and expenses reflecting the results of business and operations of the Stations for January 1998 and for each month thereafter, within thirty (30) days after the end of each such month, and (b) weekly sales pacing reports for the Stations and copies of any financial statements. After Sellers' acquisition of the Stations from the Heritage Subsidiaries and prior to the Transfer Date, provide Buyer with (a) unaudited monthly statements of assets and liabilities relating to the business and operations of the Stations, and monthly statements of revenues and expenses reflecting the results of business and operations of the Stations for the month following the month such financial statements were last provided and for each month thereafter, within thirty (30) days after the end of each such month, and (b) weekly sales pacing reports for the Stations and copies of any financial statements. 6.2.10. CONSENTS. (a) Take all reasonable action required to obtain all consents, approvals and agreements of any third parties necessary to authorize, approve or permit the consummation of the transactions contemplated by this Agreement, including, without limitation, any consent of the parties to the Station Contracts designated as necessary in Schedule 3.4 in order to consummate the transactions contemplated hereby (collectively, the "Restricted Contracts"). Notwithstanding anything to the contrary set forth in this Agreement or otherwise, to the extent that the consent or approval of any third party is required under any Restricted Contract, such Seller shall only be required to use reasonable efforts (not involving the payment by such Seller of any money to any party to any such Restricted Contract, except to the extent required by Section 6.2.10(b)) to obtain such consents and approvals, and in the event that such Seller fails to obtain any such consent or approval, Buyer shall have no right to terminate this Agreement. (b) Notwithstanding anything to the contrary in clause (a) above, each Seller shall, and shall use its commercially reasonable efforts to enforce such rights under the Heritage Agreement to cause a Heritage Subsidiary to retain -31- until such time as any required consents shall have been obtained by such Seller, all rights to and under any Station Contract which requires the consent of any other party thereto for assignment to Buyer if such consent has not been obtained on the Closing Date (the "Deferred Contract"). Until the assignment of the Deferred Contract, (i) each Seller shall continue to use all commercially reasonable efforts and Buyer shall cooperate with Sellers to obtain the consent and/or to remove any other impediments to such assignment, and (ii) Sellers and Buyer agree to cooperate in any lawful arrangement to provide (to the extent permitted without breach of such Deferred Contract) that Buyer shall receive the benefits of such interest after the Closing Date to the same extent as if it were the lessee thereunder; provided, however, if Buyer shall fail to receive such benefits after the Closing Date for any Leased Property that is a main transmitter tower site or a studio site for any Station (the "Designated Properties"), Sellers agree to make such payments as are necessary for Buyer to receive such benefits as long as the aggregate amount of all such payments does not exceed Two Hundred Thousand Dollars ($200,000) for all such Designated Properties under this Agreement. If, subsequent to the Closing, any Seller shall obtain required consents to assign any Deferred Contract, the Deferred Contract for which consent to assign has been obtained shall at that time be deemed to be conveyed, granted, bargained, sold, transferred, setover, assigned, released, delivered and confirmed to Buyer, without need of further action by any Seller or of future documentation. 6.2.11. CORPORATE ACTION. Take all corporate action (including, without limitation, all shareholder action), under the Law of any state having jurisdiction over such Seller necessary to effectuate the transactions contemplated by this Agreement and the other Seller Documents. 6.2.12. ENVIRONMENTAL AUDIT. Subject to the cooperation of the Trustee, permit Buyer and Buyer's agents, as soon as practical after the date hereof and upon Buyer's request therefor, access to the Real Property and the Leased Property for the purpose of conducting, at Buyer's expense, Phase I and Phase II environmental audits. Any such environmental audits shall be conducted by a reputable environmental investigatory firm of Buyer's choice subject to the reasonable approval of Sellers and in a manner as will not unreasonably interfere with the normal business and operations of any of the Stations. 6.2.13. HERITAGE AGREEMENT. Consummate the acquisition of the Assets in accordance with all of the provisions of the Heritage Agreement and use commercially -32- reasonable efforts to pursue in a timely manner any claims relating to the Stations that Sellers may have under the Heritage Agreement. 6.3. CONFIDENTIALITY. Each Seller shall, at all times, maintain strict confidentiality with respect to all documents and information furnished to such Seller by or on behalf of Buyer. Nothing shall be deemed to be confidential information that: (a) is known to a Seller at the time of its disclosure to such Seller; (b) becomes publicly known or available to a Seller other than through disclosure by such Seller; (c) is received by a Seller from a third party not actually known by such Seller to be bound by a confidentiality agreement with or obligation to Buyer; or (d) is independently developed by a Seller. Notwithstanding the foregoing provisions of this Section 6.3, each Seller may disclose such confidential information (a) to the extent required or deemed advisable to comply with applicable Laws; (b) to its officers, directors, employees, representatives, financial advisors, attorneys, accountants, and agents with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); (c) to the Heritage Subsidiaries and the Trustee, as necessary, with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); and (d) to any Governmental Authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, each Seller will return to Buyer all documents and other material prepared or furnished by Buyer relating to the transactions contemplated hereunder, whether obtained before or after the execution of this Agreement. 6.4. HERITAGE ACQUISITION. Upon receipt of a written notice by Sellers from Buyer that the Buyer is prepared to proceed with the Non-License Transfer hereunder simultaneously with (or immediately following) the acquisition of the Stations from the Heritage Subsidiaries, Sellers agree to acquire the Stations from the Heritage Subsidiaries as promptly as possible to the extent permitted under the Heritage Agreement. Notwithstanding the foregoing, nothing in the preceding sentence shall constitute a waiver by Buyer of any conditions precedent to Buyer's obligation to proceed with the Non-License Transfer. ARTICLE 7. COVENANTS AND AGREEMENTS OF BUYER Buyer covenants and agrees with Sellers as follows: -33- 7.1. CONFIDENTIALITY. Buyer shall, at all times prior to the Non-License Transfer and the Closing, maintain strict confidentiality with respect to all documents and information furnished to Buyer by or on behalf of a Seller. Nothing shall be deemed to be confidential information that: (a) is known to Buyer at the time of its disclosure to Buyer; (b) becomes publicly known or available other than through disclosure by Buyer; (c) is received by Buyer from a third party not actually known by Buyer to be bound by a confidentiality agreement with or obligation to a Seller; or (d) is independently developed by Buyer. Notwithstanding the foregoing provisions of this Section 7.1, Buyer may disclose such confidential information (a) to the extent required or deemed advisable to comply with applicable Laws; (b) to its officers, directors, partners, employees, representatives, financial advisors, attorneys, accountants, agents, underwriters, lenders, investors and any other potential sources of financing with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); and (c) to any Governmental Authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, Buyer will return to Sellers all documents and other material prepared or furnished by Sellers relating to the transactions contemplated by this Agreement, whether obtained before or after the execution of this Agreement. 7.2. CORPORATE ACTION. Prior to the Non-License Transfer and the Closing, Buyer shall take all corporate action (including, without limitation, all shareholder action), under the Laws of any state having jurisdiction over Buyer necessary to effectuate the transactions contemplated by this Agreement and the other Buyer Documents. 7.3. ACCESS. From and after the Transfer Date for a period of three (3) years, Buyer shall cause to be afforded to representatives of Sellers and the Heritage Subsidiaries reasonable access during normal business hours to the offices, books and records, contracts and reports of the Stations which relate to the operations of the Stations during the period during which the Stations were owned by the Sellers or the Heritage Subsidiaries, as Sellers or the Heritage Subsidiaries shall from time to time reasonably request; provided, however, that (a) such investigation shall only be upon reasonable notice and shall not unreasonably disrupt the personnel or operations of Buyer or the Stations, and (b) under no circumstances shall Buyer be required to provide access to any Seller, any Heritage Subsidiary or any representatives of any Seller or any Heritage Subsidiary (i) any information or materials subject to confidentiality agreements with third parties required to be -34- kept confidential by applicable Laws, or (ii) any privileged attorney-client communications or attorney work product. All requests for access to the offices, books and records, contracts and reports of the Stations shall be made to such representatives as Buyer shall designate in writing, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. Buyer agrees not to dispose of any such books and records, contracts and reports of the Stations which relate to the operations of the Stations during the period during which the Stations were owned by Sellers or the Heritage Subsidiaries without consulting with Sellers prior to disposal thereof and taking any reasonable action requested by Sellers with respect to retention and transfer to Sellers thereof. 7.4. COLLECTION OF RECEIVABLES. At the earlier of the Non-License Transfer or the Closing, Sellers shall assign the Accounts Receivable to Buyer for collection purposes only, and, within ten (10) business days after the Transfer Date, Seller shall furnish to Buyer a list of the Accounts Receivable by accounts and the amounts then owing. Buyer agrees, for a period of one hundred fifty (150) days following the Transfer Date, without any requirement to litigate to collect the Accounts Receivable, to use its reasonable efforts (with at least the care and diligence Buyer uses to collect its own accounts receivable) to collect for Sellers the Accounts Receivable and to remit to Sellers (or their designees) on the fifth day following the last day of each month occurring during such one hundred fifty (150) day period (or, if any such day is a Saturday, Sunday or holiday, on the next day on which banking transactions are resumed), collections received by Buyer with respect to the Accounts Receivable. Buyer shall not make any referral or compromise of any Accounts Receivable to a collection agency or attorney for collection and shall not compromise for less than full value any Account Receivable without the prior written consent of Sellers. Any Account Receivable not collected by Buyer within one hundred fifty (150) days following the Closing Date shall revert to Sellers (or their designees). Buyer shall reassign, without recourse to Buyer, each Account Receivable and deliver to Sellers, all records relating thereto on the same day as it remits to Sellers (or their designees) the collections received. All payments in respect of the Accounts Receivable received during the one hundred fifty (150) day period shall be first applied to the oldest balance then due on the Accounts Receivable unless the account debtor indicates in writing that payment is to be applied otherwise due to a dispute over an Account Receivable. Buyer agrees, upon the reasonable request of Sellers, to furnish to Sellers periodic reports on the status of its Accounts Receivable. Buyer shall have no right to set-off any amounts collected for Accounts Receivable for any amounts owed to Buyer by Sellers; provided, however, that Buyer shall have the right to seek indemnification in accordance with the terms and conditions of this Agreement. -35- ARTICLE 8. MUTUAL COVENANTS AND UNDERSTANDINGS OF SELLERS AND BUYER 8.1. POSSESSION AND CONTROL. Between the date hereof and the Closing Date, Buyer shall not directly or indirectly control, supervise or direct, or attempt to control, supervise or direct, the business and operations of the Stations, and such operation, including complete control and supervision of all programming, shall be the sole responsibility of the owners of the Stations, except as contemplated by the LMA Agreement after the Non-License Transfer. On and after the Closing Date, Sellers shall have no control over, or right to intervene, supervise, direct or participate in, the business and operations of the Stations. 8.2. RISK OF LOSS. The risk of loss or damage by fire or other casualty or cause to the Assets until the Transfer Date shall be upon Sellers. Except as otherwise provided in Section 9.3, in the event of loss or damage prior to the Transfer Date with respect to which Sellers have adequate replacement cost insurance and which has not been restored, replaced, or repaired as of the Transfer Date, Buyer shall proceed with the Non-License Transfer or the Closing, as applicable, and receive at the Non-License Transfer or the Closing, as applicable, the insurance proceeds or an assignment of the right to receive such insurance proceeds, as applicable, to which Sellers otherwise would be entitled, whereupon Sellers shall have no further liability to Buyer for such loss or damage. 8.3. PUBLIC ANNOUNCEMENTS. Sellers and Buyer shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated herein and shall not issue any such press release or make any such public statement without the prior written consent of the other parties hereto, which shall not be unreasonably withheld; provided, however, that a party may, without consulting with the other parties, issue such press release or make such public statement as may be required by Law or any listing agreement with a national securities exchange to which STC or Sinclair is a party if it has used all reasonable efforts to consult with the other party and to obtain such party's consent but has been unable to do so in a timely manner. -36- 8.4. EMPLOYEE MATTERS. 8.4.1. Upon the earlier of the Non-License Transfer or the Closing, Buyer shall offer employment to each of the employees of the Stations (including those on leave of absence, whether short-term, long-term, family, maternity, disability, paid, unpaid or other), at a comparable salary, position and place of employment as held by each such employee immediately prior to the Transfer Date (such employees who are given such offers of employment and accept such offers are referred to herein as the "Transferred Employees"); provided, however, that the two (2) employees of the Stations designated in the TBA Agreement shall continue as employees of Sellers and shall not become Transferred Employees hereunder until the Closing. Nothing in this Section 8.4.1 is intended to guarantee employment for any Transferred Employee for any length of time after the Transfer Date. 8.4.2. Except as provided otherwise in this Section 8.4, Sellers shall pay, discharge and be responsible for (a) all salary and wages arising out of or relating to the employment of the employees of the Stations prior to the Transfer Date and (b) any employee benefits arising under the Benefit Plans of any Seller Party, any Heritage Subsidiary and their Affiliates during the period prior to the Transfer Date. From and after the Transfer Date, Buyer shall pay, discharge and be responsible for all salary, wages and benefits arising out of or relating to the employment of the Transferred Employees by Buyer on and after the Transfer Date. Buyer shall be responsible for all severance Liabilities, and all COBRA Liabilities for any Transferred Employees of the Stations terminated by Buyer on or after the Transfer Date, including, without limitation all Liabilities under the retention and severance agreements set forth on Schedule 8.4.8 (subject to the reimbursement obligations of Sellers set forth in Section 8.4.8). 8.4.3. Buyer shall cause all Transferred Employees as of the Transfer Date to be eligible to participate in its "employee welfare benefit plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2) of ERISA, respectively) of Buyer in which similarly situated employees of Buyer are generally eligible to participate; provided, however, that all Transferred Employees and their spouses and dependents shall be eligible for coverage immediately after the Transfer Date (and shall not be excluded from coverage on account of any pre-existing condition) to the extent provided under such plans with respect to Transferred Employees. 8.4.4. For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service in any such plan for which a Transferred Employee may be eligible after the Transfer Date, Buyer shall ensure that, to the extent permitted by law, service by such Transferred Employee with any Seller, any Heritage Subsidiary or any Affiliate of -37- Sellers or the Heritage Subsidiaries shall be deemed to have been service with Buyer. In addition, Buyer shall ensure that each Transferred Employee receives credit under any welfare benefit plan of Buyer for any deductibles or co-payments paid by such Transferred Employee and his or her dependents for the current plan year under a plan maintained by any Seller, any Heritage Subsidiary or any Affiliate of Sellers or the Heritage Subsidiaries. Buyer shall grant credit to each Transferred Employee for all sick leave in accordance with the policies of Buyer applicable generally to its employees after giving effect to service for any Seller or any Heritage Subsidiary as service for Buyer. To the extent taken into account in determining the Final Proration Amount, Buyer shall assume and discharge Liabilities of Sellers for the payment of all unused vacation leave accrued by Transferred Employees as of the Transfer Date. To the extent any claim with respect to such accrued vacation leave is lodged against Sellers, with respect to any Transferred Employee, Buyer shall indemnify, defend and hold harmless Sellers from and against any and all losses, directly or indirectly, as a result of, or based upon or arising from the same. 8.4.5. As soon as practicable following the Transfer Date, Buyer shall establish and maintain a defined contribution plan or plans (which may be a preexisting plan or plans (the "Buyer's Plan") intended to be qualified under Section 401(a) and 401(k) of the Code for the benefit of the Transferred Employees. Effective as of the Transfer Date, Sellers shall, and shall use their commercially reasonable efforts to enforce such rights under the Heritage Agreement to cause the Heritage Subsidiaries to, cause appropriate amendments to be made to all retirement savings plans to which any Transferred Employees participate (the "Sellers' Plan") to provide that the Transferred Employees shall be fully vested in their accounts under the Sellers' Plan. As soon as practicable after the Transfer Date, Buyer shall take all necessary action to qualify the Buyer's Plan under the applicable provisions of the Code (including but not limited to Section 401), if it is not yet so qualified, and Buyer and Sellers shall make any and all filings and submissions to the appropriate governmental agencies required to be made by them in connection with the transfer of assets described hereafter. As soon as practicable following the earlier of the receipt of a favorable determination letter from the Internal Revenue Service regarding the qualified status of both the Sellers' Plan and the Buyer's Plan (each as amended to the date of transfer) or sooner, if Sellers and Buyer so agree, Sellers shall, and shall use their commercially reasonable efforts to enforce such rights under the Heritage Agreement to, cause the Heritage Subsidiaries to cause to be transferred to the Buyer's Plan, in cash and in kind, all of the individual account balances of Transferred Employees under the Sellers' Plan, including any outstanding plan participant loan receivables allocated to such accounts. -38- 8.4.6. Buyer acknowledges and agrees that Buyer's obligations pursuant to this Section 8.4 are in addition to, and not in limitation of, Buyer's obligation to assume the employment contracts set forth on Schedule 2.1.8. 8.4.7. Except as otherwise provided in this Section 8.4 or in any employment, severance or retention agreements of any Transferred Employees, all Transferred Employees shall be at-will employees, and Buyer may terminate their employment or change their terms of employment at will. No employee (or beneficiary of any employee) of the Stations may sue to enforce the terms of this Agreement, including specifically this Section 8.4, and no employee or beneficiary shall be treated as a third party beneficiary of this Agreement. Except to the extent provided for herein, Buyer may cover the Transferred Employees under existing or new benefit plans, programs, and arrangements, and may amend or terminate any such plans, programs, or arrangements at any time. 8.4.8. To the extent that Sellers receive any severance payments from the Heritage Subsidiaries in connection with the termination of employment by Sellers or Buyer of a general manager for the Stations in accordance with the terms of the Heritage Agreement, Sellers shall pay any such amounts received from the Heritage Subsidiaries to Buyer within five (5) days of receipt. 8.5. DISCLOSURE SCHEDULES. Prior to Sellers' acquisition of the Stations from the Heritage Subsidiaries, Sellers shall have the right from time to time to update or correct Schedules 2.1.5, 2.1.6, 2.1.9, 2.1.10, 3.4 and 3.17 attached hereto solely to reflect actions by Sellers or the Heritage Subsidiaries after the date hereof which are not prohibited by Section 6.1 of the Heritage Agreement or this Agreement. From and after Sellers' acquisition of the Stations from the Heritage Subsidiaries and prior to the Transfer Date, Sellers shall have the obligation to update or correct Schedules 2.1.5, 2.1.6, 2.1.9, 2.1.10, 3.4 and 3.17 attached hereto solely to reflect actions by Sellers which are not prohibited by Section 6.1 hereof. The inclusion of any fact or item on a Schedule referenced by a particular section in this Agreement shall, should the existence of the fact or item or its contents, be relevant to any other section, be deemed to be disclosed with respect to such other section whether or not an explicit cross-reference appears in the Schedules. 8.6. BULK SALES LAWS. Buyer hereby waives compliance by Sellers, in connection with the transactions contemplated hereby, with the provisions of any applicable bulk transfer laws. -39- 8.7. TAX MATTERS. Each party hereto represents, warrants, covenants and agrees that for tax purposes the sale of Assets (except for the License Assets) is not effective until the Transfer Date, and the sale of the License Assets is not effective until the Closing Date. Seller and Buyer agree that all Tax returns and reports shall be filed consistent with the sale of Assets taking place as aforesaid. 8.8. PRESERVATION OF BOOKS AND RECORDS. For a period of three (3) years after the Closing Date, Sellers agree not to dispose of, and agree to provide Buyer reasonable access to, any material books or records in possession of Sellers immediately after the Transfer Date that relate to the business or operations of the Stations prior to the Transfer Date. 8.9. TBA AGREEMENT. At the Non-License Transfer pursuant to Section 11.2, Buyer and Sellers shall enter into a time brokerage agreement for the Stations substantially in the form of Exhibit E hereto (the "TBA Agreement"). ARTICLE 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER The obligations of Buyer to purchase the Assets and to consummate the Non-License Transfer or proceed with the Closing, as applicable, are subject to the satisfaction (or waiver in writing by Buyer) at or prior to the Non-License Transfer or the Closing, as applicable, of each of the following conditions: 9.1. CLOSING UNDER THE HERITAGE AGREEMENT. Sellers shall have acquired the Assets pursuant to the terms of the Heritage Agreement. 9.2. REPRESENTATIONS AND COVENANTS. The representations and warranties of Sellers made in this Agreement shall be true and correct on and as of the Non-License Transfer Date or the Closing Date, as applicable, with the same effect as though such representations and warranties had been made on and as of the Non-License Transfer Date or the Closing Date, as applicable (except as modified by the Schedules updated after the date hereof in accordance with Section 8.5 and except -40- for representations and warranties that speak as of a specific date or time other than the Non-License Transfer Date or the Closing Date, as applicable (which need only be true and correct in all material respects as of such date or time)), and the covenants and agreements of Sellers required to be performed on or before the Non-License Transfer Date or the Closing Date, as applicable, in accordance with the terms of this Agreement shall have been performed in all respects, except to the extent that the failure of such representations and warranties to be true and correct and the failure to perform such covenants shall not have, when considered together, had a material adverse effect on any material FCC Licenses or on the broadcast transmissions of any Station (a "Transmission Defect"); provided, however, if a Transmission Defect exists as of the Non-License Transfer Date or the Closing Date, as applicable, then either or both of Sellers and Buyer shall be entitled, by written notice to the other, to postpone the Non-License Transfer Date or the Closing Date, as applicable, for a period of up to sixty (60) days to resume such Station's broadcast transmission. 9.3. NO TRANSMISSION DEFECTS. There shall not exist any loss or damage at any of the Stations which has resulted in the regular broadcast transmission of such Station (including its effective radiated power) to be diminished in any material respect; provided, that if any such loss or damage does exist, then either or both of Sellers and Buyer shall be entitled, by written notice to the other, to postpone the Non-License Transfer Date or the Closing Date, as applicable, for a period of up to sixty (60) days to resume such Station's broadcast transmission. 9.4. DELIVERY OF DOCUMENTS. Sellers shall have delivered to Buyer all contracts, agreements, instruments and documents required to be delivered by Sellers to Buyer pursuant to Section 11.4. 9.5. FCC ORDER. The FCC Order shall have been issued with respect to each Station; provided, however, that there shall be no requirement that the FCC Order shall have been issued as of the Non-License Transfer Date. 9.6. HART-SCOTT-RODINO. All applicable waiting periods under Hart-Scott-Rodino shall have expired or terminated. -41- 9.7. LEGAL PROCEEDINGS. No injunction, restraining order or decree of any nature of any court or Governmental Authority of competent jurisdiction shall be in effect that restrains or prohibits the transactions contemplated by this Agreement. ARTICLE 10. CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS The obligations of Sellers to sell, transfer, convey and deliver the Assets and to consummate the Non-License Transfer or to proceed with the Closing, as applicable, are subject to the satisfaction (or waiver in writing by Sellers) at or prior to the Non-License Transfer or the Closing, as applicable, of each of the following conditions: 10.1. CLOSING UNDER THE HERITAGE AGREEMENT. Sellers shall have acquired the Assets pursuant to the terms of the Heritage Agreement. 10.2. REPRESENTATIONS AND COVENANTS. The representations and warranties of Buyer made in this Agreement shall be true and correct in all material respects on and as of the Non-License Transfer Date or the Closing Date, as applicable, with the same effect as though such representations and warranties had been made on and as of the Non-License Transfer Date or the Closing Date, as applicable, (except for representations and warranties that speak as of a specific date or time other than the Non-License Transfer Date or the Closing Date, as applicable, (which need only be true and correct in all material respects as of such date or time)), and the covenants and agreements of Buyer required to be performed on or before the Non-License Transfer Date or the Closing Date, as applicable, in accordance with the terms of this Agreement shall have been performed in all material respects. 10.3. DELIVERY BY BUYER. Buyer shall have delivered to Sellers the Purchase Price in accordance with Section 2.5 and all contracts, agreements, instruments and documents required to be delivered by Buyer to Seller pursuant to Section 11.5. -42- 10.4. FCC ORDER. The FCC Order shall have been issued with respect to each Station; provided, however, that there shall be no requirement that the FCC Order shall have been issued as of the Non-License Transfer Date. 10.5. HART-SCOTT-RODINO. All applicable waiting periods under Hart-Scott-Rodino shall have expired or terminated. 10.6. LEGAL PROCEEDINGS. No injunction, restraining order or decree of any nature of any court or Governmental Authority of competent jurisdiction shall be in effect that restrains or prohibits the transactions contemplated by this Agreement. ARTICLE 11. CLOSING; NON-LICENSE TRANSFER 11.1. CLOSING. 11.1.1. To the extent not previously transferred pursuant to the Non-License Transfer, the closing for all of the Assets hereunder (the "Closing") shall be held on a date specified by Buyer that is within ten (10) days after the later of (a) the date on which all applicable waiting periods under Hart-Scott-Rodino shall have expired or terminated, or (b) the date on which all of the FCC Orders for all Stations shall have been issued (the date on which the Closing shall occur pursuant to this Section 11.1 is referred to herein as the "Closing Date"). 11.1.2. If the Closing shall not have occurred on or prior to such date which is two (2) years after the date of this Agreement due to the failure to receive an FCC Order for reasons relating solely to Buyer's qualifications, Buyer shall designate a successor licensee and the parties will cooperate to secure the necessary governmental approvals to cause the designated successor to become the licensee. If the Closing shall not have occurred on or prior to such date which is four (4) years after the date of this Agreement due to the failure to receive an FCC Order for reasons relating solely to any Seller, Sellers shall jointly and severally indemnify, defend and hold Buyer harmless from and against any and all actual Losses incurred by Buyer as a result of the FCC's failure to issue such FCC Order by such date for such reasons. All proceeds received from a transfer of the License Assets to any such successor licensee shall be for Buyer; provided, however, to the -43- extent Buyer has not incurred any Losses for which the Sellers have indemnified Buyer pursuant to the preceding sentence, Sellers shall receive the amount of TWO MILLION DOLLARS ($2,000,000) which would otherwise have been payable to Sellers at Closing pursuant to Section 2.5.2. 11.1.3. If the Closing shall not have occurred on or prior to such date which is four (4) years after the date of this Agreement, Sellers and Buyer acknowledge and agree to cooperate and use commercially reasonable efforts to consummate the sale to a third party of both the License Assets and the Non-License Assets in an orderly and mutually satisfactory manner (the "Third Party Sale"). At the closing of the Third Party Sale pursuant to this Section 11.1.3, (a) up to Two Million Dollars ($2,000,000) of the proceeds therefrom shall be paid directly to Sellers by wire transfer of immediately available funds to an account identified by Sellers in writing, and (b) any proceeds therefrom in excess of the Two Million Dollars ($2,000,000), if any, shall be paid directly to Buyer by wire transfer of immediately available funds to an account identified by Buyer writing. 11.2. NON-LICENSE TRANSFER. 11.2.1. Notwithstanding anything to the contrary herein, provided that the conditions set forth in Article 9 (except for Section 9.5) and Article 10 (except for Section 10.4) shall have been satisfied and the Closing shall not have occurred, there shall be a closing (the "Non-License Transfer") for the purchase and sale of all of the Assets, other than the License Assets, upon the earlier to occur of (a) such date which is seventy-five (75) days after the date of this Agreement (the "Outside Date"), or (b) any date prior to the Outside Date specified by Buyer in writing at least five (5) days prior to such date (the date on which the Non-License Transfer shall occur pursuant to this Section 11.2.1 is referred to herein as the "Non-License Transfer Date"). The parties acknowledge and agree that if the conditions set forth in Article 9 (except for Section 9.5) and Article 10 (except for Section 10.4) are not satisfied as of the Outside Date, the Outside Date shall be such date which is ten (10) days after satisfaction of all such conditions (subject to rights of Sellers and Buyer to terminate this Agreement prior to such date in accordance with Article 13). 11.2.2. At the Non-License Transfer, Sellers shall sell, assign, transfer, convey and deliver to Buyer free and clear of any Encumbrances other than Permitted Encumbrances, and Buyer shall purchase, acquire, pay for and accept from Sellers, all right, title and interest of Sellers in, to and under the Assets, other than the License Assets. -44- 11.3. TIME AND PLACE OF NON-LICENSE TRANSFER AND CLOSING. The Closing and the Non-License Transfer shall be held at 10:00 A.M. local time on the Closing Date and the Non-License Transfer Date, respectively, at the offices of Hogan & Hartson L.L.P., 8300 Greensboro Drive, Suite 1100, McLean, Virginia, or at such other time and place as the parties may agree. 11.4. DELIVERIES BY SELLERS. At the Non-License Transfer and the Closing, as applicable, Sellers shall deliver to Buyer the following: 11.4.1. AGREEMENTS AND INSTRUMENTS The following bills of sale, assignments and other instruments of transfer duly executed by Sellers: (a) a Bill of Sale; (b) an Assignment of FCC Licenses; provided that the Assignment of Licenses shall not be delivered at a Non-License Transfer; (c) an Assignment of Contracts and Leases; (d) an Assumption Agreement; (e) certificates of title with respect to the motor vehicles listed on Schedule 2.1.9 or if any such motor vehicles are leased by a Seller, an assignment of such lease; (f) special or limited warranty deeds for all Real Property in the form appropriate to the jurisdictions in which such Real Property is located; and (g) the TBA Agreement. 11.4.2. CONSENTS. Copies of all consents Sellers have been able to obtain to effect the assignment to Buyer of the Station Contracts listed on Schedule 3.4. 11.4.3. CERTIFIED RESOLUTIONS. A copy of the approval of the board of directors and the stockholders of each Seller, certified as being correct and complete and then in full force and effect, authorizing the execution, delivery and performance of this Agreement, and of the other Seller Documents, and the consummation of the transactions contemplated hereby and thereby. -45- 11.4.4. OFFICERS' CERTIFICATES. (a) A certificate of each Seller certifying the matters set forth in Section 9.2; and (b) A certificate of each Seller as to the incumbency of the representatives of such Seller executing this Agreement or any of the other Seller Documents on behalf of such Seller, and true and correct copies of the organizational documents of each Seller. 11.4.5. GOOD STANDING CERTIFICATES. To the extent available from the applicable jurisdictions, certificates as to the formation and/or good standing of each Seller issued by the appropriate governmental authorities in the states of organization and each jurisdiction in which such Seller is qualified to do business, each such certificate (if available) to be dated a date not more than a reasonable number of days prior to the Transfer Date. 11.5. DELIVERIES BY BUYER. At the Non-License Transfer and the Closing, Buyer shall deliver to Sellers the following: 11.5.1. PURCHASE PRICE PAYMENT. The Purchase Price in the amount and manner set forth in Section 2.5. 11.5.2. AGREEMENTS AND INSTRUMENTS. The Assumption Agreement and other instruments of transfer duly executed by Buyer. 11.5.3. CERTIFIED RESOLUTIONS. Copies of the resolutions of the board of directors and stockholder of Buyer, certified as being correct and complete and then in full force and effect, authorizing the execution, delivery and performance of this Agreement and of the other Buyer Documents, and the consummation of the transactions contemplated hereby and thereby. -46- 11.5.4. OFFICERS' CERTIFICATE. (a) A certificate of Buyer signed by an officer of Buyer certifying the matters set forth in Section 10.2; and (b) A certificate signed by the Secretary of Buyer as to the incumbency of the officers of Buyer executing this Agreement or any of the other Buyer Documents on behalf of Buyer, and true and correct copies of the organizational documents of Buyer. ARTICLE 12. SURVIVAL; INDEMNIFICATION 12.1. SURVIVAL OF REPRESENTATIONS. 12.1.1. Unless otherwise set forth herein (including, without limitation, Section 12.1.2), all representations and warranties, covenants and agreements of Sellers and Buyer contained in or made pursuant to this Agreement or in any certificate furnished pursuant hereto shall survive the Non-License Transfer Date or the Closing Date, as applicable, and shall remain in full force and effect to the following extent: (a) representations and warranties with respect to the Non-License Assets shall survive for a period of twelve (12) months after the Non-License Transfer Date, (b) representations and warranties with respect to the License Assets shall survive for a period of twelve (12) months after the Closing Date, (c) the covenants and agreements with respect to the Non-License Assets which by their terms survive the Non-License Transfer Date shall continue in full force and effect until fully discharged (but not beyond the expiration of twelve (12) months after the Non-License Transfer Date), (d) the covenants and agreements with respect to the License Assets which by their terms survive the Closing Date shall continue in full force and effect until fully discharged (but not beyond the expiration of twelve (12) months after the Closing Date), and (e) any representation, warranty, covenant or agreement that is the subject of a claim which is asserted in a reasonably detailed writing prior to the expiration of the survival period set forth in this Section 12.1.1, shall survive with respect to such claim or dispute until the final resolution thereof. 12.1.2. No claim for indemnification may be made pursuant to this Article 12 after the survival period set forth in this Section 12.1. -47- 12.2. INDEMNIFICATION BY SELLERS. Subject to the conditions and provisions of Section 12.4 and Section 12.5, from and after the Transfer Date, Sellers jointly and severally agree to indemnify, defend and hold harmless Buyer from and against and in any respect of, on a net after-tax basis, any and all Losses, asserted against, resulting to, imposed upon or incurred by Buyer, directly or indirectly, by reason of or resulting from: (a) any failure by Sellers to pay, perform or discharge any Liabilities not assumed by Buyer pursuant hereto; (b) the business or operations of the Stations during the period prior to the Transfer Date (except to the extent Buyer has assumed the Liability for any such Losses pursuant hereto); (c) any misrepresentation or breach of the representations and warranties of any Seller contained in or made pursuant to this Agreement or any other Seller Document; (d) any breach by Sellers of any covenants of Sellers contained in or made pursuant to this Agreement or any other Seller Document; or (e) the failure of any Seller to comply with the provisions of any applicable bulk transfer law. 12.3. INDEMNIFICATION BY BUYER. Subject to the conditions and provisions of Section 12.4 and Section 12.5, from and after the Transfer Date, Buyer hereby agrees to indemnify, defend and hold harmless Sellers from, against and with respect of, on a net after-tax basis, any and all Losses, asserted against, resulting to, imposed upon or incurred by Sellers, directly or indirectly, by reason of or resulting from: (a) any failure by Buyer to pay, perform or discharge any Liabilities assumed by Buyer pursuant hereto; (b) the business or operations of the Stations during the period from and after the Transfer Date; (c) any misrepresentation or breach of the representations and warranties of Buyer contained in or made pursuant to this Agreement or any other Buyer Document; or (d) any breach by Buyer of any covenants of Buyer contained in or made pursuant to this Agreement or any other Buyer Document. 12.4. LIMITATIONS ON INDEMNIFICATION. 12.4.1. Notwithstanding any other provision of this Agreement to the contrary, in no event shall Losses include a party's incidental, consequential or punitive damages, regardless of the theory of recovery. Each party hereto agrees to use reasonable efforts to mitigate any losses which form the basis for any claim for indemnification hereunder. 12.4.2. Notwithstanding any other provision of this Agreement to the contrary, Sellers shall not be liable to Buyer in respect of any indemnification hereunder except to the extent that the aggregate amount of Losses of Buyer under -48- this Agreement exceeds Five Hundred Thousand Dollars ($500,000) (the "Basket Amount"), and then only to the extent of the excess over the amount of Two Hundred Fifty Thousand Dollars ($250,000); provided, however, that the aggregate amount of Losses of Buyer under this Agreement shall not exceed Four Million Dollars ($4,000,000) (the "Indemnity Cap"); further provided, however, the Basket Amount shall not be applicable to any amounts owed in connection with the determination of the Proration Amount pursuant to Section 2.6, to the payment or reimbursement obligations of Sellers under Sections 8.2 and 8.4.8, or to the indemnities set forth in Section 12.2(a) or Section 12.2(b); further provided, however, the Indemnity Cap shall not be applicable (i) if the transfer of the License Assets to Buyer has not occurred on or prior to such date which is four (4) years from the date of this Agreement as a result of a default under, or breach of, any of the terms of this Agreement by Sellers, (ii) if the Closing has not occurred on or prior to such date which is four (4) years from the date of this Agreement under the circumstances described in the second sentence of Section 11.1.2, or (iii) in the event of fraud. 12.4.3. Notwithstanding any other provision of this Agreement to the contrary, Buyer acknowledges and agrees that the maximum aggregate liability of Sellers pursuant to this Agreement to Buyer and any third parties for any and all Losses shall not exceed the Indemnity Cap, regardless of whether Buyer seeks indemnification pursuant to this Article 12, regardless of the form of action, whether in contract or tort, including negligence, and regardless of whether or not Sellers are notified of the possibility of damages to Buyer or any other third party; provided, however, the Indemnity Cap shall not be applicable if the transfer of the License Assets to Buyer has not occurred on or prior to such date which is four (4) years from the date of this Agreement as a result of a default under, or breach of, any of the terms of this Agreement by Sellers, (ii) if the Closing has not occurred on or prior to such date which is four (4) years from the date of this Agreement under the circumstances described in the second sentence of Section 11.1.2, or (iii) in the event of fraud. 12.4.4. Each party (a "recipient party") shall notify the other party in writing (the "representing party") reasonably promptly of any perceived breach by the representing party of which the recipient party has knowledge of any representations, warranties, covenants and agreements, and of any Losses (including a brief description of the same) of the recipient party caused thereby. In the event of any breach that is cured prior to the Transfer Date in accordance with the terms of this Agreement, the representing party shall have no obligation under Section 12.2 or Section 12.3 or otherwise to indemnify the recipient party with respect to such Losses. -49- 12.5. CONDITIONS OF INDEMNIFICATION. The obligations and liabilities of Sellers and of Buyer hereunder with respect to their respective indemnities pursuant to this Article 12, resulting from any Losses, shall be subject to the following terms and conditions: 12.5.1. The party seeking indemnification (the "Indemnified Party") must give the other party or parties, as the case may be (the "Indemnifying Party"), notice of any such Losses promptly after the Indemnified Party receives notice thereof; provided that the failure to give such notice shall not affect the rights of the Indemnified Party hereunder except to the extent that the Indemnifying Party shall have suffered actual damage by reason of such failure. 12.5.2. The Indemnifying Party shall have the right to undertake, by counsel or other representatives of its own choosing, the defense of such Losses at the Indemnifying Party's risk and expense. 12.5.3. In the event that the Indemnifying Party shall elect not to undertake such defense, or, within a reasonable time after notice from the Indemnified Party of any such Losses, shall fail to defend, the Indemnified Party (upon further written notice to the Indemnifying Party) shall have the right to undertake the defense, compromise or settlement of such Losses, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the Indemnifying Party (subject to the right of the Indemnifying Party to assume defense of such Losses at any time prior to settlement, compromise or final determination thereof). In such event, the Indemnifying Party shall pay to the Indemnified Party, in addition to the other sums required to be paid hereunder, the costs and expenses incurred by the Indemnified Party in connection with such defense, compromise or settlement as and when such costs and expenses are so incurred. 12.5.4. Anything in this Section 12.5 to the contrary notwithstanding, (a) if there is a reasonable possibility that Losses may materially and adversely affect the Indemnified Party other than as a result of money damages or other money payments, the Indemnified Party shall have the right, at its own cost and expense, to participate in the defense, compromise or settlement of the Losses, (b) the Indemnifying Party shall not, without the Indemnified Party's written consent, settle or compromise any Losses or consent to entry of any 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 of such Losses in form and substance satisfactory to the Indemnified Party, and (c) in the event that the Indemnifying Party undertakes defense of any Losses, the Indemnified Party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the Indemnifying -50- Party and its counsel or other representatives concerning such Losses and the Indemnifying Party and the Indemnified Party and their respective counsel or other representatives shall cooperate with respect to such Losses and (d) in the event that the Indemnifying Party undertakes defense of any Losses, the Indemnifying Party shall have an obligation to keep the Indemnified Party informed of the status of the defense of such Losses and furnish the Indemnified Party with all documents, instruments and information that the Indemnified Party shall reasonably request in connection therewith. 12.6. CURE OF BREACH. Notwithstanding any other provision of this Agreement to the contrary, a breach by Sellers of any representations and warranties or a failure to perform any covenant or agreement hereunder may be cured by Sellers prior to the Transfer Date (a) by reducing the Purchase Price in an amount equal to the Losses to Buyer caused by such breach, (b) by making payment to a third party or taking other action to discharge the Losses, (c) by placing an amount equal to the Losses in an escrow account under an escrow arrangement reasonably satisfactory to Sellers and Buyer or (d) a combination of the foregoing. If the foregoing actions fully cure the breach, Sellers shall have no obligation under Section 12.2 or otherwise to indemnify Buyer with respect to the Losses caused by such breach; if such actions partially cure the breach, Sellers shall continue to have an obligation under Section 12.2 to indemnify Buyer with respect to the remaining portion of the Losses caused by such breach. ARTICLE 13. TERMINATION 13.1. TERMINATION BY THE PARTIES. This Agreement may be terminated at any time prior to the Closing by: 13.1.1. the mutual consent of Sellers and Buyer; 13.1.2. Sellers in accordance with, and subject to, the terms and conditions of Section 14.1; and 13.1.3. Buyer if any loss or damage at a Station described in Section 9.3 shall not have been cured within the sixty (60) day period described in Section 9.3. -51- 13.1.4. Buyer if the closing of the Heritage Agreement with respect to the Stations shall not have occurred on or prior to July 16, 1998. 13.2. AUTOMATIC TERMINATION. This Agreement shall automatically terminate without further action by the parties upon the termination of the Heritage Agreement in accordance with its terms. 13.3. EFFECT OF TERMINATION. 13.3.1. In the event this Agreement is terminated as provided in Sections 13.1.1, 13.1.3, 13.1.4 and 13.2, Buyer shall receive the immediate return of the Letter of Credit, this Agreement shall be deemed null, void and of no further force or effect, and the parties hereto shall be released from all future obligations hereunder; provided, however, that the obligations of Buyer and Sellers set forth in Sections 6.3 and 7.1 (which relate to confidentiality), and Section 15.3 (which relates to payment of certain expenses), shall survive such termination and the parties hereto shall have any and all remedies to enforce such obligations provided at law or in equity or otherwise (including, without limitation, specific performance). 13.3.2. In the event this Agreement is terminated as provided in Section 13.1.2, this Agreement shall be deemed null, void and of no further force or effect, and the parties hereto shall be released from all future obligations hereunder; provided, however, that the obligations of Buyer and Sellers set forth in Sections 6.3 and 7.1 (which relate to confidentiality), Article 14 (which relates to remedies and the Letter of Credit) and Section 15.3 (which relates to payment of certain expenses), shall survive such termination and the parties hereto shall have any and all remedies to enforce such obligations provided at law or in equity or otherwise (including, without limitation, specific performance). ARTICLE 14. REMEDIES 14.1. DEFAULT BY BUYER. If Buyer shall default in the performance of its obligations under this Agreement in any material respect and such default is not cured within thirty (30) days after notice thereof (it being understood that Buyer shall have no right to such thirty (30) day cure period with respect to a payment default under Section 2.5), and provided that Sellers shall not then be in material default in the performance of -52- their obligations hereunder, Sellers shall be entitled, by written notice to Buyer, to terminate this Agreement, and as the sole and exclusive remedy of Sellers under this Agreement, to receive the Deposit by drawing on the Letter of Credit in accordance with the terms of the Deposit Escrow Agreement and the Letter of Credit (without set-off, deduction or counterclaim) as liquidated damages, and upon such payment Buyer shall be discharged from all further liability under this Agreement. 14.2. LIQUIDATED DAMAGES. Sellers and Buyer have provided for the amount of the Deposit to be liquidated damages as a remedy for Sellers after having considered carefully the anticipated and actual harms and losses that would be incurred if Buyer defaults and thus fails to perform its obligations to consummate the transactions contemplated hereunder, the difficulty of ascertaining at this time the actual amount of damages, special and general, that Sellers will suffer in such event, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy in such event. 14.3. SPECIFIC PERFORMANCE. Sellers acknowledge that the Assets to be sold and delivered to Buyer pursuant to this Agreement are unique and that Buyer has no adequate remedy at law if Sellers shall fail to perform any of their obligations hereunder, and Sellers therefore confirm and agree that Buyer's right to specific performance is essential to protect the rights and interests of Buyer. Accordingly, in addition to any other remedies which Buyer may have hereunder or at law or in equity or otherwise, Sellers hereby agree that Buyer shall have the right to have all obligations, undertakings, agreements and other provisions of this Agreement specifically performed by Sellers and that Buyer shall have the right to obtain an order or decree of such specific performance in any of the courts of the United States or of any state or other political subdivision thereof. ARTICLE 15. GENERAL PROVISIONS 15.1. ADDITIONAL ACTIONS, DOCUMENTS AND INFORMATION. Buyer agrees that it will, at any time, prior to, at or after the Transfer Date, take or cause to be taken such further actions, and execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments and obtain such consents, as may be reasonably requested by Sellers in -53- connection with the consummation of the purchase and sale contemplated by this Agreement. Sellers agree that they will, at any time, prior to, at or after the Transfer Date, take or cause to be taken such further actions, and execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments and obtain such consents, as may be reasonably requested by Buyer in connection with the consummation of the purchase and sale contemplated by this Agreement. 15.2. BROKERS. Each Seller represents to Buyer that such Seller has not engaged, or incurred any unpaid liability (for any brokerage fees, finders' fees, commissions or otherwise) to, any broker, finder or agent in connection with the transactions contemplated by this Agreement; except for Salomon Smith Barney (whose fee is the sole responsibility of Buyer), Buyer represents to Sellers that Buyer has not engaged, or incurred any unpaid liability (for any brokerage fees, finders' fees, commissions or otherwise) to, any broker, finder or agent in connection with the transactions contemplated by this Agreement; and Seller agrees to indemnify Buyer, and Buyer agrees to indemnify Sellers, against any claims asserted against the other party for any such fees or commissions by any person purporting to act or to have acted for or on behalf of the indemnifying party. Notwithstanding any other provision of this Agreement, this representation and warranty shall survive the Transfer Date without limitation and shall not be subject to the Basket Amount contained in Section 12.4. 15.3. EXPENSES AND TAXES. Each party hereto shall pay its own expenses incurred in connection with this Agreement and in the preparation for and consummation of the transactions provided for herein. Notwithstanding the foregoing, Buyer, on the one hand, and Sellers, on the other hand, shall each pay one-half of (a) all sales (including, without limitation, bulk sales), use, documentary, stamp, gross receipts, registration, transfer, conveyance, excise, recording, license and other similar Taxes and fees ("Transfer Taxes") applicable to, imposed upon or arising out of the sale by Sellers and the purchase by Buyer of the Assets whether now in effect or hereinafter adopted and regardless of which party such Transfer Tax is imposed upon (except for any Taxes incurred by Sellers from any gain realized on the sale of the Assets hereunder, which Taxes shall be the sole responsibility of Sellers), (b) any FCC filing fees incurred in connection with the assignment of the FCC Licenses to Buyer, (c) any fees and expenses incurred in connection with any HSR Filings, and (d) the fees and expenses of Geraghty & Miller for the environmental site assessments performed on the Real Property as disclosed on Schedule 3.16. -54- 15.4. NOTICES. All notices, demands, requests, or other communications which may be or are required to be given or made by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by first-class registered or certified mail, return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by telegram, telex, or facsimile transmission addressed as follows: If to Buyer: STC Broadcasting, Inc. 3839 4th Street North Suite 420 St. Petersburg, Florida 33703 Attn: David Fitz Fax: (813) 821-8092 with copies (which shall not constitute notice) to: Hogan & Hartson L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004 Attn: William S. Reyner, Jr., Esq. Fax: (202) 637-5910 and to: Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, Texas 75201 Attn: Lawrence D. Stuart, Jr. Fax: (214) 740-7355 If to any Seller: Sinclair Broadcast Group, Inc. 2000 W. 41st Street Baltimore, Maryland 21211 Attn: David D. Smith, President Fax: (410) 467-5043 with copies (which shall not constitute notice) to: -55- Thomas & Libowitz, P.A. 100 Light Street, Suite 1100 Baltimore, Maryland 21202 Attn: Steven A. Thomas, Esq. Fax: (410) 752-2046 and to: Sinclair Communications, Inc. 2000 W. 41st Street Baltimore, Maryland 21211 Attn: General Counsel Fax: (410) 662-4707 or such other address as the addressee may indicate by written notice to the other parties. Each notice, demand, request, or communication which shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of messenger or (with respect to a telex) the answerback being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 15.5. WAIVER. No delay or failure on the part of any party hereto in exercising any right, power or privilege under this Agreement or under any other instrument or document given in connection with or pursuant to this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified therein. 15.6. BENEFIT AND ASSIGNMENT. 15.6.1. No Seller shall assign this Agreement, in whole or in part, whether by operation of law or otherwise, without the prior written consent of Buyer and any purported assignment contrary to the terms hereof shall be null, -56- void and of no force and effect. The Buyer shall not assign this Agreement, in whole or in part, whether by operation of law or otherwise, without the prior written consent of Sellers and any purported assignment contrary to the terms hereof shall be null, void and of no force and effect; provided, however, Buyer shall be entitled, without the consent of Sellers, to assign Buyer's rights and interests hereunder (in whole or in part as to any Station) (a) prior to the Transfer Date, to any Person that directly or indirectly is in control of, or is controlled by, or is under common control with Buyer; further provided, however, that Buyer gives Seller written notice thereof and such assignee shall be responsible for all representations, covenants and agreements of Buyer hereunder as if such assignee was a party hereto, and that any such assignment shall not relieve Buyer of any of its Liabilities hereunder; and (b) from and after the Transfer Date, to any Person. 15.6.2. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns as permitted hereunder. No Person, other than the parties hereto and their respective successors and assigns as permitted hereunder, is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto or their respective successors and assigns as permitted hereunder. 15.7. ENTIRE AGREEMENT; AMENDMENT. This Agreement, including the Schedules and Exhibits hereto and the other instruments and documents referred to herein or delivered pursuant hereto, contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, commitments or understandings with respect to such matters. No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by each of the parties hereto. 15.8. SEVERABILITY. If any part of any provision of this Agreement or any other contract, agreement, document or writing given pursuant to or in connection with this Agreement shall be invalid or unenforceable under applicable law, such part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts of such provisions or the remaining provisions of said contract, agreement, document or writing. -57- 15.9. HEADINGS. The headings of the sections and subsections contained in this Agreement are inserted for convenience only and do not form a part or affect the meaning, construction or scope thereof. 15.10. GOVERNING LAW. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed under and in accordance with the laws of the State of New York, excluding the choice of law rules thereof. 15.11. SIGNATURE IN COUNTERPARTS. This Agreement may be executed in separate counterparts, none of which need contain the signatures of all parties, each of which shall be deemed to be an original, and all of which taken together constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than the number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. -58- IN WITNESS WHEREOF, each of the parties hereto has executed this Asset Purchase Agreement, or has caused this Asset Purchase Agreement to be duly executed and delivered in its name on its behalf, all as of the day and year first above written. STC BROADCASTING OF VERMONT, INC. By:______________________________________ Name: David A. Fitz Title: Chief Financial Officer TUSCALOOSA BROADCASTING, INC. By:______________________________________ Name: David B. Amy Title: Treasurer and Secretary WPTZ LICENSEE, INC. By:______________________________________ Name: David B. Amy Title: Treasurer and Secretary WNNE LICENSEE, INC. By:______________________________________ Name: David B. Amy Title: Treasurer and Secretary ANNEX I DEFINITIONS "ACCOUNTING FIRM" shall have the meaning set forth in Section 2.6.2. "ACCOUNTS RECEIVABLE" means all cash accounts receivable with respect to the Stations as of the end of the broadcast day immediately preceding the Transfer Date. "ADDITIONAL AGREEMENTS" shall have the meaning set forth in Section 6.1.6(a). "AFFILIATE" shall mean, with respect to any Person, any other Person that, (a) directly or indirectly is in control of, is controlled by, or is under common control with, the first Person, (b) is an officer, director, trustee, partner (general or limited), employee or holder of five percent (5%) or more of any class of any voting or non-voting securities or other equity in the first Person, (c) is an officer, director, trustee, partner (general or limited), employee or holder of five percent (5%) or more of any class of the voting or non-voting securities or other equity in any Person which directly or indirectly is in control of, is controlled by, or is under common control with, the first Person, and (d) any Family of any individual included in (a), (b) or (c). For purposes of this definition, "control" (including with correlative meanings "controlled by" and "under common control with") shall mean possession, directly or indirectly, of either (X) five percent (5%) or more of the voting power of the securities having ordinary voting power for the election of directors of the first Person, or (Y) the power to direct or cause the direction of the management or policies of the first Person (whether through ownership of securities, partnership interests or any other ownership or debt interests, by contract or otherwise). "AGREEMENT" shall have the meaning set forth in the Preamble. "APPLICANT" shall have the meaning set forth in Section 4.5.2. "ASSETS" shall have the meaning set forth in Section 2.1. "ASSIGNMENT OF CONTRACTS AND LEASES" means that certain Assignment of Contracts and Leases, dated as of the Transfer Date and executed by Sellers, substantially in the form attached hereto as Exhibit C. "ASSIGNMENT OF FCC LICENSES" means that certain Assignment of FCC Licenses, dated as of the Closing Date and executed by Sellers, substantially in the form attached hereto as Exhibit B. "ASSUMED LIABILITIES" mean the Liabilities assumed by Buyer pursuant to Section 2.8. "ASSUMPTION AGREEMENT" means that certain Assumption Agreement, dated the Transfer Date and executed by Buyer and Sellers, substantially in the form attached hereto as Exhibit D. "BALANCE SHEET" shall have the meaning set forth in Section 3.5.1. "BASE PURCHASE PRICE" shall have the meaning set forth in Section 2.4. "BASKET AMOUNT" shall have the meaning set forth in Section 12.4.2. "BENEFIT ARRANGEMENT" means any benefit arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Plan, including, without limitation, employment agreements, executive compensation arrangements, incentive programs or arrangements, sick leave, vacation pay, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock option or purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, perquisite, company cars, any plans subject to Code Section 125, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. "BENEFIT PLANS" shall have the meaning set forth in Section 3.14.1. "BILL OF SALE" means that certain Bill of Sale and Assignment of Assets, dated as of the Transfer Date and executed by Sellers, substantially in the form attached hereto as Exhibit A. "BUYER DOCUMENTS" shall mean, collectively, this Agreement, the Deposit Escrow Agreement, the Assumption Agreement and the TBA Agreement. "BUYER'S PLAN" shall have the meaning set forth in Section 8.4.5. "CLOSING" shall have the meaning set forth in Section 11.1.1. "CLOSING DATE" shall have the meaning set forth in Section 11.1.1. "CODE" means the Internal Revenue Code of 1986, as amended, and all Laws promulgated pursuant thereto or in connection therewith. ANNEX I-2 "COMMUNICATIONS ACT" means the Communications Act of 1934, as amended. "CURRENT BALANCE SHEET DATE" shall have the meaning set forth in Section 3.5.2. "DEFERRED CONTRACT" shall have the meaning set forth in Section 6.2.10(b). "DEPOSIT" shall have the meaning set forth in Section 2.3. "DEPOSIT ESCROW AGENT" means George Mason Bank. "DEPOSIT ESCROW AGREEMENT" means that certain Escrow Agreement dated as of the date hereof by and among Buyer, Sellers and the Deposit Escrow Agent. "DESIGNATED PROPERTIES" shall have the meaning set forth in Section 6.2.10(b). "DMA" means the designated market area for a particular television or radio station as determined by the A.C. Nielsen Co. "ENCUMBRANCES" mean any mortgages, pledges, liens, security interests, defects in title, easements, rights-of-way, encumbrances, restrictions and any other matters affecting title. "ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, ("CERCLA") as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. ss. 9601 et seq.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss. 2601 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 9601 et seq.; the Clean Water Act ("CWA"), 33 U.S.C. ss. 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss. 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. ss. 7401 et seq.; or any other applicable federal, state, or local laws relating to Hazardous Materials generation, production, use, storage, treatment, transportation or disposal, or the protection of the environment from Hazardous Materials "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and all Laws promulgated pursuant thereto or in connection therewith. ANNEX I-3 "ERISA AFFILIATE" means any person that, together with any Seller Party, would be or was prior to March 17, 1997 treated as a single employer under Section 414 of the Code or Section 4001 of ERISA. "EXCLUDED ASSETS" shall have the meaning set forth in Section 2.2. "FAMILY" of an individual includes (a) the individual, (b) the individual's spouse and former spouses and any other natural person who resides with such individual, (c) any other natural person who is related to the individual or any person described in the preceding clause (b) within the second degree. "FCC" means the Federal Communications Commission. "FCC APPLICATIONS" shall have the meaning set forth in Section 5.1. "FCC LICENSES" shall have the meaning set forth in Section 2.1.1. "FCC ORDER" means an order or orders of the FCC, or of the Chief, Mass Media Bureau of the FCC, acting under delegated authority, consenting to the assignment to Buyer of the FCC Licenses for the Stations. "FINAL PRORATION AMOUNT" shall have the meaning set forth in Section 2.6.2. "GOVERNMENTAL AUTHORITY" means any agency, board, bureau, court, commission, department, instrumentality or administration of the United States government, any foreign government, any state government or any local or other governmental body in a state, territory or possession of the United States or the District of Columbia. "HART-SCOTT-RODINO" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and all Laws promulgated pursuant thereto or in connection therewith. "HAZARDOUS MATERIALS" means any wastes, substances, or materials (whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants, or contaminants, including without limitation, substances defined as "hazardous wastes," "hazardous substances," "toxic substances," "radioactive materials," or other similar designations in, or otherwise subject to regulation under, any Environmental Laws. "HERITAGE SUBSIDIARIES" shall have the meaning set forth in the Recitals. ANNEX I-4 "HERITAGE AGREEMENT" shall have the meaning set forth in the Recitals. "HMSI" shall have the meaning set forth in the Recitals. "HSR FILING" shall have the meaning set forth in Section 5.2. "INDEMNITY CAP" shall have the meaning set forth in Section 12.4.2. "INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the respective meanings set forth in Section 12.5.1. "INTELLECTUAL PROPERTY" shall have the meaning set forth in Section 2.1.4. "LAWS" means any federal, state or local law, foreign law, statute, code, ordinance, regulation, order, writ, injunction, judgment or decree applicable to the specified Person and to the businesses and assets thereof. "LEASED PROPERTY" shall have the meaning set forth in Section 2.1.2(b). "LETTER OF CREDIT" shall have the meaning set forth in Section 2.3. "LIABILITIES" shall mean, as to any Person, all debts, adverse claims, liabilities and obligations, direct, indirect, absolute or contingent of such Person, whether accrued, vested or otherwise, whether in contract, tort, strict liability or otherwise and whether or not actually reflected, or required by generally accepted accounting principles to be reflected, in such Person's balance sheets or other books and records. "LICENSE ASSETS" shall mean the FCC Licenses and the other Assets described on Schedule I hereto. "LMA" means any time brokerage agreement, local marketing arrangement, joint sales agreement, joint operating agreement, limited management agreement or other similar agreement or contract. "LOSSES" means any and all demands, claims, complaints, actions or causes of action, suits, proceedings, investigations, arbitrations, assessments, losses, damages, liabilities, obligations (including those arising out of any action, such as any settlement or compromise thereof or judgment or award therein) and any costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements. ANNEX I-5 "MATERIAL ADVERSE EFFECT" means a material adverse effect on the business, assets or financial condition of the Stations taken as a whole, except for any such material adverse effect resulting from (a) general economic conditions applicable to the television broadcast industry, (b) general conditions in the markets in which the Stations operate, (c) circumstances that are not likely to recur and either have been substantially remedied or can be substantially remedied without substantial cost or delay, or (d) the refusal by Buyer to consent to any new Program Contract. "MULTIEMPLOYER PLAN" means any Plan described in Section 3(37) of ERISA. "NETWORK AGREEMENT" shall have the meaning set forth in Section 2.1.8. "NON-LICENSE ASSETS" shall mean the Assets, other than the License Assets. "NON-LICENSE TRANSFER" shall have the meaning set forth in Section 11.2.1. "NON-LICENSE TRANSFER DATE" shall have the meaning set forth in Section 11.2.1. "OPERATING CONTRACTS" shall have the meaning set forth in Section 2.1.9. "ORDINARY COURSE OF BUSINESS" means the ordinary course of business of the Stations consistent with past practices of the Heritage Subsidiaries both with respect to type and amount; any actions taken pursuant to the requirements of law or contracts existing on the date hereof shall be deemed to be action in the Ordinary Course of Business. "OUTSIDE DATE" shall have the meaning set forth in Section 11.2.1. "PERMITTED ENCUMBRANCES" means (a) Encumbrances of a landlord, or other statutory lien not yet due and payable, or a landlord's liens arising in the Ordinary Course of Business, (b) Encumbrances arising in connection with equipment or maintenance financing or leasing under the terms of the Station Contracts set forth on the Schedules which have been made available to Buyer, (c) Encumbrances arising pursuant to the terms of leases on Real Property or Leased Property as set forth on Schedule 2.1.1 and Schedule 2.1.9 which are subject to any lease or sublease to a third party, (d) Encumbrances for Taxes not yet due and payable or which are being contested in good faith and by appropriate ANNEX I-6 proceedings if adequate reserves with respect thereto are maintained on Seller's books in accordance with generally accepted accounting principles, (e) Encumbrances that do not materially detract from the value of any of the Assets or materially interfere with the use thereof as currently used, or (f) those Encumbrances on Schedule 3.8. "PERSON" shall mean any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization, other form of business or legal entity or Governmental Authority. "PLAN" means any plan, program or arrangement, whether or not written, that is or was an "employee benefit plan" as such term is defined in Section 3(3) of ERISA and (a) which was or is established or maintained by any Seller Party or any ERISA Affiliate for the benefit of any current or former employees of the Stations; (b) to which any Seller Party contributed or was obligated to contribute or to fund or provide benefits or had any liability (whether actual or contingent) with respect to any of its assets or otherwise for the benefit of any current or former employees of the Stations; or (c) which provides or promises benefits to any person who performs or who has performed services for the Stations and because of those services is or has been (i) a participant therein or (ii) entitled to benefits thereunder. "PROGRAM CONTRACTS" shall have the meaning set forth in Section 2.1.5. "PRORATION AMOUNT" shall have the meaning set forth in Section 2.6.1. "PRORATION ITEMS" shall mean any power and utility charges, business and license fees (including retroactive adjustments thereof), sales and service charges, commissions, special assessments, and rental payments and personal and real estate Taxes and assessments with respect to the Real Property, taxes (except for Taxes arising from the transfer of the Assets hereunder), deposits, Trade-out Agreements, accrued vacation, unused sick leave and other similar prepaid and deferred items and any other operating expenses incurred in the Ordinary Course of Business (except with respect to Program Contracts, only those payments due and payable during the month in which the Transfer Date occurs shall be prorated). The parties acknowledge and agree that there shall be excluded from Proration Items the following: (a) severance pay relating to any employee of any Seller who shall have been terminated prior to the Transfer Date, and (b) any Liabilities not being assumed by Buyer in accordance with Section 2.8. "PURCHASE PRICE" shall have the meaning set forth in Section 2.4. ANNEX I-7 "QUALIFIED PLAN" means a Plan that satisfies, or is intended by any Seller Party to satisfy, the requirements for tax qualification described in Section 401 of the Code including, without limitation, any Plan that was terminated on or after July 1, 1989, as to which any Seller Party may have any actual or contingent liability. "REAL PROPERTY" shall have the meaning set forth in Section 2.1.2(a). "RESTRICTED CONTRACTS" shall have the meaning set forth in Section 6.2.10(a). "SCHEDULES" shall mean the disclosure schedules delivered by Seller to Buyer in connection herewith. "SELLER DOCUMENTS" shall mean, collectively, this Agreement, the Deposit Escrow Agreement, the Assignment of Contracts and Leases, the Bill of Sale, the Assignment of FCC Licenses, the Assumption Agreement and the TBA Agreement. "SELLER PARTIES" shall mean, collectively, Sellers, HMC and the Heritage Subsidiaries. "SELLER TAX RETURNS" means all federal, state, local, foreign and other applicable Tax returns, declarations of estimated Tax reports required to be filed by any Seller or any of the Heritage Subsidiaries in connection with the business and operations of the Stations (without regard to extensions of time permitted by law or otherwise). "SELLERS' PLAN" shall have the meaning set forth in Section 8.4.5. "STATION" and "STATIONS" shall have the meaning set forth in the Recitals. "STATION CONTRACTS" shall have the meaning set forth in Section 2.1.9. "STC" shall have the meaning set forth in the Recitals. "TAXES" means all federal, state and local taxes (including, without limitation, income, profit, franchise, sales, use, real property, personal property, ad valorem, excise, employment, social security and wage withholding taxes) and installments of estimated taxes, assessments, deficiencies, levies, imports, duties, license fees, registration fees, withholdings, or other similar charges of every kind, character or description imposed by any Governmental Authorities. ANNEX I-8 "TBA AGREEMENT" shall have the meaning set forth in Section 8.9. "THIRD PARTY SALE" shall have the meaning set forth in Section 11.1.3. "TIME SALES AGREEMENTS" shall have the meaning set forth in Section 2.1.7. "TRADE-OUT AGREEMENTS" shall have the meaning set forth in Section 2.1.6. "TRANSFER DATE" shall mean the earlier of the Non-License Transfer Date or the Closing Date. "TRANSFER TAXES" shall have the meaning set forth in Section 15.3. "TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section 8.4.1. "TRANSMISSION DEFECT" shall have the meaning set forth in Section 9.2. "TRUSTEE" shall have the meaning set forth in the Recitals. "WELFARE PLAN" means an "employee welfare benefit plan" as such term is defined in Section 3(1) of ERISA. "WFFF" shall have the meaning set forth in the Recitals. "WNNE" shall have the meaning set forth in the Recitals. "WPTZ" shall have the meaning set forth in the Recitals. ANNEX I-9 EXHIBIT E TIME BROKERAGE AGREEMENT This TIME BROKERAGE AGREEMENT (this "Agreement") is entered into as of the ___ day of ________, 1998, by and among TUSCALOOSA BROADCASTING, INC., a Maryland corporation ("Tuscaloosa"), WPTZ LICENSEE, INC., a Maryland corporation ("WPTZ Licensee") and WNNE LICENSEE, INC., a Maryland corporation ("WNNE Licensee") (Tuscaloosa, WPTZ Licensee and WNNE Licensee, collectively, "Owner"), and STC BROADCASTING OF VERMONT, INC., a Delaware corporation ("Programmer"). RECITALS: WHEREAS, Owner is the licensee, pursuant to authorizations issued by the Federal Communications Commission ("FCC"), of television broadcast station WPTZ-TV, Channel 5, North Pole, New York ("WPTZ") and television broadcast station WNNE-TV, Channel 31, Hartford, Vermont ("WNNE"), licensed to WPTZ Licensee and WNNE Licensee, respectively; WHEREAS, Owner is the programmer of television broadcast station WFFF-TV, Channel 44, Burlington, Vermont ("WFFF") (WPTZ, WNNE and WFFF, individually, a "Station" and collectively, the "Stations"); WHEREAS, Programmer and Owner entered into an Asset Purchase Agreement dated February 3, 1998 (the "Asset Purchase Agreement") pursuant to which Owner has agreed to sell and Programmer has agreed to acquire substantially all of the assets (the "Assets"), including (without limitation) the FCC licenses held by Owner in connection with its ownership and operation of the Stations; WHEREAS, Programmer is experienced in broadcast ownership and operation; WHEREAS, during the terms of this Agreement, Owner wishes to retain Programmer to provide programming and related services for the Stations, all in conformity with Station policies and procedures, FCC rules and policies for time brokerage arrangements, and the provisions hereof, WHEREAS, Programmer agrees to use the Stations to broadcast such programming of its selection that is in conformity with all rules, regulations and policies of the FCC, subject to Owner's full authority to manage and control the operation of the Stations; WHEREAS, Programmer and Owner agree to cooperate to make this Agreement work to the benefit of the public and both parties and as contemplated by the terms set forth herein; and WHEREAS, all capitalized terms used herein but not otherwise defined have the meaning ascribed to such terms in the Asset Purchase Agreement. AGREEMENT: NOW, THEREFORE, in consideration of the above recitals, and mutual promises and covenants contained herein, the parties intending to be legally bound, agree as follows: SECTION 1 USE OF STATION AIR TIME. 1.1 Scope. During the term of this Agreement, Owner shall make available to Programmer broadcast time on the Stations as set forth in this Agreement. Programmer shall deliver such programming, at its expense, to the Stations' transmitters or other authorized remote control points designated by Owner. Programmer shall provide such programming of Programmer's selection complete with commercial matter, news, public service announcements and other suitable programming to the Stations for at least one hundred and sixty-six (166) hours 2 per week. Except as otherwise provided in this Agreement, Owner agrees to broadcast such programming in its entirety, including commercials at the times specified, on the facilities of the Stations without interruption, deletion, or addition of any kind. Owner may use such time as Owner may require up to two (2) hours per week, for the broadcast of its own regularly-scheduled news, public affairs, and other nonentertainment programming on the Stations, to be scheduled at mutually agreeable times. Owner may elect to set aside additional air time (up to two (2) hours per week) (the "Additional Time") to be scheduled at a mutually agreeable time, for the broadcast of specific non-entertainment programming on issues of importance to the local community. Owner shall provide Programmer with as much notice as possible, but in no event less than three (3) weeks' notice, of its intention to set aside such Additional Time. All program time not reserved by or designated for Owner shall be available for use by Programmer. Owner agrees that Programmer may sell, or engage a third party to sell, commercial time during the programming provided by Programmer to the Stations for Programmer's account. 1.2 Term. This Agreement shall commence on the date of the Non-License Transfer as contemplated in the Asset Purchase Agreement (the "Effective Date"), and end on the Closing Date (the "Term"), unless terminated earlier pursuant to any of the provisions of Section 5 hereof. SECTION 2 STATION OPERATIONS. 2.1 Owner Control Over Station Operations. (a) Owner shall retain full authority, power and control over the management and operations of the Stations during the Term, including specifically, control over the personnel, programming and finances of the Stations. 3 (b) Subject to Owner's full authority, power and control over the management and operations of the Stations, Programmer agrees to provide programming and related services to the Stations. Such related services shall include: (i) the sale of advertising time on the Stations; (ii) coordination of traffic and billing functions; (iii) maintenance, repair and replacement of the Stations' transmitting or studio equipment and the other Assets, and (iv) other administrative or operational functions as Owner and Programmer may agree to, consistent with FCC rules and regulations relating to time brokerage agreements. Programmer shall provide and perform Programmer's obligations hereunder, including all related services, diligently and in a manner consistent with broadcast industry practices. (c) Owner shall employ at WPTZ's main studio location, at Owner's expense, a Station Manager and a staff level employee, who will direct the day-to-day operations of the Stations, and who will report to and be accountable to Owner. Such employees shall be paid reasonable compensation commensurate with their job responsibilities, as mutually agreed to by Owner and Programmer. (d) When on the Owner's premises, all employees of Programmer used to provide Programmer's programming or other services to the Stations shall be subject to the overall supervision of Owner's management personnel. 2.2 Station Expenses. During the Term, Programmer shall be responsible for and shall reimburse Owner within fifteen (15) days following receipt of a request for reimbursement by Owner for any direct out-of-pocket costs incurred by Owner as necessary to preserve and maintain the FCC Licenses and other Assets of the Stations then owned by Owner (including the expenses of Owner as a result of Section 2.1(c) above). 2.3 Consideration. As consideration for the air time made available hereunder and the 4 other agreements of the parties made hereunder, Programmer agrees to pay Owner the payments set forth in Attachment 2.3 hereto. Notwithstanding any provision of this Agreement to the contrary, in the event of a preemption by Owner of Programmer's programming under Sections 1.1 (with respect to the Additional Time only), 3.2, 4.1 or 4.2 of this Agreement, the Monthly Payment as defined in Attachment 2.3 shall be reduced by an amount equal to (a) the amount of the Monthly Payment multiplied by (b) a fraction the numerator of which is the number of minutes of Programmer's programming preempted by Owner during such month and the denominator of which is one hundred sixty-six (166). SECTION 3 STATION PUBLIC INTEREST OBLIGATIONS. 3.1 Owner Authority. Owner shall be responsible for the Stations' compliance with all applicable provisions of the Communications Act of 1934, as amended (the "Act"), the rules, regulations and policies of the FCC and all other applicable laws. Programmer shall cooperate with Owner, at Programmer's expense, in taking such actions as Owner may reasonably request to assist Owner in maintaining the Stations' compliance with the Act, rules, regulations and policies of the FCC and all other applicable laws. Notwithstanding any other provision of this Agreement, Programmer recognizes that Owner has certain obligations to operate the Stations in the public interest, and to broadcast programming to meet the needs and interests of the Stations' communities of license and service area. From time to time Owner shall air, or if Owner requests, Programmer shall air, programming on issues of importance to the local community. Nothing in this Agreement shall abrogate or limit the unrestricted authority of Owner to discharge Owner's obligations to the public and to comply with the Act and the rules, regulations and policies of the FCC, and Owner shall have no liability or obligation to Programmer, for 5 taking any action that Owner deems necessary or appropriate to discharge such obligations or comply with such laws, rules, regulations or policies. 3.2 Additional Owner Obligations. Although both Owner and Programmer shall cooperate in the broadcast of emergency information over the Stations, Owner shall retain the right, without any liability or obligation to Programmer, to interrupt Programmer's programming in case of an emergency or for programming which, in the good faith judgment of Owner, is of greater local or national public importance. In all such cases, Owner shall use Owner's commercially reasonable efforts to provide Programmer notice of Owner's intention to interrupt Programmer's programming. Owner shall coordinate with Programmer each Station's hourly station identification and any other announcements required to be aired by FCC rules or regulations. Owner shall (a) continue to maintain and staff a main studio in compliance with the rules of the FCC, (b) maintain each Station's local public inspection file within each Station's community of license, and (c) prepare and place in such inspection file in a timely manner all material required by Section 73.3526 of the FCC's Rules, including without limitation each Station's quarterly issues and program lists and FCC Form 398. Programmer shall, upon request by Owner, promptly provide Owner with such information concerning Programmer's programs and advertising as is necessary to assist Owner in the preparation of such information or to enable Owner to verify independently the Stations' compliance with any other laws, rules, regulations or policies applicable to the Stations' operation. Owner shall also maintain the station logs, receive and respond to telephone inquiries, and control and oversee any remote control point for the Stations. 6 SECTION 4 STATION PROGRAMMING & OPERATIONAL POLICIES. 4.1 Broadcast Station Programming Policy Statement. Owner has adopted a Broadcast Station Programming Policy Statement (the "Policy Statement"), a copy of which appears as Attachment 4.1 hereto and which may be amended from time to time in order to comply with the rules and regulations of the FCC by Owner upon written notice to Programmer. Programmer agrees and covenants to comply in all material respects with the Policy Statement, with all rules and regulations of the FCC, and with all changes subsequently made by Owner or the FCC. Programmer shall furnish or cause to be furnished the artistic personnel and material for the programs as provided by this Agreement and all programs shall be prepared and presented in conformity with the rules, regulations and policies of the FCC and with the Policy Statement. All advertising spots and promotional material or announcements shall comply with all applicable federal, state and local regulations and policies and the Policy Statement, and shall be produced in accordance with quality standards established by Programmer. If Owner determines that a program, commercial announcement or promotional material supplied by Programmer is for any reason, in Owner's reasonable discretion, unsatisfactory or unsuitable or contrary to the public interest, or does not comply with the Policy Statement Owner may, upon written notice to Programmer (to the extent time permits such notice), and without any liability or obligation to Programmer suspend or cancel such program, commercial announcement or promotional material and substitute its own programming or, if Owner requests, Programmer shall provide promptly suitable programming, commercial announcement or other announcement or promotional material. 4.2 Owner Control of Station Programming. Notwithstanding any contrary provision contained in this Agreement, and consistent with Owner's obligations pursuant to the Act and the 7 rules and regulations of the FCC, Owner shall have the right, without any liability or obligation to Programmer to delete any material contained in any programming or commercial matter furnished by Programmer for broadcast over the Stations that Owner determines is unsuitable for broadcast or the broadcast of which Owner believes would be contrary to the public interest. Owner shall have the right, without any liability or obligation to Programmer to broadcast Owner's own programming in place of such deleted material. 4.3 [INTENTIONALLY OMITTED]. 4.4 Political Advertising. Owner shall oversee and shall take ultimate responsibility for the Stations' compliance with the political broadcasting rules of the FCC and Sections 312 and 315 of the Act, including but not limited to, the provision of equal opportunities, compliance with lowest unit charge requirements, and the provision of reasonable access to federal political candidates. Programmer shall cooperate with Owner, at Programmer's expense, to assist Owner in complying with the political broadcasting rules of the FCC. Programmer shall supply such information promptly to Owner as may be necessary to comply with the lowest unit charge and other applicable political broadcast requirements of federal law. To the extent that Owner deems necessary or appropriate, Programmer shall release advertising availabilities to Owner to permit Owner to comply with the political broadcasting rules of the FCC and Sections 312 and 315 of the Act. Programmer shall be entitled to all revenues received by Owner for such advertising. 4.5 Advertising of Credit Terms. To the extent prohibited by the rules of the Federal Trade Commission, no advertising of credit terms shall be made over broadcast material supplied hereunder by Programmer beyond mention of the fact that credit terms are available. 4.6 Payola/Plugola. In order to enable Owner to fulfill Owner's obligations under Section 317 of the Act, Programmer, in compliance with Section 507 of the Act, will, in advance 8 of any scheduled broadcast by the Stations, disclose to Owner any information of which Programmer has knowledge or which has been disclosed to Programmer as to any money, service, or other valuable consideration that any person has paid or accepted, or has agreed to pay or to accept, for the inclusion of any matter as a part of the programming or commercial matter to be supplied to Owner pursuant to this Agreement. Programmer will cooperate with Owner, at Programmer's expense, as necessary to ensure compliance with this provision. Commercial matter with obvious sponsorship identifications shall not require disclosure in addition to that contained in the commercial copy. 4.7 Programmer Compliance with Copyright Act. Programmer represents and warrants that Programmer will have full authority to broadcast the programming on the Stations; that Programmer shall not broadcast any material in violation of the Copyright Act; and the performing rights to all music contained in broadcast material supplied hereunder by Programmer are licensed by BMI, ASCAP, or SESAC, are in the public domain, are controlled by Programmer, or are cleared at the source by Programmer. SECTION 5 TERMINATION. 5.1 Termination by Programmer. Unless terminated pursuant to the provisions of Section 1.2, this Agreement may be terminated by Programmer by written notice to Owner, if Programmer is not then in material default or breach hereof, upon the occurrence of either of the following: (a) five (5) days following the date of termination of the Asset Purchase Agreement; or (b) Owner is in material breach of Owner's representations or Owner's material obligations hereunder or under the Asset Purchase Agreement and has failed to cure 9 such breach within thirty (30) days of notice from Programmer. 5.2 Termination by Owner. Unless terminated pursuant to the provisions of Section 1.2, this Agreement may be terminated by Owner by written notice to Programmer, if Owner is not then in material default or breach hereof, upon the occurrence of any of the following: (a) five (5) days following the date of termination of the Asset Purchase Agreement; or (b) Programmer is in material breach of Programmer's representations or Programmer's material obligations hereunder or under the Asset Purchase Agreement and has failed to cure such breach within thirty (30) days of notice from Owner. 5.3 Termination. If not otherwise earlier terminated, this Agreement will terminate, upon the first to occur of any of the following: (a) this Agreement is declared invalid or illegal in whole or substantial part by an order or decree of an administrative agency or court of competent jurisdiction and such order or decree has become final and no longer subject to further administrative or judicial review, unless as a result of actions taken by Programmer in violation of the terms hereof; (b) there has been a material change in FCC rules or policies that would cause this Agreement to be in violation thereof and such change is in effect and not the subject of an appeal or further administrative review, provided that in such event the parties shall first negotiate in good faith and attempt to agree on an amendment to this Agreement that will provide the parties with a valid, binding and enforceable agreement that conforms to the new FCC rules, policies or precedent; or (c) the mutual, written consent of both parties. 5.4 Severability. The parties hereto intend that the transactions contemplated 10 hereunder comply in all respects with the Act and all applicable rules, regulations, and policies of the FCC. If any provision of this Agreement shall be declared void, illegal, or invalid by any governmental authority with jurisdiction thereof, the remainder of this Agreement shall remain in full force and effect without such offending provision so long as such remainder substantially reflects the original agreement of the parties hereunder. Furthermore, in such event, the parties shall use their commercially reasonable efforts to reach agreement promptly on lawful substitute provisions in place of said offending provision so as to effectuate more closely their intent as expressed hereunder. If any governmental authority grants to any other entity or individual rights which are not contained in this Agreement, then the parties shall use their commercially reasonable efforts to amend this Agreement to provide the parties hereto such lawful provisions which comport with any rules, regulations and policies adopted after the date of this Agreement. 5.5 Force Majeure. Any failure or impairment of the Assets or any delay or interruption in the broadcast of programs, or failure at any time to furnish facilities, in whole or in part, for broadcast, due to Acts of God, restrictions by any governmental authority, civil riot, floods or any other similar cause not reasonably within the control of Owner, shall not constitute a breach of this Agreement and Owner will not be liable to Programmer for any liability or obligation with respect thereto. 5.6 Insurance; Risk of Loss. (a) From the date hereof through the end of the Term, Owner shall maintain with reputable insurance companies reasonably acceptable to Programmer, commercially reasonable amounts of insurance as is conventionally carried by broadcasters operating television stations in the area comparable to those of the Stations, including replacement cost insurance and general liability insurance, with respect to the Assets and shall cause Programmer to be named as 11 an additional insured on Owner's policies. The risk of any loss, damage, impairment, confiscation, or condemnation of any equipment or other personal property owned and used by Owner in the business and operations of the Stations ("Risk of Loss") shall be borne by Owner at all times throughout the Term, to the extent of, but solely to the extent of, Owner's receipt of insurance proceeds in respect thereof and in no event shall Owner have any liability or obligation to Programmer in respect of any such loss, damage, impairment, confiscation or condemnation. The Risk of Loss beyond that specifically borne by the Owner in accordance with the immediately preceding sentence shall be borne by Programmer. Owner shall use such proceeds of insurance to repair or replace any such equipment or such other personal property of Owner to the extent of such proceeds. At Owner's request and subject to Owner's supervision and direction, Programmer shall effect in a timely fashion any repairs to or replacement of any of Owner's damaged equipment or property. (b) From the date hereof through the end of the Term, Programmer shall maintain with reputable insurance companies reasonably acceptable to Owner, insurance in such amounts and with respect to such risks, as reasonably requested by Owner, including broadcast liability insurance, naming Owner as an additional insured, and general comprehensive insurance, also naming Owner as an additional insured, each with a commercially reasonable amount of coverage as is conventionally carried by broadcasters operating television stations in the area comparable to those of the Stations. The risk of any loss, damage, impairment, confiscation, or condemnation of any equipment or other personal property owned or leased and used by Programmer in the performance of its obligations hereunder shall be borne by Programmer at all times throughout the Term. 12 SECTION 6 INDEMNIFICATION. 6.1 Indemnification by Programmer. Programmer shall indemnify and hold harmless Owner from and against any and all claims, losses, costs, liabilities, damages, expenses, including any FCC fines or forfeitures (including reasonable legal fees and other expenses incidental thereto), of every kind, nature and description (collectively "Damages") arising or resulting from or relating to (a) Programmer's breach of any representation, covenant, agreement or other obligation of Programmer contained in this Agreement, (b) any action taken by Programmer or Programmer's employees and agents with respect to the Stations, or any failure by Programmer or Programmer's employees and agents to take any action with respect to the Stations, including, without limitation, Damages relating to violations of the Act, or any rule, regulation or policy of the FCC, slander, defamation or other claims relating to programming provided by Programmer or Programmer's broadcast and sale of advertising time on the Stations, or (c) the business or operations of the Stations by Programmer (except where Damages are caused by Owner's negligence, recklessness, willful misconduct, or a breach of Owner's representations or obligations under this Agreement or the Asset Purchase Agreement) from and after the date of this Agreement. 6.2 Indemnification by Owner. Owner shall indemnify and hold harmless Programmer from and against any and all Damages arising or resulting from or relating to (a) Owner's breach of any representation, covenant, agreement or other obligation of Owner contained in this Agreement, (b) any action taken by Owner or Owner's employees and agents with respect to the Stations, or any failure by Owner or Owner's employees and agents to take any action with respect to the Stations, including, without limitation, Damages relating to violations of the Act, or any rule, regulation or policy of the FCC, slander, defamation or other 13 claims relating to programming provided by Owner or Owner's broadcast and sale of advertising time on the Stations, or (c) the business or operations of the Stations by Owner (except where Damages are caused by Programmer's negligence, recklessness, willful misconduct, or a breach of Programmer's representations or obligations under this Agreement or the Asset Purchase Agreement) from and after the date of this Agreement. 6.3 Indemnification Procedure. Neither Owner nor Programmer shall be entitled to indemnification pursuant to this Section 6.3 unless (a) such claim for indemnification is asserted in writing delivered to the other party, together with a statement as to the factual basis for the claim and the amount of the claim and (b) such claim, in the aggregate with all other claims made by such party under this Agreement and the Asset Purchase Agreement, exceeds Five Hundred Thousand Dollars ($500,000), and then only to the extent of the excess over the amount of Two Hundred Fifty Thousand Dollars ($250,000); provided, however, that the aggregate dollar amount of claims under this Agreement and the Asset Purchase Agreement shall not exceed Four Million Dollars ($4,000,000). The party making the claim (the "Claimant") shall make available to the other party (the "Indemnitor") the information relied upon by the Claimant to substantiate the claim. The Indemnitor under this Section 6.3 shall have the right to conduct and control through counsel of such Indemnitor's own choosing the defense of any third party claim, action or suit (and the Claimant shall cooperate fully with the Indemnitor), but the Claimant may, at its election, participate in the defense of any such claim, action or suit at its sole cost and expense; provided that, if the Indemnitor shall fail to defend any such claim, action or suit, then the Claimant may defend through counsel of its own choosing such claim, action or suit, and (so long as it gives the Indemnitor at least fifteen (15) days' notice of the terms of the proposed settlement thereof and permits the Indemnitor to then undertake the defense thereof) settle such 14 claim, action or suit, and to recover from the Indemnitor the amount of such settlement or of any judgment and the costs and expenses of such defense. The Indemnitor shall not compromise or settle any third party claim, action or suit without the prior written consent of the Claimant, which consent will not be unreasonably withheld or delayed. 6.4 Arbitration. To the fullest extent not prohibited by law, any controversy, claim or dispute arising out of or relating to this Agreement, including the determination of the scope or applicability of this Agreement to arbitrate, shall be settled by final and binding arbitration in accordance with the rules then in effect of the American Arbitration Association ("AAA"), as modified or supplemented under this section, and subject to the Federal Arbitration Act, 9 U.S.C. ss.ss. 1-16. The decision of the arbitrators shall be final and binding provided that, where a remedy for breach is prescribed hereunder or limitations on remedies are prescribed, the arbitrators shall be bound by such restrictions, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. If any series of claims arising out of the same or related transactions shall involve claims which are arbitrable under the preceding paragraph and claims which are not, the arbitrable claims shall first be finally determined before suit may be instituted upon the others and the parties will take such action as may be necessary to toll any statutes of limitations, or defenses based upon the passage of time, that are applicable to such nonarbitrable claims during the period in which the arbitrable claims are being determined. In the event of any controversy, claim or dispute that is subject to arbitration under this Section 6.4, any party thereto may commence arbitration hereunder by delivering notice to the other party or parties thereto; provided, in advance of the commencement of any arbitration each of the parties agrees to participate in a non-binding mediation effort (not to exceed thirty (30) days) in an attempt to resolve such 15 controversy, claim or dispute. The arbitration panel shall consist of three (3) arbitrators, appointed in accordance with the procedures set forth in this paragraph. Within ten (10) business days of delivery of the notice of commencement of arbitration referred to above, Owner, on the one hand, and Programmer, on the other hand, shall each appoint one arbitrator, and the two arbitrators so appointed shall within ten (10) business days of their appointment mutually agree upon and appoint one additional arbitrator (or, if such arbitrators cannot agree on an additional arbitrator, the additional arbitrator shall be appointed by the AAA as provided under its rules); provided, that persons eligible to be selected as arbitrators shall be limited to attorneys at law who (a) are on the AAA's Large, Complex Case Panel, (b) have practiced law for at least fifteen (15) years as an attorney specializing in either general commercial litigation or general corporate and commercial matters, and (c) are experienced in matters involving the broadcasting industry. The arbitration hearing shall be held in Washington, D.C. and shall commence no later than thirty (30) business days after the completion of the selection of the arbitrators. Consistent with the intent of the parties hereto that the arbitration be conducted as expeditiously as possible, the parties agree that (a) discovery shall be limited to the production of such documents and the taking of such depositions as the arbitrators determine are reasonably necessary to the resolution of the controversy, claim or dispute and (b) the arbitrators shall limit the presentation of evidence by each side in such arbitration to not more than ten (10) full days' (equivalent thereof) or such shorter period as the arbitrators shall determine to be necessary in order to resolve the controversy, claim or dispute. The arbitrators shall be instructed to render a decision within ten (10) business days of the close of the arbitration hearing. If arbitration has not been completed within ninety (90) days of the commencement of such arbitration, any party to the arbitration may initiate litigation upon ten (10) days' written notice to the other party(ies); provided, however, 16 that if one party has requested the other to participate in an arbitration and the other has failed to participate, the requesting party may initiate litigation before the expiration of such ninety-day period; and provided further, that if any party to the arbitration fails to meet any of the time limits set forth in this Section 6.4 or set by the arbitrators in the arbitration, any other party may provide ten (10) days' written notice of its intent to institute litigation with respect to the controversy, claim or dispute without the need to continue or complete the arbitration and without awaiting the expiration of such ninety-day period. The parties hereto further agree that if any of the rules of the AAA are contrary to or in conflict with any of the time periods provided for hereunder, or with any other aspect of the matters set forth in this Section 6.4, that such rules shall be modified in respects necessary to accord with the provisions of this Section 6.4 (and the arbitrators shall be so instructed by the parties). The arbitrators shall base their decision on the terms of this Agreement and applicable law and judicial precedent in the State of New York, and shall render their decision in writing and include in such decision a statement of the finding of fact and conclusions of law upon which the decision is based. Each party agrees to cooperate fully with the arbitrator(s) to resolve any controversy, claim, or dispute. The arbitrators shall not be empowered to award punitive damages or damages in excess of actual damages. 6.5 Damages: Specific Performance. (a) In the event of a material breach by Owner of Owner's obligations hereunder, Programmer shall be entitled to seek monetary damages against Owner. The parties recognize, however, that given the unique nature of the Stations and this Agreement, monetary damages alone will not be adequate to compensate Programmer for any injury resulting from Owner's breach. Programmer shall therefore be entitled, as an alternative to the right to seek and collect 17 monetary damages, to obtain specific performance of the terms of this Agreement. (b) In the event of a material breach by Programmer of its obligations hereunder, Owner shall be entitled to seek monetary damages against Programmer. SECTION 7 REPRESENTATIONS, WARRANTIES, AND COVENANTS. 7.1 Representations, Warranties, and Covenants of Owner. Owner represents, warrants, and covenants that: (a) Owner is legally qualified, empowered, and authorized to enter into this Agreement, and that the execution, delivery and performance hereof shall not constitute a breach or violation of any agreement, contract or other obligation to which Owner is subject or by which Owner is bound. (b) Owner is now, and for so long as this Agreement shall be in effect, will be the holder of the FCC Licenses necessary for the operation of WPTZ and WNNE as then being operated. (c) Owner does not know of any current or prospective governmental investigation having a material adverse effect on the Stations, their properties or business. (d) As of this date, Owner does not know of any facts which would cause the Commission to refuse to renew the FCC Licenses. (e) Owner shall not take any action or omit to take any action which would have a materially adverse impact upon Owner, the Assets, the Stations or upon Owner's ability to perform this Agreement. (f) This Agreement constitutes the legal, valid and binding obligation of Owner, enforceable in accordance with its terms, except to the extent that the enforcement 18 thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, or similar law affecting creditors' rights and remedies generally, and (ii) general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). 7.2 Representations, Warranties and Covenants of Programmer. Programmer represents, warrants, and covenants that: (a) Programmer is legally qualified, empowered, and authorized to enter into this Agreement, and that the execution, delivery and performance hereof shall not constitute a breach or violation of any agreement, contract or other obligation to which Programmer is subject or by which Programmer is bound. (b) This Agreement constitutes the legal, valid and binding obligation of Programmer, enforceable in accordance with its terms, except to the extent that the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganizations, moratorium or similar laws affecting creditors' rights and remedies generally, and (ii) general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). SECTION 8: MISCELLANEOUS. 8.1 Assignment. This Agreement shall not be assigned by any party hereto without the prior written consent of the other party, which consent shall not be unreasonably withheld, except that Programmer may assign its rights and interests hereunder to any reputable broadcasting entity provided, that (a) Programmer gives Owner written notice of any such assignment; (b) such assignment shall not relieve Programmer of any of its obligations or liabilities hereunder; and (c) such assignment would not violate any applicable laws, rules, regulations or policies of any applicable governmental authority. It is understood and agreed that 19 nothing herein shall be deemed to expand the rights granted hereunder to any permitted assignee, which rights shall be in combination with, and not in addition to, the rights of Programmer. This Agreement shall be binding on the parties' respective heirs and permitted assigns. 8.2 Entire Agreement; Amendments. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and, except for the Asset Purchase Agreement, and documents delivered pursuant thereto, supersedes any and all prior agreements, broadcasting commitments, or any other understandings between Programmer and Owner with respect to such subject matter. No provision of this Agreement shall be changed or modified, nor shall this Agreement be discharged in whole or in part, except by an agreement in writing signed by the party against whom the change, modification, or discharge is claimed or sought to be enforced, nor shall any waiver of any of the conditions or provisions of this Agreement be effective and binding unless such waiver shall be in writing and signed by the party against whom the waiver is asserted, and no waiver of any provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision. 8.3 Further Assurances. Owner and Programmer shall use commercially reasonable efforts in the performance and fulfillment of the terms and conditions of this Agreement in effectuating the intent of such parties as expressed under this Agreement. From time to time, without further consideration, Owner and Programmer shall execute and deliver such other documents and take such other actions as either party hereto reasonably may request to effectuate such intent. 8.4 Counterparts. This Agreement may be signed in any number of counterparts with the same effect as if the signatures to each such counterpart were upon the same instrument. 20 8.5 Notices. All notices, demands and other communications which may or are required to be given hereunder or with respect hereto shall be in writing, shall be delivered personally or sent by nationally recognized overnight delivery service, charges prepaid, or by registered or certified mail, return-receipt requested, or by facsimile transmission, and shall be deemed to have been given or made when personally delivered, the next business day after delivery to such overnight delivery service, when receipt is confirmed by facsimile transmission, five (5) days after deposited in the mail, first class postage prepaid, addressed as follows: (a) If the notice is to Programmer: STC Broadcasting, Inc. 3839 4th Street North Suite 420 St. Petersburg, Florida 33703 Attn: David Fitz Fax: (813) 821-8092 with copies (which shall not constitute notice) to: Hogan & Hartson L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004 Attn: William S. Reyner, Jr., Esq. Fax: (202) 637-5910 and to: Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, Texas 75201 Attn: Lawrence D. Stuart, Jr. Fax: (214) 740-7355 or to such other address as Programmer may from time to time designate. 21 (b) If to Owner: Sinclair Broadcast Group, Inc. 2000 W. 41st Street Baltimore, Maryland 21211 Attn: David D. Smith, President Fax: (410) 467-5043 with copies (which shall not constitute notice) to: Thomas & Libowitz, P.A. 100 Light Street, Suite 1100 Baltimore, Maryland 21202 Attn: Steven A. Thomas, Esq. Fax: (410) 752-2046 and to: Sinclair Communications, Inc. 2000 West 41st Street Baltimore, Maryland 21211 Attn: General Counsel Fax: (410) 662-4707 or to such other address as Owner may from time to time designate. 8.6 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard to its choice of law rules. 8.7 Taxes. Owner and Programmer shall each pay its own ad valorem taxes, if any, which may be assessed on such party's personal property for the periods that such items are owned by such party. 8.8 No Joint Venture or Partnership. Programmer shall act as an independent contractor in rendering its services hereunder. Neither party shall have any power or authority to act for or on behalf of the other or to bind the other in any manner whatsoever, except as and to the extent expressly provided for in this Agreement. The parties hereto agree that nothing herein shall constitute a joint venture or partnership between them. 22 8.9 Headings. The headings in this Agreement are for convenience only and will not affect or control the meaning or construction of the provisions of this Agreement. 23 IN WITNESS WHEREOF, the parties hereto have executed this Time Brokerage Agreement as of the date first above written. PROGRAMMER: STC BROADCASTING OF VERMONT, INC. By: ------------------------------ Name: ---------------------------- Title: --------------------------- OWNER: TUSCALOOSA BROADCASTING, INC. By: ------------------------------ Name: ---------------------------- Title: --------------------------- WPTZ LICENSEE, INC. By: ------------------------------ Name: ---------------------------- Title: --------------------------- WNNE LICENSEE, INC. By: ------------------------------ Name: ---------------------------- Title: --------------------------- 24 ATTACHMENT 2.3 MONTHLY FEE During the first nine (9) months of this Agreement, Programmer shall pay to Owner a monthly fee equal to Thirteen Thousand Three Hundred Dollars ($13,300) plus the salaries of the two employees retained by Owner. If the Closing under the Asset Purchase Agreement has not occurred within nine (9) months of the date of this Agreement, the monthly fee from and after such date shall increase to Twenty Thousand Dollars ($20,000) plus the salaries of the two employees retained by Owner; provided, however, the monthly fee shall not increase if the reason that the Closing has not occurred by such nine (9) month date is because of a breach or default by Owner under the Asset Purchase Agreement. 25 ATTACHMENT 4.1 BROADCAST STATION PROGRAMMING POLICY STATEMENT I. No Plugola or Payola. Except for commercial messages aired in compliance with 47 C.F.R. ss.73.1212, Programmer shall not receive any consideration in money, goods, services, or otherwise, directly or indirectly (including to relatives) from any persons or company for the presentation of any programming over the Stations without reporting the same to Owner's Station Manager. The commercial mention of any business activity or "plug" for any commercial, professional, or other related endeavor, except where contained in an actual commercial message of a sponsor, is prohibited. II. No Lotteries. Announcements giving any information about lotteries or games prohibited by applicable federal or state law or regulation are prohibited. III. Election Procedures. At least fifteen (15) days before the start of any primary or election campaign, Programmer will clear with Owner's Station Manager the rates Programmer will charge for the time to be sold for use by qualified candidates for the public office and/or their supporters to make certain that the rates charged are in conformance with applicable law and the Stations' policies. IV. Required Announcements. Programmer shall broadcast (i) an announcement in a form satisfactory to Owner at the beginning of 26 each hour to identify the Stations and (ii) any other announcements that may be required by law or regulation. V. No Illegal Announcements. No announcements or promotion prohibited by applicable federal, state law or regulation shall be made over the Stations. Any game, contest, or promotion relating to or to be presented over the Stations must be fully stated and explained in advance to Owner, which reserves the right in its sole discretion to reject any game, contest, or promotion. VI. Owner Discretion Paramount. In accordance with the Owner's responsibility under the Communications Act of 1934, as amended, and the Rules and Regulations of the Federal Communications Commission, Owner reserves the right to reject or terminate any advertising proposed to be presented or being presented over the Stations which is in conflict with established policies of the Stations or which in Owner's or its Station Manager's reasonable judgment would be contrary to the public interest. Owner may waive any of the foregoing regulations in specific instances, if, in its opinion, the Stations will remain in compliance with all applicable laws, rules, regulations and policies and broadcasting in the public interest is served. In any case where questions of policy or interpretation arise, Programmer should submit the same to Owner for decision before making any commitments in connection therewith. 27 EX-10.64 10 EXHIBIT 10.64 STOCK PURCHASE AGREEMENT BY AND BETWEEN SINCLAIR COMMUNICATIONS, INC. AND THE STOCKHOLDERS OF LAKELAND GROUP TELEVISION, INC. TABLE OF CONTENTS 1. DEFINITIONS ...............................................................1 2. SALE OF SHARES ............................................................2 3. PURCHASE PRICE ............................................................2 3.1 Payment ..........................................................2 4. CLOSING ...................................................................3 5. REPRESENTATIONS AND WARRANTIES OF SELLERS .................................3 5.1. Representations as to Shares, Etc. .............................3 5.2. Representations and Warranties as to the Company ...............4 a. Organization and Good Standing ..........................4 b. Capitalization ..........................................4 c. No Conflicts ............................................5 d. Real Property ...........................................5 e. Personal Property .......................................6 f. Financial Statements ....................................6 g. FCC .....................................................8 h. Intellectual Property ...................................9 i. Employee Benefit Plans ..................................9 j. Labor ..................................................11 k. Insurance ..............................................12 l. Material Contracts ....................................12 m. Compliance with Laws ...................................13 n. Litigation .............................................13 o. No Brokers .............................................13 p. Consents ...............................................13 q. Environmental ..........................................13 r. Tax Matters ............................................14 s. Dividends ..............................................16 t. Accounts Receivable ....................................17 i 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER ..............................17 6.1. Organization and Good Standing ................................17 6.2. Execution and Effect of Agreement .............................17 6.3. No Conflicts ..................................................17 6.4. Consents ......................................................18 6.5. Litigation ....................................................18 6.6. No Brokers ....................................................18 6.7. Funds Available ...............................................18 6.8. Purchaser Qualifications ......................................18 7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES ........19 7.1. Limitation; Survival ..........................................19 7.2. Schedules and Exhibits ........................................19 7.3. Non-Employee Sellers ..........................................19 8. TAX MATTERS ..............................................................19 8.1. Section 338 Election ..........................................19 8.2 Apportionment ..................................................20 8.2 Apportionment ..................................................20 8.3 Cooperation in Tax Matters .....................................20 8.4 Certain Taxes ..................................................20 8.6. Certain Withheld Amounts ......................................20 9. ADDITIONAL COVENANTS AND UNDERTAKINGS ....................................22 9.1. Further Assurances and Assistance .............................22 9.2. Access to Information .........................................22 9.3. Conduct of Business Prior to Closing ..........................22 9.4. H-S-R Act .....................................................25 9.5. FCC Application ...............................................25 9.6. Books and Records .............................................26 9.7. Contractual Obligations .......................................26 9.8. Control of Stations ...........................................26 9.9. Assumption of Brokerage Amounts ...............................27 9.10. Interruption of Broadcast Transmission. ......................27 ii 10. INDEMNIFICATION .........................................................28 10.1. Indemnification of Purchaser by Sellers ....................28 10.2. Indemnification of Sellers by Purchaser ....................29 10.3. Limitations and Other Provisions Regarding Indemnification Obligations ................................................29 10.4. Notice of Claim /Defense of Action .........................30 10.5 Tax Contests ...............................................31 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE .............32 11.1. Conditions Precedent to the Obligation of Purchaser ........32 11.2. Conditions Precedent to the Obligation of Sellers ..........34 12. DELIVERIES AT THE CLOSING ...............................................35 12.1. Deliveries by Sellers ......................................35 12.2. Deliveries by Purchaser ....................................36 13. EXPENSES ................................................................36 14. TERMINATION .............................................................37 14.1 Termination ................................................37 14.2 Procedure and Effect of Termination ........................37 15. NOTICES .................................................................38 16. SELLERS' AGENT ..........................................................40 16.1. Sellers' Agent .............................................40 17. MISCELLANEOUS ...........................................................41 17.1. Headings ...................................................41 17.2. Schedules and Exhibits .....................................41 17.3. Execution in Counterparts ..................................41 17.4. Entire Agreement ...........................................41 17.5. Governing Law ..............................................41 17.6. Modification ...............................................41 17.7. Successors and Assigns .....................................42 17.8. Waiver .....................................................42 17.9. Severability ...............................................42 iii 17.10. Announcements ..............................................42 17.11. Specific Performance .......................................43 17.12 Bulk Transfers .............................................43 17.13 Third Party Beneficiaries ..................................43 17.14 Interpretation .............................................43 ANNEX 1 -- Definitions ANNEX 2 -- Sellers EXHIBITS A - Deposit Escrow Agreement B - Indemnification Escrow Agreement C - Form of Opinion D - Form of Opinion SCHEDULES 5.1 Encumbrances on Stock 5.2c Conflicts Regarding Sellers or the Company 5.2d Leases of Real Property 5.2e Exceptions to Title to Personal Property 5.2f Financial Statements 5.2g FCC Licenses 5.2h Intellectual Property 5.2i Company Plans and Benefit Arrangements 5.2k Insurance Policies 5.2l Material Contracts 5.2m Exceptions to Compliance with Laws 5.2n Litigation Involving the Company 5.2p Consents Required for Sellers or the Company 5.2q Environmental Notices or Claims 5.2r(i) Exceptions to Certain Tax Representations 5.2r(ii) Tax Matters (Statement as to Basis, etc.) iv 5.2t Exceptions Regarding Accounts Receivable 6.3 Conflicts Regarding Purchaser 6.4 Consents Required for Purchaser 6.5 Litigation Involving Purchaser 9.3c Pre-Closing Sales, etc. of Company Property 9.3j Pre-Closing Changes to Compensation, etc. 9.9 Engagement Letter with Dain Bosworth Incorporated 11.1(i) Form of Statement by the Company under FIRPTA v STOCK PURCHASE AGREEMENT ------------------------ THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of this 14th day of November, 1997, is entered into by and among Sinclair Communications, Inc., a Maryland corporation ("Purchaser"), and each person who has executed this Agreement (each a "Seller" and collectively, "Sellers"). WITNESSETH: ----------- WHEREAS, Sellers own issued and outstanding shares of capital stock (the "Stock") of Lakeland Group Television, Inc., a Minnesota corporation (the "Company"); and WHEREAS, the Company is the owner of the assets and operator of KLGT-TV, Channel 23, in the Minneapolis-Saint Paul, Minnesota market (the "Station"); and WHEREAS, the Company holds the licenses granted by the Federal Communications Commission (the "FCC") pursuant to which the Station is permitted to operate (the "FCC Licenses"); and WHEREAS, each Seller desires to sell to Purchaser, and Purchaser desires to purchase from such Seller, all of the issued and outstanding shares of Stock held by such Seller. NOW, THEREFORE, for the purpose of consummating the above transaction and in consideration of the promises and mutual covenants herein contained, Sellers and Purchaser hereby agree as follows: SECTION 1 DEFINITIONS ----------- As used in this Agreement, capitalized terms shall have the meanings specified in the text hereof or on Annex 1 hereto (which is incorporated herein by reference), which meanings shall be applicable to both the singular and plural forms of the terms defined. SECTION 2 SALE OF SHARES -------------- At the Closing, each Seller shall sell, assign, transfer and deliver to Purchaser, and Purchaser shall purchase from each Seller, that number and class of shares of Stock as is set forth opposite the name of such Seller in Annex 2 hereto. SECTION 3 PURCHASE PRICE -------------- 3.1 Payment. In consideration for the sale of the Stock, Purchaser shall pay to Sellers the aggregate amount of $50,000,000.00 (the "Purchase Price"), payable as follows: (1) One Million Five Hundred Thousand Dollars ($1,500,000.00) simultaneously with the execution and delivery of this Agreement, to be held in escrow by Richfield Bank & Trust Co. as Escrow Agent pursuant to the Escrow Agreement in the form of Exhibit A hereto (the "Deposit Escrow Agreement"). At the Closing, Purchaser and Sellers shall cause such $1,500,000.00 to be released to the Sellers' Agent (as hereinafter defined) and shall cause any interest or other additional amounts in such escrow to be released to Purchaser; (2) $1,000,000.00 at the Closing, to be held in Escrow (the "Indemnification Escrow") by First Union National Bank as Escrow Agent pursuant to the Indemnification Escrow Agreement in the form of Exhibit B hereto (the "Indemnification Escrow Agreement"); and (3) the balance of the Purchase Price at the Closing, by wire transfer of federal or other immediately available United States funds to the accounts specified by the Sellers' Agent no less than two (2) Business Days prior to the Closing. 2 SECTION 4 CLOSING ------- The closing of the transaction contemplated by this Agreement (the "Closing"), subject to fulfillment or waiver of the conditions set forth in Section 11 hereof, shall be held at the offices of Thomas & Libowitz, P.A., Suite 1100, 100 Light Street, Baltimore, Maryland 21202, at 10:00 A.M. local time (but shall be deemed to have occurred at the close of business on the immediately preceding day), on the later to occur of (a) five Business Days after all applicable waiting periods under the H-S-R Act shall have expired or terminated, or (b) five Business Days after the Final Order, unless (i) Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser shall give Sellers reasonable notice of the Closing, or (ii) the parties shall mutually agree upon a different date or location (the actual date of Closing being the "Closing Date"). SECTION 5 REPRESENTATIONS AND WARRANTIES OF SELLERS ----------------------------------------- 5.1. REPRESENTATIONS AS TO SHARES, ETC. a. Each Seller (severally and not jointly) hereby represents and warrants to Purchaser that: (i) such Seller holds of record and owns beneficially all of the shares of the Stock set forth opposite such Seller's name in Annex 2 hereto free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.1 hereof, all of which will be released at or before the Closing; (ii) upon transfer of the Stock set forth opposite such Seller's name in Annex 2 hereto to Purchaser at the Closing, Purchaser will have legal and equitable title to such Stock, free and clear of any lien, security interest, pledge or encumbrance (other than any created by or on behalf of Purchaser); (iii) such Seller has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of such Seller, and if such Seller is an entity that such entity is duly and validly organized, existing and in good standing in the jurisdiction of its formation; (iv) this Agreement has been duly executed and delivered by such Seller and constitutes a legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity, whether applied by a court of law or equity (collectively, the "Enforceability Limits"); (v) such Seller's shares of Stock are not subject 4 to any option(s), warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights (other than those reflected in Schedule 5.1 and that contemplated by Section 16 hereof); and (vi) neither the execution and delivery of this Agreement by such Seller nor the consummation of the transactions contemplated hereby by such Seller will (a) violate any of the provisions of any governing documents of such Seller if it is an entity, (b) violate any provision of applicable law, rule or regulation, which violation would prevent or interfere with such Seller's ability to perform its obligations hereunder, or (c) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which such Seller is a party or to which its property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with such Seller's ability to perform hereunder. b. Neither Seller nor anyone acting on behalf of such Seller, has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the sale of the Stock and the transactions contemplated by this Agreement other than the Company's engagement of Dain Bosworth Incorporated. 5.2. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY. Sellers, jointly and severally, hereby represent and warrant to Purchaser as to the Company as follows: a. ORGANIZATION AND GOOD STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of Minnesota and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. The Company is not required to be qualified as a foreign corporation in any other jurisdiction. The Company does not own any direct or indirect subsidiaries. b. CAPITALIZATION. The authorized capital stock of the Company consists of a single class of common stock having a par value of $.01 per share, of which 10,000,000 shares are authorized. The issued and outstanding shares thereof are as described on Annex 2. All the outstanding shares of the Stock have been validly issued and are fully paid and nonassessable and are held of record by the respective Sellers as set forth on Annex 2 hereto. Except as described on Annex 2, (i) no shares of capital stock of the Company are held in treasury, (ii) there are no other issued or outstanding equity securities of the Company, (iii) there are no outstanding stock appreciation rights, phantom stock rights, 4 profit participation rights, or other similar rights with respect to shares; (iv) there are no other issued or outstanding securities of the Company convertible or exchangeable at any time into equity securities of the Company; and (v) the Company is not subject to any commitment or obligation that would require the issuance or sale of additional shares of capital stock of the Company at any time under options, subscriptions, warrants, rights or any other obligations. The Company does not have any equity interest in any corporation, partnership, joint venture or other entity. c. NO CONFLICTS. Except as described on Schedule 5.2c, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of incorporation or by-laws of the Company, (ii) violate any provision of applicable law, rule and regulation, which violation would prevent or interfere with Sellers' ability to perform hereunder or have a Material Adverse Effect, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which the Company is a party or to which its property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with Sellers' ability to perform hereunder or have a Material Adverse Effect. d. REAL PROPERTY. The Company owns no real estate. All leaseholds and other interests in Real Property and all buildings, structures, towers and improvements thereon used in the business and operations of the Station are listed on Schedule 5.2d to this Agreement. The Sellers have delivered to the Purchaser correct and complete copies of the leases and subleases listed in Schedule 5.2d. With respect to each lease and sublease listed in Schedule 5.2.d (except as disclosed in such Schedule 5.2d): (i) the lease or sublease is legal, valid, binding, enforceable (subject to the Enforceability Limits), and in full force and effect in all material respects; (ii)no party to the lease or sublease is in material breach or default, and no event has occurred which, with notice or lapse of time, would constitute a material breach or default or permit termination, modification, or acceleration thereunder; 5 (iii) no party to the lease or sublease has repudiated any material provision thereof; (iv) there are no material disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; (v) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold; and (vi) all facilities leased or subleased thereunder have received all material approvals of governmental authorities (including material licenses and permits) required in connection with the operation thereof, and have been operated and maintained in accordance with applicable laws, rules, and regulations in all material respects . e. PERSONAL PROPERTY. Except as set forth on Schedule 5.2e hereto or on the Financial Statements, the Company has good and marketable (to the extent applicable under Minnesota law) title to all of its material items of tangible personal property and assets used or useful by the Company located on its premises or shown on the Financial Statement, and the Company owns such assets free and clear of all liens, security interests and encumbrances. The tangible personal property of the Company has been maintained in accordance with normal industry practice and is in good condition and repair (subject to normal wear and tear) and is adequate for its present use by the Company. f. FINANCIAL STATEMENTS. Schedule 5.2f includes copies of the Financial Statements. The Financial Statements have been prepared in accordance with GAAP, consistently applied with prior periods (except that the balance sheet of July 31, 1997, is not a year-end statement and is subject to year-end adjustments and the Financial Statements do not include the notes required by GAAP). The Financial Statements present fairly the financial position of the Company as at and for the periods indicated therein. Except as set forth on Schedule 5.2.f hereto, since July 31, 1997, there has not been any material adverse change in the business, financial condition, operations, or results of operations of the Company taken as a whole. Without limiting the generality of the foregoing, since that date: 6 (i) the Company has not sold, leased, transferred, or assigned any material assets, tangible or intangible, outside the ordinary course of business; (ii) the Company has not entered into any material agreement, contract, lease, or license outside the ordinary course of business; (iii) the Company has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which the Company is a party or by which the Company is bound; (iv) the Company has not imposed any security interest upon any of its assets, tangible or intangible; (v) the Company has not made any material capital expenditures outside the ordinary course of business; (vi) the Company has not made any material capital investment in, or any material loan to, any other Person outside the ordinary course of business; (vii) the Company has not created, incurred, assumed, or guaranteed more than $25,000.00 in aggregate indebtedness for borrowed money and capitalized lease obligations; (viii) the Company has not granted any license or sublicense of any material rights under or with respect to any Intellectual Property; (ix) there has been no change made or authorized in the articles or bylaws of the Company; (x) the Company has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; (xi) the Company has not declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; (xii) the Company has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; 7 (xiii) the Company has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees outside the ordinary course of business; (xiv) the Company has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; (xv) the Company has not granted any increase in the base compensation of any of its directors, officers, and employees outside the ordinary course of business; (xvi) the Company has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Employee Benefit Plan); (xvii) the Company has not made any other material change in employment terms for any of its directors, officers, and employees outside the ordinary course of business; (xviii) the Company has not made or changed any material Tax election or taken any other action with respect to Taxes not in the ordinary course of business and consistent with past practices; and (xix) the Company has not committed to do any of the foregoing. g. FCC. The Company and the Station are operated in material compliance with the terms of the FCC Licenses, the Communications Act of 1934, as amended, and applicable rules, regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC Licenses, a true and complete list of which is set forth on Schedule 5.2g, and true and complete copies of each of which have been delivered to Purchaser, are valid and in full force and effect. Except as set forth on Schedule 5.2g, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses and, to the Company's Knowledge, there is not now before the FCC any investigation or complaint against the Company or relating to the Station, the unfavorable resolution of which would impair the qualifications of the Company to hold any FCC Licenses. Except as set forth on Schedule 5.2g, there is no proceeding pending before the FCC, and the Company has received no notice of violation from the FCC with respect to the Station. Except as set forth on Schedule 5.2g, the Company has received no order or notice of violation issued by any governmental entity which permits revocation, adverse modification or termination of 8 any FCC License. Except as set forth on Schedule 5.2g, none of the FCC Licenses or other licenses is subject to any restriction or condition which requires any material change in the operation of the Station as currently operated. The FCC Licenses listed in Schedule 5.2g are currently in effect and, except as disclosed on the Schedules, are not subject to any liens, or other encumbrances. No license renewal applications are pending with respect to any of the FCC Licenses, but the Company must file an application for renewal of the FCC Licenses on or before December 1, 1997. As of the date hereof, the Company has received no notice or other information to the effect that the FCC would not renew the FCC Licenses in the ordinary course for a full license term without any adverse conditions, upon the timely filing of appropriate applications and payment of the required filing fee. As of the date hereof, the Company has received no notice or other information to the effect that the FCC would not grant the FCC Application in the ordinary course without any adverse conditions. All documents required by 47 C.F.R. Section 73.3526 to be kept in the Station's public inspection files are in such file, other than documents, the absence of which either individually or in the aggregate would not have a material adverse effect on the renewal of the FCC Licenses or the Company's ability to consummate the transactions contemplated by this Agreement, and such file will be maintained in proper order and complete up to and through the Closing Date, except for any such immaterial documents. h. INTELLECTUAL PROPERTY. Set forth on Schedule 5.2h is a complete list of all Intellectual Property owned by or licensed to the Company on the date hereof and, except as otherwise set forth on Schedule 5.2h hereto, the Company owns such Intellectual Property free and clear of any royalty, lien, encumbrance or charge and does not interfere with the rights of others. Except as set forth on Schedule 5.2h, the Company has not received any written notice or written claim that any such Intellectual Property is not valid or enforceable, or of any infringement upon or conflict with any patent, trademark, service mark, copyright or trade name of any third party by the Company. Except as set forth on Schedule 5.2h, the Company has not given any notice of infringement to any third party with respect to any of the Intellectual Property and to the Company's Knowledge no such infringement exists. i. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit Plans and Benefit Arrangements: (i) Schedule 5.2i completely and accurately lists all Company Plans and Company Benefit Arrangements and specifically identifies any that are Qualified Plans. Neither the Company nor any ERISA Affiliate has maintained or contributed to any Qualified Plans since October 18, 1991, other than the IDS Financial Services Inc. Defined Contribution Prototype Plan (the "401(k) Plan"). The 401(k) Plan is qualified in form and operation under Code Section 401(a) and has a currently applicable determination letter 9 from the Internal Revenue Service, and its trust is exempt under Code Section 501, and nothing has occurred with respect to the 401(k) Plan or such trust that could cause the loss of such qualification or exemption or the imposition of any material liability, lien, penalty, or tax under ERISA or the Code, other than the obligation to make contributions in accordance with the 401(k) Plan. (ii) Each Company Plan and each Company Benefit Arrangement has been maintained in accordance with its constituent documents and with all applicable provisions of the Code, ERISA and other domestic and foreign laws, including federal, state, and foreign securities laws and all laws respecting reporting and disclosure, in each case in all material respects. No Company Plan holds employer securities. (iii) The Company neither has nor has ever had any ERISA Affiliates. The Company has never sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV of ERISA, nor has the Company ever made or been obligated to make or reimbursed or been obligated to reimburse another employer for, contributions to any multi-employer plan (as defined in ERISA, Section 3(37)). The Company has no liability (whether actual, contingent or otherwise) with respect to any Benefit Plan or Benefit Arrangement that is not a Company Benefit Plan or Arrangement. (iv) No claims or lawsuits (other than routine benefit claims) have been asserted, instituted or, to the knowledge of the Company, threatened by, against, or relating to any Company Plan or Company Benefit Arrangement, and the Company does not have knowledge of any fact that could form the basis for any material liability of the Company in the event of any such claim or lawsuit. The Company has not received any notice that the Company Plans and Company Benefit Arrangements are presently under audit or examination (and has not received notice of a potential audit or examination by any governmental authority, or of any matters pending with respect to the 401(k) Plan under any governmental compliance programs). (v) No Company Plan or Company Benefit Arrangement contains any provision or is subject to any law that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions this Agreement contemplates, and, except as disclosed herein or in the Schedule 5.2i, the Company has not declared or paid any bonus or other incentive compensation or established any severance plan, program, or arrangement in contemplation of the transactions contemplated by this Agreement. (vi) With respect to each Company Plan, there have been no violations of 10 Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims would result in any material liability for the Company or any Person required to be indemnified by it. (vii) The Company has made all required contributions to the Company Plan as of the last day of each plan's most recent fiscal year, all benefits accrued under any unfunded Company Plan or Company Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with generally accepted accounting principles as of July 31, 1997; and all monies withheld from employee paychecks with respect to Company Plans have been transferred to the appropriate plan within the timing required by governmental regulations. (viii) The Company has complied in all material respects with the health continuation rules of Code Sections 4980B (and its predecessor) and with Code Section 5000. No employee or former employee of the Company nor dependent of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits subject to reporting under Statement of Financial Accounting Standards No. 106, other than as required by Code Section 4980B or other applicable law. (ix) There are no contracts, agreements, plans or arrangements covering any employee or former employee of the Company that, individually or collectively, could give rise to the payment of any amount (or portion thereof) that, under Code Sections 280G, 404 or 162(m) would not be deductible when paid. j. LABOR. With respect to employees of the Company: (i) The Company is and has been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and has not and is not engaged in any unfair labor practice. (ii) The employees of the Company are not and have never been represented by any labor union in connection with employment by the Company, and no collective bargaining agreement is binding and in force against, or currently being negotiated by, the Company. To the Company's knowledge, no labor representation organization effort currently exists nor has there been any such activity within the past three years. 11 (iii) All Persons classified by the Company as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and the Company has fully and accurately reported the Company's payments to them on IRS Forms 1099 when required to do so. (iv) Since December 31, 1996, no employee of the Company, or group of employees, the loss of whom would have significant adverse effect on the business of the Company, has notified the Company of his or their intent to (A) terminate his or their relationship with the Company, or (B) make any demand for material payments or modifications of his or their arrangements with the Company. (v) The Company has received no notice of any charge or compliance proceeding actually pending or threatened against the Company before the Equal Employment Opportunity Commission or any state, local, or foreign agency responsible for the prevention of unlawful employment practices. k. INSURANCE. Schedule 5.2k hereto contains a list of all insurance policies concerning the Business, other than employee-benefit related insurance policies. All such policies are in full force and effect, there are no existing breaches or defaults by the Company with respect to such policies, and no notice of cancellation or termination has been received by the Company. l. MATERIAL CONTRACTS. Schedule 5.2l hereto contains a list of all the Material Contracts and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts listed on Schedule 5.2l are legal, valid and binding obligations of the Company enforceable in accordance with their terms (subject to the Enforceability Limits) and in full force and effect. There exists no default by the Company or event which, with notice or lapse of time, or both, would constitute a default by the Company (or, to its knowledge) any other party to any such Material Contract or which would permit termination, modification or acceleration. Except as disclosed in Schedule 5.21, the Company has not received notice (or other knowledge) that any party to any Material Contract intends to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. 12 m. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2m, the Company is in compliance in all material respects with all applicable Federal, state and local laws, rules and regulations, and the Company has received no notice of any action threatened or pending alleging noncompliance therewith. n. LITIGATION. Except as set forth on Schedule 5.2n hereto, there is no suit, claim, action, proceeding or arbitration which seeks to enjoin or obtain damages in respect of the transactions contemplated hereby pending or, to the Company's Knowledge, threatened against (i) any of Sellers, or (ii) the Company. The Company has received no citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency against or affecting the Business or the Company, except as disclosed on Schedule 5.2n, and except for such FCC orders and other governmental orders, decrees and other actions which apply to the broadcasting industry generally. o. NO BROKERS. The Company has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the sale of the Stock and the transactions contemplated by this Agreement, other than the Company's engagement of Dain Bosworth Incorporated. p. CONSENTS. Except (i) as set forth on Schedule 5.2p hereto, (ii) for filings pursuant to the H-S-R Act, or (iii) for the application requesting the approval and consent of the FCC to the transaction contemplated by this Agreement (the "FCC Application"), no filing, consent, approval or authorization of any governmental authority or of any third party on the part of any Seller or the Company is required in connection with the execution and delivery of this Agreement by Sellers or the consummation by Sellers of any of the transactions contemplated hereby (including any consents required under any Company contract as a result of the change in control contemplated hereby). q. ENVIRONMENTAL. Except as set forth on Schedule 5.2q hereto: (i) The Company has not received any notice or claim alleging that the operations of the Company at or from any Real Property do not comply in all material respects with applicable Environmental Laws, or alleging that the Company has engaged in or permitted any operations or activities upon any of the Real Property for the purpose of or involving the treatment, storage, use, generation, release, discharge, emission, or disposal of any Hazardous Substances at the Real Property, except in substantial compliance with applicable Environmental Laws. 13 (ii) The Company has not received any notice or claim alleging that the Real Property is listed or, to the Company's Knowledge, proposed for listing on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification of sites requiring investigation or remediation maintained by any state or other governmental authority. The Company has not received any notice from any governmental entity or third party of any actual or threatened Environmental Liabilities with respect to the Real Property or the conduct of the Business. (iii) The Company has not received any notice or claim alleging that there are conditions existing at the Real Property that require, or which with the giving of notice or the passage of time or both would likely require remedial or corrective action, removal or closure pursuant to the Environmental Laws. (iv) The Company has not received any notice or claim alleging that the Company does not have all the material permits, authorizations, licenses, consents and approvals necessary for the current conduct of the Business and for the operations on, in or at the Real Property which are required under applicable Environmental Laws, or is not in substantial compliance with the terms and conditions of all such permits, authorizations, licenses, consents and approvals (v) The Company has not received any notice or claim alleging that there are Hazardous Substances present on or in the Real Property or at any geologically or hydrologically adjoining property, including any Hazardous Substances contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether movable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the Real Property or such adjoining property, or incorporated into any structure therein or thereon. The Company has not received any notice or claim alleging that the Company (or any other Person for whose conduct it is or may be held responsible) has permitted or conducted, or was aware of, any Hazardous Substances, or any illegal activity conducted with respect to the Real Property or any other properties or assets (whether real, personal, or mixed) the Company has or had an interest. r. TAX MATTERS. (i) Except as set forth on Schedule 5.2r(i) hereto: 14 (A) All Tax Returns required to be filed by the Company have been filed when due in a timely fashion and all such Tax Returns are true, correct and complete in all material respects. (B) The Company has paid in full on a timely basis all Taxes owed by it that were payable on or prior to the date hereof, whether or not shown on any Tax Return. (C) The amount of the Company's liability for unpaid Taxes did not, as of July 31, 1997, exceed the amount of the current liability accruals for such Taxes (excluding reserves for deferred Taxes) reflected on the Financial Statements. (D) The Company has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over (and complied in all material respects with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto) in connection with amounts paid to any employee, independent contractor, creditor or other third party. (E) The Company has received no notice of any Tax Proceeding currently pending with respect to the Company and the Company has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (F) No waiver or extension by the Company of any statute of limitations is currently in effect with respect to the assessment, collection or payment of Taxes of the Company or for which the Company is liable. (G) The Company has not requested any extension of the time within which to file any Tax Return of the Company that is currently in effect. (H) There are no liens on the assets of the Company relating or attributable to Taxes (except liens for Taxes not yet due). (I) The Company is not and has not been at any time during the preceding five years a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (J) The Company has not entered into an agreement or consent made under Section 341(f) of the Code affecting the Company. 15 (K) The Company has not agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. (L) The Company is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and the Company has not assumed the Tax liability of any other entity or person under contract. (M) The Company is not and has not at any time been a member of an affiliated group filing a consolidated federal income tax return and does not have any liability for the Taxes of another entity or person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise. (N) The Company is not a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (O) None of the Company's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (ii) Sellers have furnished or otherwise made available to Purchaser correct and complete copies of (A) all income, franchise and other material Tax Returns filed by the Company since January 1, 1994; and (B) all examination reports, statements of deficiencies and closing agreements received by the Company with respect to the Company relating to Taxes. (iii) Schedule 5.2r(iii) contains complete and accurate statements of (A) the Company's basis in its assets, (B) the amount of any net operating loss, net capital loss and any other Tax carryovers of the Company (including losses and other carryovers subject to any limitations), and (C) material Tax elections made by or with respect to the Company. Except as stated in Schedule 5.2r(iii), the Company has no net operating losses or other Tax attributes presently subject to limitation under Code Sections 382, 383 or 384, or the federal consolidated return regulations. s. DIVIDENDS. Since December 31, 1996, no dividends have been declared, paid, issued or otherwise approved by the Board of Directors of the Company in respect of the Stock. 16 t. ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are reflected on the Financial Statements or on the accounting records of the Company as of the date hereof (collectively, the "Accounts Receivable") represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. Except as stated in Schedule 5.2t, the Accounts Receivable are current and collectable, net of the reserves shown on the Financial Statements (which reserves are adequate and calculated consistent with past practice) or on the accounting records of the Company. There is no contest, claim, or right of setoff, other than returns in the ordinary course of business, under any contract with any obligor of an Accounts Receivable relating to the amount or validity of such Accounts Receivable. The Company's financial records include a complete and accurate list of all Accounts Receivable. SECTION 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER ------------------------------------------- Purchaser hereby represents and warrants to Sellers that: 6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland. Purchaser has full corporate power and authority to carry on its business as it is now being conducted. Purchaser is qualified (or Purchaser or its permitted assignee will be qualified as of the Closing Date) as a foreign corporation in the State of Minnesota. 6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate power and authority to enter into this Agreement. The consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). 6.3. NO CONFLICTS. Except as described on Schedule 6.3 hereof, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (a) 17 violate any of the provisions of the articles of incorporation or by-laws of Purchaser, (b) violate any provision of applicable law, rule or regulation, which violation would prevent or interfere with Purchaser's ability to perform hereunder, or (c) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Purchaser is a party or to which its property is subject, or constitute a default thereunder, except where such conflict, breach, right of termination, acceleration or default would not have a material adverse effect on the business or financial condition of Purchaser or prevent or materially interfere with Purchaser's ability to perform hereunder. 6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 hereto, (ii) for filings pursuant to the H-S-R Act, or (iii) for the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of Purchaser is required in connection with the execution and delivery of this Agreement by Purchaser or the consummation of any of the transactions contemplated hereby. 6.5. LITIGATION. Except as set forth on Schedule 6.5 hereto, there is no suit, claim, action, proceeding or arbitration pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks to enjoin or obtain damages in respect of the transactions contemplated hereby. 6.6. NO BROKERS. Except for Kepper, Tupper & Company (whose fees and expenses will be paid in full by Purchaser), neither Purchaser nor anyone acting on its behalf has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the purchase of the Stock and the transactions contemplated by this Agreement. 6.7. FUNDS AVAILABLE. Purchaser currently has (and on the Closing Date will have) sufficient funds to pay the Purchase Price, in full and in accordance with this Agreement, and Purchaser's obligations to purchase the Stock are not subject to any condition or contingency involving financing, availability of funds, or any similar matter. 6.8. PURCHASER QUALIFICATIONS. Purchaser is legally, financially and otherwise qualified to be the licensee of, acquire, own and operate the Station under the Communications Act, and the rules, regulations and policies of the FCC. Purchaser knows of no fact that would, under existing law and the existing rules, regulations, policies and procedures of the FCC (a) disqualify Purchaser as a transferee of the FCC Licenses or as the owner and operator of the Station, or (b) cause the FCC to fail to approve in a timely 18 fashion the FCC Application for any reason attributable to Purchaser. No waiver of any FCC rule or policy is necessary to be obtained for the grant of the FCC Application for the transfer of control over the FCC Licenses to Purchaser, nor will processing pursuant to any exception to a rule of general applicability be requested or required in connection with the consummation of the transactions contemplated hereby. SECTION 7 ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES -------------------------------------------------------------- 7.1. LIMITATION; SURVIVAL. The representations and warranties herein and the obligations of the parties shall survive the Closing Date for a period of one year, except to the extent any claims for indemnification in respect of a breach of any such representation or warranty is made on or before such date, in which case such representation or warranty shall survive until the resolution of such claim. 7.2. SCHEDULES AND EXHIBITS. Disclosure of any fact or item in this Agreement or in any Schedule, Annex or Exhibit hereto shall be deemed to have been disclosed in all other Schedules or Exhibits requiring such disclosure and for purposes of all other representations and warranties made herein. 7.3. NON-EMPLOYEE SELLERS. In the case of each Seller who is not an officer, director or employee of the Company, the parties acknowledge that (a) such Seller does not have direct access to the books, records, employees and assets of the Company; (b) such Seller does not have personal knowledge of the matters discussed in the representations and warranties set forth in Section 5.2; (c) such Seller has not made any independent investigation or inquiry regarding such matters; and (d) such Seller is relying principally on the representations and warranties made by those Sellers who are officers or employees of the Company. SECTION 8 TAX MATTERS ----------- 8.1. SECTION 338 ELECTION. In the event that Purchaser makes an election under Section 338 of the Code (or any comparable provision of state, local or foreign law) with 19 respect to the purchase of the stock in the Company as provided herein, Purchaser shall be responsible for and shall pay all Taxes resulting from such election. 8.2 APPORTIONMENT. For purposes of apportioning any Tax to a portion of any Taxable Period, the determination shall be made assuming that there was a closing of the books as of the close of business on the last day of such portion, except that real, personal and intangible property Taxes shall be apportioned ratably on a daily basis between the portions of the Taxable Period in question. 8.3 Sellers and Purchaser shall (a) cooperate fully, as reasonably requested, in connection with the preparation and filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make available to the other, as reasonably requested, all information, records or documents with respect to Tax matters pertinent to the Company for all Taxable Periods or portions thereof ending on or before the Closing Date; and (c) preserve information, records or documents relating to Tax matters pertinent to the Company that is in their possession or under their control until the expiration of any applicable statute of limitations. 8.4 Sellers shall timely pay all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees arising from or relating to the sale of Stock under this Agreement, and Sellers shall at their own expense file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees. If required by applicable law, Purchaser will join in the execution of any such Tax Returns and other documentation. 8.5. CERTAIN WITHHELD AMOUNTS. (a) Sellers and Purchaser acknowledge and agree that: (i) Annex 2 refers to certain options to purchase shares of Stock ("Options" and each an "Option"); (ii) immediately prior to Closing, some Options may remain outstanding (each an "Unexercised Option"); (iii) Sellers shall cause each Unexercised Option to be canceled without cost to the Company or Purchaser at or before the time of Closing; (iv) Sellers may cause part of the Purchase Price to be paid to the 20 holder of each Unexercised Option; (v) Sellers may cause part of the Purchase Price to be paid to the holder of certain shares of Stock listed on Annex 2 that were issued by the Company as compensation for services previously rendered by such holder to the Company (each a "Compensatory Share"); and (vi) certain amounts so paid with respect to an Unexercised Option or a Compensatory Share may be taxable income and subject to Tax reporting, or withholding of Tax, or both. (b) For each holder of any Unexercised Option or Compensatory Share, Sellers shall (i) determine the amount of such taxable income (if any) and the amount of Tax (if any) required to be withheld; (ii) withhold such amount (the "Withheld Amount") from the amount otherwise payable to such holder; (iii) provide to the Company a statement that (A) identifies such holder, (B) specifies such Withheld Amount, and (C) states the amount of taxable income to be reported for such holder on Form W-2 or Form 1099 (as the case may be) and the Withheld Amount (if any); (iv) at or before the time of Closing, provide to the Purchaser an opinion of counsel or certified public accountants reasonably satisfactory to Purchaser to the effect that the amount of taxable income and Tax required to be withheld with respect to each holder of any Unexercised Option or Compensatory Share, as set forth in Seller's statement, are correct; and (v) pay to the Company the Withheld Amount (if any). (c) For each such holder, upon the Company's receipt of such statement and such Withheld Amount (if any), Purchaser shall cause the Company to (i) report on Form W-2 or Form 1099 (as the case may be) each amount specified on such statement, in accordance with such statement; and (ii) pay the Withheld Amount to the Internal Revenue Service and 21 the Minnesota Department of Revenue, in each case in the respective amount specified on such statement (or, in the case of any holder who is not a resident of Minnesota, to such alternate state Tax authority (if any) as may be specified in such statement). SECTION 9 ADDITIONAL COVENANTS AND UNDERTAKINGS ------------------------------------- 9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchaser and Sellers agree that each will execute and deliver to the other any and all documents, in addition to those expressly provided for herein, that may be necessary or appropriate to implement the provisions of this Agreement, whether before, at or after the Closing. The parties agree to cooperate with each other to any extent reasonably required in order to accomplish fully the transactions herein contemplated. 9.2. ACCESS TO INFORMATION. Sellers, from and after the date of this Agreement and until the Closing Date, shall cause the Company to (a) give Purchaser and Purchaser's employees and counsel full and complete access upon reasonable notice during normal business hours, to all officers, employees, offices, properties, agreements, records and affairs of the Company or otherwise relating to the Business, (b) provide Purchaser with all financial statements of the Company, which shall be prepared and delivered to Purchaser each month between the date hereof and the Closing Date, and (c) provide copies of such information concerning the Company and the Business as Purchaser may reasonably request; provided, however, that the foregoing shall not permit Purchaser or any agent thereof to (i) disrupt the Business, or (ii) contact any employee of the Company without providing reasonable prior notice to Sellers and allowing a representative of Sellers to be present. The Company and Sellers will use their commercially reasonable efforts to obtain the consent of its auditors to permit inclusion of the Financial Statements in applicable securities filings of Sinclair Broadcast Group, Inc. ("SBGI"). If Purchaser requests, it shall have the immediate right, without causing unreasonable disruption to the Business, to have the access provided for in the first sentence hereof to conduct an audit of the Station's financial information, and, subject to the foregoing, the Company and Sellers shall cooperate with Purchaser's reasonable requests in connection with such audit, including, without limitation, giving all reasonable consents thereto as long as any expenses thereof are borne by Purchaser. 9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by this Agreement, from and after the date hereof, Sellers shall use their best efforts to cause the 22 Company to conduct such Business in the ordinary course. Except as contemplated by this Agreement or as consented to by Purchaser (which consent shall not unreasonably be withheld), from and after the date hereof, Sellers shall act, and shall cause the Company to act, as follows: (a) The Company will not adopt any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; (b) The Company will not amend its charter or by-laws; (c) Except (i) for the disposition of obsolete equipment in the ordinary course of business, or (ii) as set forth on Schedule 9.3(c) hereto, the Company will not sell, mortgage, pledge or otherwise dispose of any material assets or properties owned, leased or used in the operation of the Business; (d) The Company will not merge or consolidate with, or agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity; (e) The Company will not authorize for issuance, issue or sell any additional shares of its capital stock except as required by the exercise of options outstanding on the date hereof as described in Annex 2 or any securities or obligations convertible or exchangeable into shares of its capital stock or issue or grant any option, warrant or other right to purchase any shares of its capital stock; (f) The Company will not incur, or agree to incur, any debt for borrowed money other than draws under the Company's existing revolving credit agreement; (g) The Company will not change its historic practices concerning the payment of accounts payable; (h) The Company will not declare, issue, or otherwise approve the payment of dividends of any kind in respect of the Stock or redeem, purchase or acquire any of its capital stock; (i) The Company shall maintain the existing insurance policies on the assets of the Station or other policies providing substantially similar coverages; 23 (j) Except as stated in Schedule 9.3(j) and except as otherwise agreed to by Purchaser, the Company will not permit any increases in the compensation of any of the employees of the Station except as required by law or existing contract or agreement or enter into or amend any Company Plan or Company Benefit Arrangement; (k) The Company shall not enter into or renew any contract or commitment relating to the Station or the assets of the Station, or incur any obligation that will be binding on Purchaser after Closing, except in the ordinary course of business; provided that (i) except for time sales contracts for cash at prevailing rates for a term not exceeding twelve (12) months, Sellers shall not enter into time sales agreement that will be binding on Purchaser after Closing; and (ii) the Company shall not enter into, modify, amend, renew, or change any contract with respect to programming for the Station for any period after the Closing Date (each a Programming Action) without the prior approval of Purchaser which approval shall not be unreasonably withheld or delayed. For purposes of clause (ii) above, Sellers acknowledge that it shall not be unreasonable for Purchaser to withhold its consent to approve of any Programming Action where Purchaser, acting in good faith, has advised the Company in writing that Purchaser has reason to conclude that it can acquire such programming on better terms. Purchaser acknowledges that any failure of the Company or Sellers to take any Programming Action as a result of Purchaser's withholding consent shall not be a breach of any provision of this Agreement by Sellers and shall not be a failure to satisfy any condition to be satisfied by the Company or Sellers hereunder; (l) The Company shall not enter into any transactions with any Affiliate of the Company or any Seller that will be binding upon Purchaser, or the Station following the Closing Date; (m) The Company shall use all commercially reasonable efforts to maintain the assets of the Station or replacements thereof in good operating condition and adequate repair; (n) The Company shall, in connection with the operation of the Station, make expenditures materially consistent with the estimates of expenses set forth in the Company's operating budget and, including, without limitation, the Company shall make such materially consistent expenditures in respect to promotional, programming and engineering activities for the Station (and any employee expenditures related to such activities) for any period covered by the current operating budget of the Station; 24 (o) The Company shall not make or change any material Tax election, amend any Tax Return, or take or omit to take any other action not in the ordinary course of business and consistent with past practice that would have the effect of increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of the Company. (p) The Company shall file all Tax Returns when due; provided, however, that the Company shall not file any material Tax Return without providing Purchaser with reasonable opportunity to review and consent to the filing of such Tax Return, which consent will not be unreasonably withheld; provided further, however, that the Company shall not be in breach of this Section 9.3(p) if Purchaser has not consented to such filing by the fifth (5th) Business Day preceding the due date (including any extension periods) of such filing. 9.4. H-S-R ACT. Each of Purchaser and Sellers shall, within ten Business Days following the date hereof, file duly completed and executed Pre-Merger Notification and Report Forms as required under the H-S-R Act and shall otherwise use their respective best efforts to comply promptly with any requests made by the Federal Trade Commission or the Department of Justice pursuant to the H-S-R Act or the regulations promulgated thereunder. All filing fees and other similar payments in connection with the H-S-R Act shall be split equally by Purchaser and the Company. 9.5. FCC APPLICATION. (a) Purchaser and Sellers jointly shall, within five Business Days following the date hereof, file (or cause to be filed) with the FCC the FCC Application; provided that the parties shall cooperate with each other in the preparation of the FCC Application and shall in good faith and with due diligence take all reasonable steps necessary to expedite the processing of the FCC Application and to secure such consents or approvals as expeditiously as practicable. If the Closing shall not have occurred for any reason within the initial effective periods of the granting of FCC approval of the FCC Application, and no party shall have terminated this Agreement under Section 14, the parties shall jointly request and use their respective best efforts to obtain one or more extensions of the effective periods of such grants. No party shall knowingly take, or fail to take, any action of which the intent or reasonably anticipated consequence would be to cause the FCC not to grant approval of the FCC Application. (b) Sellers shall cause the Company to publish the notices required by the FCC Rules and Regulations relative to the filing of the FCC Application. Copies of all applications, documents and papers filed with the FCC after the date hereof and prior to the Closing, or filed after the Closing with respect to the transaction under this Agreement, by 25 Purchaser or Sellers shall be mailed to the other simultaneously with the filing of the same with the FCC or as soon as practicable thereafter. Each of Purchaser and the Company shall bear its own costs and expenses (including the fees and disbursements of its counsel) in connection with the preparation of the portion of the application to be prepared by it and in connection with the processing of that application. All filing and grant fees, if any, paid to the FCC, shall be split equally by Purchaser and the Company. None of the information contained in any filing made by Purchaser or Sellers with the FCC with respect to the transaction contemplated by this Agreement shall contain any untrue statement of a material fact. 9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit each Seller (a) to have reasonable access to the books and records of Purchaser and those retained or maintained by the Company relating to the operation of the Business prior to the Closing or after the Closing to the extent related to transactions or events occurring prior to the Closing, and (b) to have reasonable access to employees of the Company and Purchaser to obtain information relating to such matters. Purchaser shall maintain such books and records for a period of three (3) years following the Closing. 9.7. CONTRACTUAL OBLIGATIONS. At all times after Closing, Purchaser shall cause the Company to: (a) honor all of the Company's contractual obligations disclosed herein (including, without limitation, those under employment arrangements disclosed herein or in any Schedule hereto), in each case in accordance with their respective terms and conditions; (b) continue, for at least ninety (90) days after the Closing Date, the employment of each person who is employed by the Company immediately prior to Closing, in each case under terms and conditions of employment (including, without limitation, compensation and benefits as such are disclosed herein or in any Schedule hereto) that are not less favorable to such person than those existing immediately prior to Closing, provided, however, that nothing in this clause (b) shall require the continued employment of the Station's general manager or general sales manager, except to the extent of any such contractual obligations disclosed herein or in any Schedule hereto. 9.8. CONTROL OF STATIONS. From the date hereof until the Closing Date, subject to the express provisions of this Agreement, Purchaser shall not directly or indirectly control, supervise or direct the operation of the Station. 9.9. ASSUMPTION OF BROKERAGE AMOUNTS. At the Closing, Purchaser shall pay the 26 brokerage fees and expenses due from the Company to Dain Bosworth Incorporated in accordance with the engagement letter dated November 12, 1996, executed by the Company as set forth on Schedule 9.9 hereto. 9.10. INTERRUPTION OF BROADCAST TRANSMISSION. (a) In the event of any loss, damage or impairment, confiscation or condemnation of any of the assets of the Station prior to the completion of the Closing that materially interferes with the normal operation of the Station, the Company shall notify Purchaser of same in writing immediately, specifying with particularity the loss, damage or impairment, confiscation or condemnation incurred, the cause thereof, if known or reasonably ascertainable, and the insurance coverage. The Company shall apply the proceeds of any insurance policy, judgment or award with respect thereto and take such other commercially reasonable actions, as determined in its sole discretion, as are necessary to repair, replace or restore such assets of the Station to their prior condition as soon as possible after such loss, damages or impairment, confiscation or condemnation. (b) If before the Closing Date, due to damage or destruction of the assets of the Station, the regular broadcast transmission of the Station in the normal and usual manner is interrupted for a period of twelve (12) continuous hours or more, the Company shall give prompt written notice thereof to Purchaser. If on the Closing Date, due to damages or destruction of the assets of the Station the regular broadcast transmission of the Station in the normal and usual manner is interrupted such that the regular broadcast signal of such Station (including its effective radiated power) is diminished in any material respect, then (i) the Company shall immediately give written notice thereof to Purchaser; and (ii) either, and both of, the Sellers' Agent or Purchaser shall have the right, by giving prompt written notice to the other, to postpone the Closing Date for a period of up to ninety (90) days. (c) In the event the Station's normal and usual transmission has not been resumed by the Closing Date as postponed pursuant to section (b) above, either Purchaser or Sellers' Agent, may pursuant to Section 14.1(e), terminate this Agreement by written notice to the other party. Notwithstanding the foregoing, however, Purchaser may, at its option, proceed to close this Agreement and complete the restoration and replacement of any damaged assets of the Station after the Closing Date, in which event Sellers shall cause the Company to deliver or assign to Purchaser all insurance or other proceeds received in connection therewith to the extent such proceeds are received by or payable to the Company and have not therefore been used in or committed to the restoration or replacement of the assets but Sellers shall have no other liability or obligation to 27 Purchaser in connection therewith. (d) If before the Closing Date, due to damage or destruction of the assets the regular broadcast transmission of the Station in the normal and usual manner is interrupted for a period of seven (7) continuous days or more, Sellers shall give prompt written notice thereof (the "Interruption Notice") to Purchaser. Upon receipt of the Interruption Notice, Purchaser shall have the right, in its sole and absolute discretion, by giving prompt written notice thereof to Sellers within two (2) Business Days of the date of the Interruption Notice, to terminate this Agreement with the effect specified in Section 14.2(a) hereof. SECTION 10 INDEMNIFICATION --------------- 10.1. INDEMNIFICATION OF PURCHASER BY SELLERS. (a) Subject to Section 10.3 hereof, each Seller, severally but not jointly, shall indemnify and hold Purchaser harmless from and against any and all Losses, however incurred, which arise out of or result from any breach by such Seller of any representation or warranty of such Seller as to itself or himself, in Section 5.1 of this Agreement. (b) Subject to Section 10.3 hereof, Sellers shall jointly and severally indemnify and hold Purchaser harmless from and against any and all Losses, howsoever incurred, which arise out of or result from: (i) any breach of any representation or warranty of Sellers set forth in Section 5.2 of this Agreement other than any representation or warranty of any Seller set forth in Section 5.1 of this Agreement; or (ii) the material failure by Sellers to perform any covenant of Sellers contained herein; or (iii) breaches of other agreements contemplated hereby. 28 10.2. INDEMNIFICATION OF SELLERS BY PURCHASER. Subject to Section 10.3 hereof, Purchaser shall indemnify and hold Sellers harmless from and against any and all Losses, howsoever incurred, which arise out of or result from: (a) any breach by Purchaser of any representation or warranty of Purchaser set forth in Section 6 of this Agreement; (b) the material failure by Purchaser to perform any covenant of Purchaser contained herein; or (c) breaches of other agreements contemplated hereby. 10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION OBLIGATIONS. (a) Notwithstanding the provisions of Section 10.1 hereof, Purchaser shall not be entitled to indemnification or to receive indemnification payments with respect to any Losses except if and to the extent that the aggregate amount of Losses incurred by Purchaser and its Affiliates to which it or they would otherwise be entitled to indemnification under Section 10.1 hereof, exceeds $50,000.00. (b) In determining the amount of any Losses for which indemnification is provided under this Agreement, such Losses shall be (i) net of any insurance recovery made by the indemnified party, (ii) reduced to take into account any net Tax benefit realized by the indemnified party arising from the deductibility of such Losses, and (iii) increased to take account of any net Tax cost incurred by the indemnified party arising from the receipt of indemnification payments hereunder. Any indemnification payment hereunder shall initially be made without regard to this paragraph and shall be reduced to reflect any net Tax benefit or increased to reflect any net Tax cost only after the indemnified party has actually realized such benefit or cost. For purposes of this Agreement, an indemnified party shall be deemed to have "actually realized" a net Tax benefit or net Tax cost to the extent that, and at such time as, the amount of Taxes payable by such indemnified party is (x) reduced below the amount of Taxes that such indemnified party would have been required to pay but for the deductibility of such Tax or Loss, and (y) increased above the amount of Taxes that such indemnified party would have been required to pay but for the receipt of such indemnification payments. The amount of any reduction hereunder shall be adjusted to reflect any final determination (which shall include the execution of Form 870-AD or successor form) with respect to the indemnified party's liability for Taxes. Any indemnity payments under this Agreement 29 shall be treated as an adjustment to the Purchase Price for Tax purposes, unless a final determination with respect to the indemnified party or any of its affiliates causes any such payment not to be treated as an adjustment to the Purchase Price. (c) No claim for indemnification for Losses shall be made or available after the first anniversary of the Closing Date (except to the extent of any claims made on or before such first anniversary). (d) Indemnification pursuant to this Section 10 shall be the sole and exclusive remedy of each party hereto with respect to any Losses, notwithstanding that indemnification may not be available and shall be in lieu of any and all other rights and remedies after the Closing Date (whether asserted as claims for breach of contract, tort claims, actions in equity or otherwise. (e) The maximum aggregate liability of all Sellers (including, without limitation, all liability for indemnification under this Article 10) shall not exceed the amount held in the Indemnification Escrow, and Purchaser shall not (and shall have no right to) proceed against any Seller, other than the right to proceed against the Indemnification Escrow to the extent of Losses incurred by Purchaser for which Purchaser is entitled to indemnification hereunder. (f) The terms and conditions of Section 10.3(a) through (e) shall not be deemed to limit any rights or remedies Purchaser may have for any act or acts of fraud by Sellers or any Seller. 10.4. NOTICE OF CLAIM /DEFENSE OF ACTION. (a) An indemnified party shall promptly give the indemnifying part(ies) notice of any matter which an indemnified party has determined has given or could give rise to a right of indemnification under this Agreement, stating the nature and, if known, the amount of the Losses, and method of computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right to indemnification is claimed or arises; provided that the failure of any party to give notice promptly as required in this Section 10.4 shall not relieve any indemnifying party of its indemnification obligations except to the extent that such failure materially prejudices the rights of such indemnifying party. The indemnified party shall give continuing notice promptly thereafter of all developments coming to the indemnified party's attention materially affecting any matter relating to any indemnification claims. 30 (b) Except as otherwise provided in Section 10.5, the obligations and liabilities of an indemnifying party under this Section 10 with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Section 10, shall be governed by and contingent upon the following additional terms and conditions: (i) With respect to third party claims, promptly after receipt by an indemnified party of notice of the commencement of any action or the presentation or other assertion of any claim which could result in any indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified party shall give prompt notice thereof to the indemnifying part(ies) and the indemnifying part(ies) shall be entitled to participate therein or, to the extent that it shall wish, assume the defense thereof with its own counsel. (ii) If the indemnifying part(ies) elects to assume the defense of any such action or claim, the indemnifying part(ies) shall not be liable to the indemnified party for any fees of other counsel or any other expenses, in each case incurred by such indemnified party in connection with the defense thereof. (iii) The indemnifying part(ies) shall be authorized, without consent of the indemnified party being required, to settle or compromise any such action or claim, provided that such settlement or compromise includes an unconditional release of the indemnified party from all liability arising out of such action or claim. (iv) Whether or not an indemnifying part(ies) elects to assume the defense of any action or claim, the indemnifying part(ies) shall not be liable for any compromise or settlement of any such action or claim effected without its consent, such consent not to be unreasonably withheld. (v) The parties agree to cooperate to the fullest extent possible in connection with any claim for which indemnification is or may be sought under this Agreement, including, without limitation, making available all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably requested by the other party. 10.5 TAX CONTESTS. (a) If any party receives written notice from any Taxing Authority of any Tax Proceeding with respect to any Tax for which the other party is obligated to provide indemnification under this Agreement, such party shall give prompt written notice thereof to the other party; provided, however, that the failure to give such notice shall not affect the indemnification provided hereunder except to the extent that the failure to give such 31 notice materially prejudices the indemnifying party. (b) Sellers, acting through Sellers' Agent, shall have the right, at their own expense, to control and make all decisions with respect to any Tax Proceeding relating solely to Taxes of the Company for which Sellers are liable to indemnify Purchaser; provided, that Purchaser and counsel of its own choosing shall have the right, at Purchaser's own expense, to participate fully in all aspects of the prosecution or defense of such Tax Proceeding; and provided further that Sellers shall not settle any such Tax Proceeding without the prior written consent of Purchaser if such settlement could adversely affect the past, present or future Tax liability of Purchaser or any of its Affiliates, or any Tax liability of the Company for which Seller is not obligated to indemnify Purchaser. (c) If Sellers do not exercise their right to assume control of or participate in any Tax Proceeding as provided under this Section 10.5, Purchaser may, without waiving any rights to indemnification hereunder, defend or settle the same in such manner as it may deem appropriate in its sole and absolute discretion. (d) In the event that the provisions of this Section 10.5 and the provisions of Section 10.4 conflict or otherwise each apply by the terms, this Section 10.5 shall exclusively govern all matters concerning Taxes. SECTION 11 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE 11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The obligation of Purchaser to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Sellers shall have complied in all material respects with their agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Sellers contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Purchaser shall have received a certificate from Sellers' Agent, dated as of the Closing Date and signed by Sellers' Agent, certifying as to the fulfillment of the conditions set forth in this Section 11.1(a) ("Sellers' Bring-Down Certificate"). 32 (b) No statute, rule or regulation, or order of any court or administrative agency shall be in effect which restrains or prohibits Purchaser from consummating the transactions contemplated hereby and no action or proceeding shall be pending wherein an unfavorable ruling would affect any right to own the Stock or the assets of the Station. (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) All consents and/or agreements identified on Schedule 5.2p shall have been received. (e) The Final Order approving the applications for transfer of control of the FCC Licenses and the approval of the Company's application for renewal of the FCC Licenses shall have been obtained. All the material conditions contained in the Final Order required to be satisfied on or prior to the Closing Date shall have been duly satisfied and performed. Notwithstanding the foregoing, if the consent of the FCC is conditional or qualified in any manner that has a material adverse effect on Purchaser, Purchaser may, nevertheless, in its sole discretion, require the consummation of the transactions contemplated by this Agreement, but shall not be required to do so; provided, however, that if the consent of the FCC includes a condition to the effect that Closing cannot occur until after grant of the application for renewal of the FCC Licenses, such condition will not be deemed to have a material adverse effect on Purchaser. (f) Sellers shall have delivered to Purchaser at the Closing each document required by Section 12.1 hereof. (g) The Company shall have delivered to Purchaser a written statement by a duly authorized officer of Richfield Bank & Trust Co. that the Existing Debt of the Company does not exceed $2,500,000.00 on the Closing Date. (h) Since the date of this Agreement through the Closing Date, there shall not have been any Material Adverse Effect to the business, operations, properties, assets, or condition of the Company, and no event shall have occurred or circumstance exist that would reasonably be expected to result in such a Material Adverse Effect. 33 (i) Purchaser shall have received from the Company a properly executed statement in the form set forth in Schedule 11.1(i), together with evidence that the Company has complied with the notice requirements of Section 1.897-2(h)2 of the Treasury regulations. (j) Sellers shall have taken the actions and delivered the payments, statements and opinions required by Section 8.5. 11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS. The obligation of Sellers to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Purchaser shall have complied in all material respects with its agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Purchaser contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Seller shall have received a certificate of Purchaser, dated as of the Closing Date and signed by an officer of Purchaser, certifying as to the fulfillment of the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down Certificate"). (b) No statute, rule or regulation or order of any court or administrative agency shall be in effect which restrains or prohibits Sellers from consummating the transactions contemplated hereby. (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) The issuance by the FCC of a Final Order approving the applications for transfer of control of the FCC Licenses contemplated by this Agreement shall have occurred. There shall have been duly satisfied and performed on or prior to the Closing Date all the material conditions contained in the Final Order required to be so satisfied; provided, however, that Purchaser, in its sole discretion, may waive the necessity of a "Final Grant" by the FCC and close following an "Initial Grant". (e) Purchaser shall have delivered to Sellers at the Closing the Purchase Price and each document required by Section 12.2 hereof. 34 SECTION 12 DELIVERIES AT THE CLOSING ------------------------- 12.1. DELIVERIES BY SELLERS. At the Closing, Sellers will deliver or cause to be delivered to Purchaser: (a) Sellers' Bring-Down Certificate; (b) the legal opinions of Faegre & Benson LLP, counsel to Sellers, and Wiley Rein & Fielding, FCC counsel to the Company, substantially in the form attached as Exhibit C hereto; (c) stock certificates evidencing the Stock, together with stock powers, dated as of the Closing Date and executed by the respective Sellers, transferring the Stock to Purchaser; (d) the original corporate minute books, stock registry and seal of the Company (to the extent available); (e) a certificate as to the existence and good standing of the Company issued by the Secretary of State of the State of Minnesota dated shortly before the Closing Date confirmed as of the Closing Date; (f) receipt for Purchase Price; (g) resignations of each of the officers and directors of the Company, effective as of the Closing Date; (h) the statement required by Section 11.1(i); (i) a copy of any instrument evidencing any consents received, including, but not limited to, estoppel certificates from the Company's landlord with respect to the Real Property; (j) the Indemnification Escrow Agreement, duly executed by Sellers or Sellers' Agent; (k) the statement required by Section 8.5(b)(iii); 35 (l) the opinion of counsel or certified public accountants required by Section 8.5(b)(iv); and (m) such other documents as Purchaser shall reasonably request. 12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be delivered at the Closing to Sellers' Agent or the Indemnification Escrow Agent, as the case may be: (a) Purchaser's Bring-Down Certificate; (b) a legal opinion of Thomas & Libowitz, P.A., counsel to Purchaser, substantially in the form attached as Exhibit D hereto; (c) the Purchase Price as required pursuant to Section 3.1 hereof; (d) the Indemnification Escrow Agreement, duly executed by Purchaser; (e) certificates as to the existence and good standing of the Purchaser issued by the Maryland Department of Assessments and Taxation of the State of Maryland and the Secretary of State of Minnesota as to the Purchaser's qualification as a foreign corporation dated shortly before the Closing Date and confirmed as of the Closing Date; and (f) such other documents Sellers' Agent shall reasonably request. SECTION 13 EXPENSES -------- Except as provided in Sections 9.4, 9.5 and 9.9, each party will pay its own fees, expenses, and disbursements and those of its counsel in connection with the subject matter of this Agreement (including the negotiations with respect hereto and the preparation of any documents) and all other costs and expenses incurred by it in the performance and compliance with all conditions and obligations to be performed by it pursuant to this Agreement or as contemplated hereby. The parties acknowledge and agree that (a) the Company has incurred expenses in connection with considering, evaluating, preparing and negotiating this Agreement and related documents and transactions (including, without limitation, fees and expenses of accountants, legal counsel and other professional advisors), (b) the Company will continue to incur and pay such reasonable expenses in connection 36 with completing this Agreement and transactions and documents contemplated hereby, and (c) the Company's doing so does not violate any representation, warranty or other obligation of the Company hereunder. SECTION 14 TERMINATION ----------- 14.1 TERMINATION. This Agreement may be terminated: (a) at any time by mutual written consent of Purchaser and Sellers; (b) by either Purchaser or Sellers, if the terminating party is not in default or breach in any material respect of its or their obligations under this Agreement, if the Closing hereunder has not taken place on or before twelve (12) calendar months from the date hereof, except where Closing has been postponed pursuant to the provisions of 9.10, in which case the applicable date shall be upon the expiration of the ninety (90) period referred to in Section 9.10; (c) by Sellers, if Sellers are not in default or breach in any material respect of its obligations under this Agreement, if all of the conditions in Section 11.2 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.10); (d) by Purchaser, if Purchaser is not in default or breach in any material respect of its obligations under this Agreement, if all of the conditions in Section 11.1 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.10); (e) by Purchaser or Sellers, pursuant to Section 9.10. 14.2 PROCEDURE AND EFFECT OF TERMINATION. (a) In the event of termination of this Agreement by either or both Purchaser and/or Sellers pursuant to Sections 9.10 or 14.1 hereof, prompt written notice thereof shall forthwith be given to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any of the parties hereto, but subject to and without limiting any other rights of the parties specified herein in the event a party is in default or breach in any material respect of its 37 obligations under this Agreement. If this Agreement is terminated as provided herein, all filings, applications and other submissions relating to the transactions contemplated hereby as to which termination has occurred shall, to the extent practicable, be withdrawn from the agency or other Person to which such filing is made. (b) If this Agreement is terminated pursuant to Sections 14.1(b), 14.1(d), or 14.1(e), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser. In recognition of the unique character of the property to be sold hereunder, and the damages which Purchaser will suffer in the event of a termination of this Agreement caused by a breach by Sellers, Purchaser shall have the right to pursue all remedies available hereunder at law or in equity, including, without limitation, the right to seek specific performance and/or monetary damages. Sellers hereby waive any defense that Purchaser has an adequate remedy at law for such breach of this Agreement by Sellers. (c) If this Agreement is terminated pursuant to Section 14.1(c) and Purchaser shall be in breach in any material respect of its representations, warranties, covenants, agreements, or obligations set forth in this Agreement, then and in that event, Sellers shall have the right to retain the amount delivered by Purchaser pursuant to Section 3.1(1) as liquidated damages, and as the sole and exclusive remedy of Sellers as a consequence of Purchaser's default (which aggregate amount the parties agree is a reasonable estimate of the damages that will be suffered by Sellers as a result of the default by Purchaser and does not constitute a penalty), the parties hereby acknowledging the inconvenience and nonfeasability of otherwise obtaining an adequate remedy. (d) If this Agreement is terminated pursuant to Section 14.1(a), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser. (e) In the event of a default by either party that results in a lawsuit or other proceeding for any remedy available under this Agreement, the prevailing party shall be entitled to reimbursement from the other party of its reasonable legal fees and expenses, whether incurred in arbitration, at trial, or on appeal. SECTION 15 NOTICES ------- All notices, requests, consents, payments, demands, and other communications required or contemplated under this Agreement shall be in writing and (a) personally delivered or sent via telecopy (receipt confirmed and followed promptly by delivery of the 38 original), or (b) sent by Federal Express or other reputable overnight delivery service (for next Business Day delivery), shipping prepaid, as follows: If to Purchaser to: Mr. David Smith President Sinclair Communications, Inc. 2000 West 41st Street Baltimore, MD 21211-1420 Telephone: (410) 467-5005 Fax: (410) 467-5043 With a copy to: Sinclair Communications, Inc. 2000 W. 41st Street Baltimore, MD 21211-1420 Attention: General Counsel Telephone: (410) 662-6422 Fax: 410-662-4707 If to Sellers to: Ms. Linda Rios Brook Sellers' Agent Lakeland Group Television, Inc. 1640 Como Avenue Saint Paul, Minnesota 55108 Telephone: (612) 646-2300 Fax: (612) 646-4296 39 with a copy to: Faegre & Benson LLP 2200 Norwest Center 90 South Seventh Street Minneapolis, MN 55402-3901 Attn: William R. Busch, Jr. Telephone: (612) 336-3178 Fax: (612) 336-3026 or to such other Persons or addresses as any Person may request by notice given as aforesaid. Notices shall be deemed given and received at the time of personal delivery or completed telecopying, or, if sent by Federal Express or such other overnight delivery service one Business Day after such sending. SECTION 16 SELLERS' AGENT -------------- 16.1. SELLERS' AGENT. Each of the Sellers hereby irrevocably appoints Linda Rios Brook (herein called the "Sellers' Agent"), or any successor Sellers' Agent appointed in accordance with this Section 16.1 as his, her or its agent and attorney-in-fact to take any action required or permitted to be taken by such Seller under the terms of this Agreement, including, without limiting the generality of the foregoing, the payment of expenses relating to the transactions contemplated by the Agreement, and the right to waive, modify or amend any of the terms of this Agreement in any respect, whether or not material, and agrees to be bound by any and all actions taken by the Sellers' Agent on his or its behalf. In the event of the death or incapacity of Sellers' Agent, such person shall be replaced by Miles J. Kennedy (automatically and without any action by any Seller) who shall continue in that capacity. If at any time, neither of the persons named above is serving as Sellers' Agent, then Sellers' Agent shall be such person as may be named as such in a notice to Purchaser, executed by Sellers holding (or, if such time is after Closing, formerly holding) more than 50% of all shares of Stock listed on Annex 2. The Sellers agree jointly and severally to indemnify the Sellers' Agent from and against and in respect of any and all liabilities, damages, claims, costs, and expenses, including, but not limited to attorneys' fees, arising out of or due to any action as the Sellers' Agent and any and all actions, proceedings, demands, assessments, or judgments, costs, and expenses incidental thereto, except to the extent that the same result from bad faith or gross negligence on the part of the Sellers' Agent. Purchaser shall be entitled to rely exclusively upon any communications given by the Sellers' Agent on behalf of any Seller, and shall not be liable for any action taken or not taken in reliance upon any 40 such communications from the Sellers' Agent. Purchaser shall be entitled to disregard any notices or communications given or made by Sellers unless given or made through the Sellers' Agent. SECTION 17 MISCELLANEOUS ------------- 17.1. HEADINGS. The headings contained in this Agreement (including, but not limited to, the titles of the Schedules and Exhibits hereto) have been inserted for the convenience of reference only, and neither such headings nor the placement of any term hereof under any particular heading shall in any way restrict or modify any of the terms or provisions hereof. Terms used in the singular shall be read in the plural, and vice versa, and terms used in the masculine gender shall be read in the feminine or neuter gender when the context so requires. 17.2. SCHEDULES AND EXHIBITS. All Schedules, Annexes and Exhibits attached to this Agreement constitute an integral part of this Agreement as if fully rewritten herein. 17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. 17.4. ENTIRE AGREEMENT. This Agreement, the Annexes, Schedules, Exhibits, and other documents to be delivered hereunder and thereunder constitute the entire understanding and agreement between the parties hereto concerning the subject matter hereof. All negotiations and writings between the parties hereto are merged into this Agreement, and there are no representations, warranties, covenants, understandings, or agreements, oral or otherwise, in relation thereto between the parties other than those incorporated herein or to be delivered hereunder. 17.5. GOVERNING LAW. This Agreement is to be delivered in and should be construed in accordance with and governed by the laws of the State of Maryland without giving effect to conflict of laws principles. 17.6. MODIFICATION. This Agreement cannot be modified or amended except in writing signed by each of the Purchaser and Sellers' Agent. 41 17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights and obligations hereunder shall be assigned, delegated, sold, transferred, sublicensed, or otherwise disposed of by operation of law or otherwise, without the prior written consent of each of the other parties hereto; provided, however, that Purchaser may assign its rights and obligations hereunder to one or more subsidiaries so long as Purchaser is not relieved of its obligations hereunder. In the event of such permitted assignment or other transfer, all of the rights, obligations, liabilities, and other terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against, the respective successors and assigns of the parties hereto, whether so expressed or not. 17.8. WAIVER. Any waiver of any provision hereof (or in any related document or instrument) shall not be effective unless made expressly and in a writing executed in the name of the party sought to be charged. The failure of any party to insist, in any one or more instances, on performance of any of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or of the future performance of any such term, covenant, or condition, but the obligations of the parties with respect hereto shall continue in full force and effect. 17.9. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and if any part of any provision is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, such provision may be changed, consistent with the intent of the parties hereto, to the extent reasonably necessary to make the provision, as so changed, legal, valid, binding, and enforceable. If any provision of this Agreement is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, and if such provision cannot be changed consistent with the intent of the parties hereto to make it fully legal, valid, binding and enforceable, then such provisions shall be stricken from this Agreement, and the remaining provisions of this Agreement shall not in any way be affected or impaired, but shall remain in full force and effect. 17.10. ANNOUNCEMENTS. From the date of this Agreement, all public announcements relating to this Agreement or the transactions contemplated hereby will be made only as agreed upon jointly by the parties hereto, except that nothing herein shall prevent any Seller or any Affiliate thereof or Purchaser from making any disclosure in connection with the transactions contemplated by this Agreement if (and to the extent) required by applicable law as a result of its, or its Affiliate's, being a public company, provided that prior notice of such disclosure is given to the other party hereto. 42 17.11. SPECIFIC PERFORMANCE. Sellers acknowledge that Purchaser will have no adequate remedy at law if Sellers fail to perform their obligation to consummate the sale of Stock contemplated under this Agreement. In such event, Purchaser shall have the right, in addition to any other rights or remedies it may have, to specific performance of this Agreement. 17.12 BULK TRANSFERS. Purchaser hereby waives compliance for the provisions of any applicable bulk transfer laws subject to Sellers' indemnification as a result of such failure to comply. 17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 17.14 INTERPRETATION. The Purchaser and Sellers acknowledge and agree that the preparation and drafting of this Agreement and the Exhibits, Annexes and Schedules hereto are the result of the efforts of all parties to this Agreement and every covenant, term, and provision of this Agreement shall be construed according to its fair meaning and shall not be construed against any particular party as the drafter of such covenant, term, and/or provision. [SIGNATURE PAGE TO FOLLOW - PAGE LEFT INTENTIONALLY BLANK] 43 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date and year first written above. PURCHASER: SELLERS: SINCLAIR COMMUNICATIONS, INC. By: --------------------------------- --------------------------------- Title: --------------------------------- 44 ANNEX 1 DEFINITIONS As used in the attached Stock Purchase Agreement, the following terms shall have the corresponding meaning set forth below: 1. "Accounts Receivable" has the meaning given in Section 5.2t. 2. Affiliate" of, or a Person "Affiliated" with, a specified Person, means a Person who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. 3. "Agreement" has the meaning set forth in the preamble to the attached Stock Purchase Agreement. 4. "Benefit Arrangement" shall mean any legally enforceable benefit arrangement, obligation, custom, or practice to provide benefits (other than regular cash compensation for services rendered) to present or former directors, employees, or independent contractors, other than any obligation, arrangement, custom or practice that is a Benefit Plan, including without limitation, employment agreements, severance agreements, executive compensation arrangements, including but not limited to stock options, restricted stock rights and performance unit awards, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, workers' compensation, retirement, deferred compensation, bonus, stock purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discounts, employee loans, employee banking privileges, any plans subject to Section 125 of the Code, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees or directors. 5. "Benefit Plan" shall have the meaning given in Section 3(3) of ERISA. 6. "Business" means the business of owning and operating the Station. 7. "Business Day" means any day on which banks in New York City are open for business. 8. "CERCLA" has the meaning set forth in Section 5.2q of the Agreement. 45 9. "Closing" has the meaning set forth in Section 4 of the Agreement. 10. "Closing Date" has the meaning set forth in Section 4 of the Agreement. 11. "Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time. 12. "Company" has the meaning set forth in the recitals to the Agreement. 13. "Company Benefit Arrangement" shall mean any Benefit Arrangement sponsored or maintained by the Company or with respect to which the Company has any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former directors or employees of the Company. 14. "Company's Knowledge" means the actual knowledge (without any requirement of inquiry) of any Seller who is not an officer, employee or director of the Company or the actual knowledge, after due inquiry, of any Person who is an officer or director (including any benefit manager whether or not an officer) of the Company on the date of the Agreement or any other individuals responsible for the day-to-day operations of the Stations. 15. "Company Plan" shall mean, as of the Closing Date, any Benefit Plan for which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Benefit Plan maintained by the Company or to which the Company is obligated to make payments, in each case with respect to any present or former employees of the Company. 16. "Compensatory Share" has the meaning set forth in Section 8.5 of the Agreement. 17. "Consents" means the consents, permits, or approvals of government authorities and other third parties necessary to lawfully and validly transfer the Stock to Purchaser to maintain the validity and effectiveness (without any material default or violation of the terms thereof) of any Material Contract and any licenses (including, without limitation, the FCC Licenses) to be transferred to Purchaser, or otherwise to consummate the transactions contemplated by this Agreement. 18. "Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. 46 19. "Enforceability Limits" has the meaning set forth in Section 5.1. 20. "Environment" means any surface or subsurface physical medium or natural resource, including air, land, soil (surface or subsurface), surface waters, ground waters, wetlands, stream and river sediments, rock and biota. 21. "Environmental Laws" means any federal, state, or local law, legislation, rule, regulation, ordinance or code of the United States or any subdivision thereof relating to the injury to, or the pollution or protection of the Environment. 22. "Environmental Liability" means any loss, liability, damage, cost or expense arising under any Environmental Law. 23. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 24. "ERISA Affiliate" shall mean any Person that together with the Company would be or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any general partnership of which the Company is or has been a general partner. 25. "Existing Debt" means the principal amount of all indebtedness of the Company for borrowed money or the deferred purchase price of any property, plus the amount required to be recorded as a liability on the financial statements of the Company in accordance with GAAP with respect to any capital lease. 26. "FCC" has the meaning set forth in the recitals to the Agreement. 27. "FCC Application" has the meaning set forth in Section 5.2p of the Agreement. 28. "FCC Licenses" has the meaning set forth in the Recitals of the Agreement. 29. "FCC Rules and Regulations" has the meaning set forth in Section 5.2g of the Agreement. 47 30. "Final Order" means action by the FCC as to which no further steps (including those of appeal or certiorari) can be taken in any action or proceeding to review, modify or set the determination aside, whether under Section 402 or 405 of the Communications Act, or otherwise. 31. "Financial Statements" means the consolidated balance sheet of the Company as of July 31, 1997 and the consolidated income statement and statement of changes in financial condition for the calendar year 1996. 32. "GAAP" means generally accepted accounting principles, consistently applied. 33. "Hazardous Substances" means petroleum, petroleum products, petroleum-derived substances, radioactive materials, hazardous wastes, polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any materials containing asbestos, and any materials or substances regulated or defined as or included in the definition of "hazardous substances, "hazardous materials," "hazardous constituents," "toxic substances," "pollutants, "pollutants," "contaminants" under any Environmental Laws. 34. "H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 35. "Initial Grant" means the date of the publication of the FCC "Public Notice" announcing the grant of the "Assignment Applications" for the FCC License to be transferred hereunder which contain no conditions materially adverse to Purchaser. The term "Public Notice" and "Assignment Applications" have the same meaning herein as are generally given the same under existing FCC rules, regulation and procedures. 36. "Intellectual Property" means the trademarks, trademark registrations and applications therefor, service marks, service mark registrations and applications therefor, copyright registrations and applications therefor and trade names that are (i) owned by the Company and (ii) material to the continued operation of the Business. 37. "IRS" means the Internal Revenue Service. 38. "Indemnification Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. 39. "Indemnification Escrow" has the meaning set forth in Section 3.1 of the Agreement. 48 40. "Losses" means any loss, liability, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) determined in each case on an after-tax, after-insurance coverage basis in accordance with Section 10.3(b) hereof. 41. "Material Adverse Effect" shall mean a material adverse effect on the business, business prospects or financial condition of the Company taken as a whole. 42. "Material Contract" means all agreements to which the Company is a party or by or to which it or its assets or properties are bound, except: (i) agreements for the cash sale of advertising time with a term of less than six months, (ii) agreements cancelable on no more than 90 days' notice without material penalty, or (iii) agreements which are otherwise immaterial to the Business and the Station. 43. "Permitted Exceptions" means matters that (i) do not render title to the Real Property unmarketable or (ii) do not prohibit the continued existence and/or continued use (as presently used) or maintenance of the buildings, structures or improvements presently located on the Real Property. Notwithstanding the foregoing, any matter shown on Schedule 5.2d shall be considered a Permitted Exception. 44. "Person" means a natural person, a governmental entity, agency or representative (at any level of government), a corporation, partnership, joint venture or other entity or association, as the context requires. 45. "Purchase Price has the meaning set forth in Section 3.1 of the Agreement. 46. "Purchaser" has the meaning set forth in the preamble to the Agreement. 47. "Purchaser's Bring-Down Certificate" has the meaning set forth in Section 11. 2 (a) of the Agreement. 48. "Purchaser's Knowledge" means the actual knowledge, after due inquiry, of the officers of Purchaser. 49. "Qualified Plan" shall mean any Company Plan that meets or purports to meet the requirements of Section 401(a) of the Code. 50. "Real Property" means any real property leased by the Company. 51. "Sellers" has the meaning set forth in the preamble to the Agreement. 49 52. "Sellers' Bring-Down Certificate" has the meaning set forth in Section 11.1(a) of this Agreement. 53. "Station" has the meaning set forth in the recitals to the Agreement. 54. "Stock" has the meaning set forth in the recitals to the Agreement. 55. "Tax" or "Taxes" means all taxes, including, but not limited to, income (whether net or gross), excise, property, sales, transfer, gains, gross receipts, occupation, privilege, payroll, wage, unemployment, workers' compensation, social security, occupation, use, value added, franchise, license, severance, stamp, premium, windfall profits, environmental (including taxes under Code Sec. 59A), capital stock, withholding, disability, registration, alternative or add-on minimum, estimated or other tax of any kind whatsoever (whether disputed or not) imposed by any Tax Authority, including any related charges, fees, interest, penalties, additions to tax or other assessments. 56. "Tax Authority" means any federal, national, foreign, state, municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body or other authority exercising any taxing or tax regulatory authority. 57. "Tax Liability" means any liability for a Tax. 58. "Taxable Period" means any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any applicable statute, rule or regulation. 59. "Tax Proceeding" means any audit, examination, claim or other administrative or judicial proceeding involving Taxes. 60. "Tax Returns" means all returns, reports, forms, estimates, information returns and statements (including any related or supporting information) filed or to be filed with any Tax Authority in connection with the determination, assessment, collection or administration of any Taxes. 61. "Unexercised Option" has the meaning set forth in Section 8.5 of the Agreement. 50 EX-10.65 11 EXHIBIT 10.65 STOCK PURCHASE AGREEMENT BY AND BETWEEN SINCLAIR COMMUNICATIONS, INC. AND THE STOCKHOLDERS OF MAX RADIO INC. , MAX RADIO INC. AND MAX MEDIA PROPERTIES LLC TABLE OF CONTENTS 1. DEFINITIONS................................................................3 SALE OF SHARES/EXCLUDED ASSETS.................................................3 2.1. Sale of Shares.................................................3 2.2. Excluded Assets................................................3 PURCHASE PRICE.................................................................6 3.1. Payment........................................................6 3.2. Disbursing Agent...............................................6 4. CLOSING....................................................................7 5. REPRESENTATIONS AND WARRANTIES OF SELLERS..................................7 5.1. Representations as to Shares, Etc..............................7 c.No Conflicts..............................................8 5.2. Representations and Warranties as to the Company...............8 a. Organization and Good Standing..........................8 b. Capitalization..........................................9 c. No Conflicts............................................9 d. Financial Statements....................................9 e. Employee Benefit Plans.................................11 f. Labor..................................................13 g. Insurance..............................................14 h. Material Contracts.....................................14 i. Compliance with Laws...................................15 j. Litigation.............................................15 k. No Brokers.............................................15 l. Consents...............................................15 m. Tax Matters............................................15 n. Dividends..............................................17 o. Accounts Receivable....................................18 p. Company Assets.........................................18 q. Representations as to the Company Interests............18 5.3. Representations and Warranties as to the MMP and the FCC Licensee Entities........................................18 a. Organization and Good Standing.........................18 b. Capitalization of MMP..................................19 c. Organization and Capitalization of the FCC License Entities...............................................19 d. No Conflicts...........................................20 e. Real Property..........................................20 f. Personal Property......................................21 i g. Financial Statements....................................22 h. FCC.....................................................23 i. Intellectual Property...................................24 j. Employee Benefit Plans..................................25 k. Labor...................................................27 l. Insurance...............................................28 m. Material Contracts......................................28 n. Compliance with Laws....................................28 o. Litigation..............................................28 p. Consents................................................28 q. Environmental...........................................29 r. Tax Matters.............................................30 s. Accounts Receivable.....................................32 t. Representations as to MMP Interests.....................32 5.4. Representations and Warranties as to MTR.......................33 a. Organization and Good Standing..........................33 b. Capitalization..........................................33 c. No Conflicts............................................33 d. Financial Statements....................................34 e. Employee Benefit Plans..................................35 f. Labor...................................................35 g. Insurance...............................................36 h. Material Contracts......................................36 i. Compliance with Laws....................................36 j. Litigation..............................................36 k. Consents................................................36 l. Tax Matters.............................................36 m. Dividends...............................................38 n. MTR Assets..............................................39 o. Representations as to MTR Interests.....................39 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................39 6.1. Organization and Good Standing................................39 6.2. Execution and Effect of Agreement.............................39 6.3. No Conflicts..................................................39 6.4. Consents......................................................40 6.5. Litigation....................................................40 6.6. No Brokers....................................................40 6.7. Purchaser Qualifications......................................40 7. ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES............41 7.1. Limitation; Survival..........................................41 ii 8. TAX MATTERS...............................................................41 8.1. Section 338 Election..........................................41 8.2. Tax Returns...................................................41 8.3. Apportionment.................................................42 8.4. Cooperation in Tax Matters....................................42 8.5. Certain Taxes.................................................43 8.6. FIRPTA........................................................43 8.7. Section 754 Election..........................................43 8.8. Closing Date Actions..........................................43 9. ADDITIONAL COVENANTS AND UNDERTAKINGS.....................................43 9.1. Further Assurances and Assistance.............................43 9.2. Access to Information.........................................44 9.3. Conduct of Business Prior to Closing..........................44 9.4. H-S-R Act.....................................................47 9.5. FCC Application...............................................48 (c)FCC Applications to Transfer Certain FCC Licenses.....48 9.6. Books and Records.............................................49 9.7. Employees and Employee Benefits...............................49 9.8. Interruption of Broadcast Transmission........................49 9.9. Interpretation of Certain Provisions..........................50 9.10. Collection of Accounts Receivable.............................51 9.11. Other Acquisitions............................................52 9.12. Payment of Certain Liabilities Prior to Closing...............53 9.13. Reserved......................................................53 9.14. Value Appreciation Rights and Incentive Fees..................53 10. INDEMNIFICATION..........................................................53 10.1. Indemnification of Purchaser by Sellers.......................53 10.2. Indemnification of Sellers by Purchaser.......................54 10.3. Limitations and Other Provisions Regarding Indemnification Obligations...................................55 10.4. Notice of Claim Defense of Action.............................57 10.5 Tax Contests..................................................58 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE..............59 11.1. Conditions Precedent to the Obligation of Purchaser...........59 11.2. Conditions Precedent to the Obligation of Sellers.............61 12. DELIVERIES AT THE CLOSING................................................62 12.1. Deliveries by Sellers.........................................62 12.2. Deliveries by Purchaser.......................................64 iii 13. EXPENSES.................................................................64 14. TERMINATION..............................................................64 14.1. Termination...................................................64 14.2. Procedure and Effect of Termination...........................65 15. NOTICES..................................................................66 16. SELLERS' AGENTS..........................................................68 16.1. Sellers' Agents...............................................68 17. MISCELLANEOUS............................................................68 17.1. Headings......................................................68 17.2. Schedules and Exhibits........................................69 17.3. Execution in Counterparts.....................................69 17.4. Entire Agreement..............................................69 17.5. Governing Law.................................................69 17.6. Modification..................................................69 17.7. Successors and Assigns........................................69 17.8. Waiver........................................................70 17.9. Severability..................................................70 17.10. Announcements.................................................70 17.11. Specific Performance..........................................70 17.12. Fees and Expenses.............................................70 17.13. Third Party Beneficiaries.....................................71 17.14. Interpretation................................................71 ANNEX 1 - DEFINITIONS ANNEX 2 - SELLERS EXHIBITS Exhibit A - Deposit Escrow Agreement Exhibit B - Indemnification Escrow Agreement Exhibit C - MMP II Assignment and Assumption Agreement Exhibit D - Time Brokerage Agreements Exhibit E - Opinion of Counsel, iv Clark & Stant, P.A. Exhibit F - Opinion of Sellers' FCC Counsel Exhibit G - Opinion of Counsel, Thomas & Libowitz, P.A. SCHEDULES 5.1a(ii) Encumbrances of Stock 5.1a(vi) Options and Agreements 5.1b Share Brokers 5.1c No Conflicts 5.2b Capitalization 5.2c Conflicts 5.2d Financial Statements 5.2e Employee Benefit Plans 5.2f Labor 5.2g Insurance 5.2h Material Contracts 5.2i Compliance with Laws 5.2j Litigation 5.2k Brokers 5.2l Consents 5.2m(a) Tax Matters 5.2m(c) Tax Basis and Tax Elections 5.2q Company Interest 5.3b Capitalization 5.3d Conflicts 5.3e Real Property 5.3f Personal Property 5.3g Financial Statements 5.3h FCC Licenses 5.3i Intellectual Property 5.3j Employee Benefit Plans 5.3k Labor 5.3k(d) Employee Terminations or Demands 5.3l Insurance 5.3m Material Contracts 5.3n Compliance with Laws 5.3o Litigation 5.3p Consents 5.3q Environmental Matters 5.3r(a) Tax Matters 5.3r(c) Tax Basis and Tax Elections 5.3t Representations as to MMP Interests v 5.4b Capitalization 5.4d Financial Matters 5.4h Material Contracts 5.4l(a) Tax Matters 5.4l(c) Tax Basis and Tax Elections 5.4o Representations as to MTR Interests 6.3 Conflicts 6.4 Consents 6.5 Litigation 6.7 Purchaser Qualifications 9.3(c) Planned Asset Dispositions vi STOCK PURCHASE AGREEMENT ------------------------ THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of this _____ day of December, 1997, is entered into by and among Sinclair Communications, Inc., a Maryland corporation ("Purchaser"), Aardvarks Unlimited Inc., a Virginia corporation ("Aardvarks"), Commonwealth Investors, L.P., a Virginia limited partnership ("Commonwealth"), Quad-C Partners, L.P., a Delaware limited partnership ("Quad-C Partners"), Quad-C Offshore Investors L.P., a Delaware limited partnership ("Offshore"), and Quad-C Partners II, L.P., a Virginia limited partnership ("Quad-C II"; together with Commonwealth, Quad-C Partners and Offshore "Quad-C") (each a "Seller" and collectively, "Sellers"), Max Radio Inc., a Virginia corporation (the "Company"), and Max Media Properties LLC, a Virginia limited liability company ("MMP"). RECITALS: --------- WHEREAS, Sellers own collectively all of the issued and outstanding shares of capital stock, par value $1.00, (the "Stock") of the Company; and WHEREAS, the Company is the owner of 31% of the issued and outstanding shares of capital stock, par value $1.00, of MTR Holding Corp., a Virginia corporation ("MTR"), 3,069,000 Class A Membership Units (out of a total 11,631,431 Membership Units) of MMP and a 2% limited partnership interest in Radio License L.P., a Virginia limited partnership ("RLLP"), the holder of the FCC Licenses of the Radio Stations (as defined below); and WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into a Stock Purchase Agreement (the "Investors Agreement") to acquire all of the issued and outstanding shares of Max Investors, Inc., a Virginia corporation ("Investors"). Investors is the owner of 3,133,897 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into an Asset Purchase Agreement (the "MTC Agreement") to acquire from Max Television Company, a Virginia corporation ("MTC"), 5,140,500 Class B Membership Units (out of a total 11,631,431 Membership Units) of MMP, 69% of the equity of MTR and a 2% limited partnership interests in the Television Licensees (as defined below); and WHEREAS, the Purchaser has simultaneously with the execution of this Agreement entered into an Asset Purchase Agreement (the "Management Agreement") to acquire from Max Management LLC, a Virginia limited liability company ("Management"), 188,034 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, MTR is the owner of 100,000 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; and WHEREAS, MMP is the owner of the assets (other than the FCC Licenses) and operator of television stations WSYT-TV in the Syracuse, New York market, WMMP-TV in the Charleston, South Carolina market, WKEF-TV in the Dayton, Ohio market, WEMT-TV in Greeneville, Tennessee, KBSI-TV in Cape Girardeau, Missouri and KETK-TV in the Tyler, Texas market (each a "Television Station" and collectively, the "Television Stations"); and WHEREAS, MMP is the owner of the assets (other than the FCC Licenses) and operator of radio stations WMQX-FM, in Winston-Salem, North Carolina ("WMQX"), WJMH-FM in Reidsville, North Carolina ("WJMH"), WQMG-AM in Greensboro, North Carolina ("WQMG-AM"), WQMG-FM in Greensboro, North Carolina ("WQMG"; together with WMQX, WJMH, WQMG-AM, the "Greensboro Stations"), WWDE-FM, in Hampton, Virginia ("WWDE"), WNVZ-FM, in Norfolk, Virginia ("WNVZ"), WPTE-FM, in Virginia Beach, Virginia ("WPTE"), and WFOG-FM, in Suffolk, Virginia ("WFOG"; together with WWDE, WNVZ and WPTE, the "Norfolk Stations") (each a "Radio Station" and collectively, the "Radio Stations"); and WHEREAS, MMP programs television station WDKA-TV, in Paducah, Kentucky, pursuant to a Time Brokerage Agreement with WDKA Acquisition Corp., television station WNYS-TV, in Syracuse, New York pursuant to a Time Brokerage Agreement with RKM Media, Inc. and television station KLSB-TV, in Nacogdoches, Texas pursuant to a Time Brokerage Agreement with KLSB Acquisition Corp. (the "LMA Stations" and for purposes of this Agreement, the LMA Stations, the Radio Stations and the Television Stations shall be collectively referred to as the "Stations"); and WHEREAS, MMP owns a 98% general partnership interest in RLLP; and WHEREAS, MMP owns a 98% general partnership interest in each of Max Television of Dayton L.P. ("Dayton LP"), Max Television of Girardeau L.P., Max Television of Syracuse L.P., Max Television of Tri-Cities L.P. ("Tri-Cities LP"), Max Television of Charleston L.P. and Max Television of Tyler L.P. (each a "Television Licensee" and collectively, the "Television Licensees" and together with RLLP the "FCC Licensee Entities"), each of which holds the FCC License of a Television Station as indicated on Annex A hereto; and WHEREAS, the parties desire that, before the Closing and after receipt of any required approval of the FCC, MMP transfer all partnership interests it holds in Dayton 2 LP and Tri-Cities LP to Max Media Properties II LLC, a newly-created Virginia limited liability company ("MMP II) (the "MMP II Transfers"); and WHEREAS, the parties desire that, after the MMP II Transfers, but before the Closing, MMP distribute to MTC all of the membership interests in MMP II (the "MMP II Distribution"); and WHEREAS, on the consummation of this Agreement, the MTC Agreement, the Investors Agreement and the Management Agreement (collectively, the "Purchase Agreements"), Purchaser will own, directly or indirectly, all of the 11,631,431 Membership Units of MMP and all general and limited partnership interests in the FCC Licensee Entities, other than in Dayton LP and Tri-Cities LP (the "MMP II Licensees"); and WHEREAS, MMP holds certain assets more fully described below (the "Excluded Assets") that will not be acquired by Purchaser; and WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to purchase from Sellers, all of the issued and outstanding shares of Stock. SECTION 1 DEFINITIONS ----------- As used in this Agreement, capitalized terms shall have the meanings specified in the text hereof or on Annex 1 hereto (which is incorporated herein by reference), which meanings shall be applicable to both the singular and plural forms of the terms defined. SECTION 2 SALE OF SHARES/EXCLUDED ASSETS ------------------------------ 2.1 SALE OF SHARES. At the Closing, each Seller shall sell, assign, transfer and deliver to Purchaser, and Purchaser shall purchase from each Seller, that number and class of shares of Stock as is set forth opposite the name of each Seller in Annex 2 hereto. Each Seller consents to the sale of stock by each other Seller pursuant to this Agreement. 2.2 EXCLUDED ASSETS. (a) The following assets (collectively, the "Excluded Assets") may be distributed by MMP to the holders of Membership Units in MMP, and may be distributed by the Company and MTR to their shareholders or their designee prior to the Closing: 3 (i) all cash, cash equivalents and cash items of any kind whatsoever, certificates of deposit, money market instruments, bank balances and rights in and to bank accounts, and Treasury Bills; (ii) all furniture, fixtures and equipment located at the principal place of business of MMP, the address of which is 900 Laskin Road, Virginia Beach, Virginia 23451 and the leasehold interest therein; (iii) the Option Agreement with Gary and Susan Clarke, WWBI TV, Inc. dated as of July 11, 1997, as amended and all promissory notes and agreements related thereto and all related collateral and other documents; (iv) all notes payable and other amounts due from MCC Air Inc. and all assets, including real property, promissory notes and agreements relating solely to the sale and lease of WMQX-AM, Greensboro, NC to Winston-Salem Radio Corporation and Willis Broadcasting Corporation; (v) subject to the terms and conditions of the Indemnification Escrow Agreement (as defined below), the accounts receivable of the Company and of MMP; (vi) the names "Max Media," "Max Television," "Max Radio" and "Max Media Properties". Any distribution of Excluded Assets by MMP will be made pro rata to the holders of Membership Units in MMP unless otherwise agreed by Purchaser. (b) Notwithstanding anything to the contrary in Section 2.2(a) above, the Company, MTR and MMP shall each retain an amount of cash, cash equivalents and other cash items that are sufficient to cover and pay their respective Closing Date Liabilities. For purposes of this Agreement, the term "Closing Date Liabilities" shall mean the liabilities of the Company, MTR and MMP (other than for Funded Debt, liabilities with respect to program contract liabilities accruing after the Closing Date and liabilities with respect to trade and barter obligations arising after the Closing Date) whether or not disclosed on any Schedule hereto (A) as of the Closing Date; (B) for operations prior to the Closing Date; and (C) for all liabilities of any kind whatsoever under that certain Mutual Release dated as of January 1, 1997 and that certain Settlement Agreement dated as of January 17, 1997 (collectively the "Shareholder Settlement Agreements"). Except as otherwise provided in this Section 2.2(b), the Closing Date Liabilities shall be determined in accordance with GAAP consistently applied with prior 4 periods, and shall be consistent with the books and records of the Company, MTR and MMP. The amount of cash, cash equivalents and cash items retained to cover the Closing Date Liabilities shall not be considered Excluded Assets. (i) MMP shall deliver to Purchaser at the Closing a certificate (the "Estimate Certificate") setting forth its good faith estimate of the Closing Date Liabilities, which shall be used to determine the amount of cash, cash equivalents and other cash items required to be retained by the Company, MTR and MMP pursuant to this Section 2.2(b). (ii) Within one hundred twenty (120) days of the Closing, Purchaser shall cause its accountant to prepare and deliver to Sellers a certificate setting forth its calculation of the Closing Date Liabilities (the "Accountant's Certificate"). The amount of the Closing Date Liabilities as set forth on the Accountant's Certificate shall be final unless Sellers' Agents notify Purchaser within thirty (30) days from their receipt of the Accountant's Certificate that they dispute the Accountant's Certificate. If Sellers' Agents and Purchaser are unable to agree on the amount of the Closing Date Liabilities within fifteen (15) days after Sellers' Agents' notice, the parties shall jointly appoint and engage an independent accountant of national or regional repute (the "Independent Accountant") to perform an independent evaluation of the Closing Date Liabilities. The findings of the Independent Accountant as to the amount of the Closing Date Liabilities shall be final and binding on the parties hereto. (iii) Upon the determination of the Closing Date Liabilities becoming final which is different from the Estimate Certificate either (A) Purchaser shall be entitled to a payment from the Indemnification Escrow equal to the amount by which the aggregate amount of the Closing Date Liabilities exceeds the Closing Date Liabilities shown on the Estimate Certificate, taking into account any amounts paid from the Indemnification Escrow under provisions similar to this provision in the MTC Agreement, the Management Agreement and the Investors Agreement, or (B) Purchaser shall pay to Disbursing Agent an amount by which the aggregate amount of Closing Date Liabilities shown on the Estimate Certificate exceeds the Closing Date Liabilities as finally determined. (iv) For purposes of determining the amount of the Tax liabilities of the Company and MTR to be included in the Closing Date Liabilities (the "Closing Date Tax Liabilities"), such Tax liabilities shall include all Tax liabilities of the Company and MTR that are attributable to items of income, gain, loss, deduction and credit of MMP and the FCC Licensee Entities accruing through and including the Closing Date, notwithstanding that such items may be reported by the Company, MTR, Purchaser, or Purchaser's Affiliates in Taxable Periods ending after the Closing Date. The amount of the Tax liabilities attributable to the Tax items of MMP and the FCC Licensee Entities shall be 5 determined by assuming that the taxable years of MMP and the FCC Licensee Entities, as well as the taxable years of the Company and MTR, end as of the close of business on the Closing Date and by assuming Purchaser's compliance with Section 8.8. The Closing Date Tax Liabilities shall not include, and Purchaser shall have no rights of Indemnification under Section 10 with respect to, any Tax Liabilities arising from the MMP II Distribution (v) Notwithstanding anything to the contrary contained in this Section 2.2, the final determination of the Closing Date Liabilities hereunder shall not affect Purchaser's indemnification rights pursuant to Section 10 to the extent the actual Closing Date Liabilities exceed the final determination thereunder. SECTION 3 PURCHASE PRICE -------------- 3.1 Payment. In consideration for the sale of the Stock, Purchaser shall pay to Sellers the aggregate amount of the "Purchase Price", payable as follows: (1) Purchaser has deposited with First Union National Bank, as Escrow Agent pursuant to the Deposit Escrow Agreement, the Escrow Deposit which shall be distributed in accordance with the Deposit Escrow Agreement in the form attached hereto as Exhibit A. (2) At the Closing, the "Initial Deposit" which shall be held in Escrow (the "Indemnification Escrow") by Citibank, N.A. as Escrow Agent pursuant to the Indemnification Escrow Agreement in the form of Exhibit B hereto (the "Indemnification Escrow Agreement"); and (3) the balance of the Purchase Price at the Closing, by wire transfer of federal or other immediately available funds to the accounts specified by Disbursing Agent pursuant to wire instructions delivered in writing to Purchaser not later than two (2) Business Days prior to the Closing. 3.2. DISBURSING AGENT. The Disbursing Agent shall disburse the Purchase Price to Sellers in accordance with the Disbursement Agreement. SECTION 4 CLOSING ------- The closing of the transaction contemplated by this Agreement (the "Closing"), subject to fulfillment or waiver of the conditions set forth in Section 11 hereof, shall be held 6 at the offices of Clark & Stant, P.C., One Columbus Center, Suite 900, Virginia Beach, Virginia 23462, at 10:00 A.M. local time (but shall be deemed to have occurred at the close of business on such day), on the later to occur of (a) five Business Days after all applicable waiting periods under the H-S-R Act shall have expired or terminated, or (b) five Business Days after the Final Order (the date of Closing being the "Closing Date"), unless (i) Purchaser elects to close upon receipt of Initial Grant, in which case Purchaser shall give Sellers reasonable notice of the Closing, or (ii) the parties shall mutually agree upon a different date or location; provided, however, that in no event shall the Closing be held prior to March 18, 1998; and provided, further, that in the event the Closing is postponed past July 15, 1998, due to a postponement of the Closing under Section 9.8(b) or otherwise, Sellers, in their sole discretion, may postpone the Closing to September 1, 1998. In no event shall Closing occur later than the Termination Date. SECTION 5 REPRESENTATIONS AND WARRANTIES OF SELLERS ----------------------------------------- 5.1. REPRESENTATIONS AS TO SHARES, ETC. Each Seller hereby represents and warrants to Purchaser that: a. (i) such Seller is the record and the beneficial owner of all the shares of the Stock set forth opposite such Seller's name in Annex 2 hereto; (ii) such Seller holds of record and owns beneficially all of the shares of the Stock set forth opposite such Seller's name in Annex 2 hereto free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.1a(ii) hereof, all of which will be released at or before the Closing; (iii) except for any lien, security interest, pledge or encumbrance created by Purchaser on or subsequent to the Closing Date, upon transfer of the Stock set forth opposite such Seller's name in Annex 2 hereto to Purchaser at the Closing, Purchaser will have legal and equitable title to such Stock, free and clear of any lien, security interest, pledge or encumbrance; (iv) such Seller has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of such Seller, and if such Seller is an entity that such entity is duly and validly organized, existing and in good standing in the jurisdiction of its formation; (v) this Agreement has been duly executed and delivered by such Seller and constitutes a legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (vi) except as described on Schedule 5.1a(vi), the shares are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting 7 rights (other than that contemplated by Section 16 hereof). b. Except as described on Schedule 5.1b, no Seller nor anyone acting on behalf of any Seller, has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the sale of the Stock and the transactions contemplated by this Agreement. The payment of such brokerage fees, commissions, or finders fees, if any, shall remain the sole obligation of Sellers. c. NO CONFLICTS. Except as described on Schedule 5.1(c), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, as to any Seller (a) violate any provision of the articles of incorporation, by-laws, general or limited partnership agreement or limited liability company operating agreement with respect to any Seller that is an entity, (b) violate any provision of applicable law, rule and regulation, which violation would prevent or interfere with any Seller's ability to perform hereunder, or (c) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument, to which any Seller is a party or to which their property is subject, or constitutes to default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with any Seller's ability to perform hereunder. 5.2. REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY. Sellers and the Company, jointly and severally, hereby represent and warrant to Purchaser as to the Company as follows: a. ORGANIZATION AND GOOD STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia hereto and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. The Company is qualified as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. Other than stock of MTR, the Company does not own any direct or indirect subsidiary corporation. b. CAPITALIZATION. The designations of each class of the capital stock of the Company and the number of authorized and issued and outstanding shares thereof is as described on Schedule 5.2b. All the shares of the Stock have been validly issued and are fully paid and nonassessable and are held of record by the respective Sellers as set forth on Annex 2 hereto. Except as described on Schedule 5.2b, (i) no shares of capital stock of the 8 Company is held in treasury, (ii) there are no other issued or outstanding equity securities of the Company, (iii) there are no stock appreciation rights, phantom stock rights, profit participation rights, or other similar rights with respect to shares outstanding; and (iv) there are no other issued or outstanding securities of the Company convertible or exchangeable at any time into equity securities of the Company. The Company is not subject to any commitment or obligation that would require the issuance or sale of additional shares of capital stock of the Company at any time under options, subscriptions, warrants, rights or any other obligations. Schedule 5.2b sets forth the equity interests in any corporation, partnership, limited liability company, joint venture or other entity owned by the Company. c. NO CONFLICTS. Except as described on Schedule 5.2c, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of incorporation or by-laws of the Company, (ii) violate any provision of applicable law, rule and regulation, which violation would prevent or materially interfere with Sellers' ability to perform hereunder or have a Material Adverse Effect, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which the Company is a party or to which its property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with the Company's ability to perform hereunder or have a Material Adverse Effect; provided, however, that clause (iii) above shall be limited to Sellers' Knowledge. d. FINANCIAL STATEMENTS. The Company has provided or made available to Purchaser copies of the Financial Statements. The Financial Statements have been prepared in accordance with GAAP consistently applied with prior periods. The Financial Statements present fairly the financial position of the Company as at and for the periods indicated therein. Except as set forth on Schedule 5.2.d hereto, since December 31, 1996, there has not been any Material Adverse Effect on the business, financial condition, operations or results of operations of the Company taken as a whole. Without limiting the generality of the foregoing, since December 31, 1996, except as set forth on Schedule 5.2d: (i) the Company has not sold, leased, transferred, or assigned any material assets, tangible or intangible; (ii) the Company has not entered into any material agreement, contract, lease, or license; (iii) the Company has not accelerated, terminated, made material 9 modifications to, or canceled any material agreement, contract, lease, or license to which the Company is a party or by which the Company is bound; (iv) the Company has not imposed any security interest upon any of its assets, tangible or intangible; (v) the Company has not made any material capital expenditures; (vi) the Company has not made any material capital investment in, or any material loan to, any Person; (vii) the Company has not directly created, incurred, assumed, or guaranteed any indebtedness for borrowed money and capitalized lease obligations; (viii) the Company has not granted any license or sublicense of any material rights under or with respect to any Intellectual Property; (ix) there has been no change made or authorized in the charter or bylaws of the Company; (x) the Company has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; (xi) the Company has not declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; (xii) the Company has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (xiii) the Company has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees; (xiv) the Company has not entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; (xv) the Company has not granted any increase in the base compensation of any of its directors, officers, and employees outside the ordinary course of business; 10 (xvi) the Company has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Company Plan or Company Benefit Arrangement); (xvii) the Company has not made any other material change in employment terms for any of its directors, officers, and employees; (xviii) the Company has not made or changed any material Tax election or taken any other action with respect to Taxes inconsistent with past practices; (xix) the Company has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and (xx) except as set forth in this Agreement, the Company has not committed to any of the foregoing. e. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit Plans and Benefit Arrangements: (a) Schedule 5.2e completely and accurately lists all Company Plans and Company Benefit Arrangements and specifically identifies any that are Qualified Plans. Neither Company nor any ERISA Affiliate has ever maintained or contributed to any Qualified Plans other than those listed on Schedule 5.2e. The Qualified Plan has always qualified in form and operation under Code Section 401(a) and has a currently applicable determination letter from the Internal Revenue Service, and its trust has always been exempt under Code Section 501, and nothing has occurred with respect to such plan and trust that could cause the loss of such qualification or exemption or the imposition of any liability, lien, penalty, or tax under ERISA or the Code. (b) Each Company Plan and each Company Benefit Arrangement has been maintained in accordance with its constituent documents and with all applicable provisions of the Code, ERISA and other domestic and foreign laws, including federal, state, and foreign securities laws and all laws respecting reporting and disclosure. No Company Plan holds employer securities. (c) Neither the Company nor any ERISA Affiliate (since August 1, 1992) has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV of ERISA. Neither the 11 Company nor any ERISA Affiliate has ever made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37)). The Company has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement that is not a Company Benefit Arrangement or with respect to any Benefit Plan sponsored or maintained (or which has been or should have been sponsored or maintained) by any ERISA Affiliate; and no facts exist that could reasonably be expected to result in such liability, as a result of termination, withdrawal or funding waiver with respect to any such plan, program, or arrangements. (d) There are no pending claims or lawsuits by, against, or relating to any non-Company Benefit Plans or non-Company Benefit Arrangements that would, if successful, result in liability for the Company, and no claims or lawsuits (other than routine benefit claims) have been asserted, instituted or, to the Knowledge of the Company, threatened by, against, or relating to any Company Plan or Company Benefit Arrangement, and the Company does not have Knowledge of any fact that could form the basis for any such claim or lawsuit. The Company Plans and Company Benefit Arrangements are not presently under audit or examination (and have not received notice of a potential audit or examination) by any governmental authority, and no matters are pending with respect to the Qualified Plan under any governmental compliance programs. (e) No Company Plan or Company Benefit Arrangement contains any provision or is subject to any law that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions this Agreement contemplates, and the Company has not declared or paid any bonus or other incentive compensation or established any severance plan, program, or arrangement in contemplation of the transactions contemplated by this Agreement. 12 (f) With respect to each Company Plan, there have been no violations of Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims would result in any liability for the Company or any Person required to be indemnified by it. (g) The Company has made all required contributions to the Company Plan as of the last day of each plan's most recent fiscal year, all benefits accrued under any unfunded Company Plan or Company Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with generally accepted accounting principles; and all monies withheld from employee paychecks with respect to Company Plans have been transferred to the appropriate plan within the timing required by governmental regulations. (h) The Company and its ERISA Affiliates have complied with the health continuation rules of Code Sections 4980B (and its predecessor) and with Code Section 5000. No employee or former employee of the Company nor beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits subject to reporting under Statement of Financial Accounting Standards No. 106, other than as required by Code Section 4980B or other applicable law. (i) There are no contracts, agreements, plans or arrangements, including but not limited to the provisions of this Agreement, covering any employee or former employee of the Company that, individually or collectively, could give rise to the payment of any amount (or portion thereof) that would not be deductible pursuant to Code Sections 280G, 404 or 162. f. LABOR. With respect to employees of and service providers to the Company, except as set forth on Schedule 5.2f: (a) The Company is and has been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and has not and is not engaged in any unfair labor practice. (b) The employees of the Company are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against, or currently being negotiated by, the Company, and to the Company's 13 knowledge, no labor representation organization effort exists nor has there been any such activity within the past three years. (c) All Persons classified by the Company as independent contractors do satisfy and has satisfied the requirements of law to be so classified, and the Company have fully and accurately reported their compensation on IRS Forms 1099 when required to do so. (d) Since December 31, 1996, the Company has not employed any employees. (e) There is no charge or compliance proceeding actually pending or threatened against the Company before the Equal Employment Opportunity Commission or any state, local, or foreign agency responsible for the prevention of unlawful employment practices. g. INSURANCE. Schedule 5.2g hereto contains a list of all insurance policies concerning the Business and describes coverage thereunder (including whether occurrence or claims made), other than employee-benefit related insurance policies. All such policies are legal, valid, binding, enforceable and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by court of law or equity). There are no existing breaches or defaults by the Company or, to the Company's Knowledge by any other party with respect to such policies, and no notice of cancellation or termination has been received. h. MATERIAL CONTRACTS. Schedule 5.2h hereto contains a list of all the Material Contracts and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts listed on Schedule 5.2h are legal, valid and binding obligations of the Company enforceable in accordance with their terms and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the right of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). There exists no default or event which, with notice or lapse of time, or both, would constitute a default by the Company or to the Company's Knowledge any other party to any such Material Contract or which would permit termination, modification or acceleration. Neither Sellers nor the Company has received notice (or otherwise has knowledge) that any party to any Material Contract intends to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. 14 i. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.2i, the Company is in material compliance with all material applicable Federal, state and local laws, rules and regulations, and to the Company's knowledge, there are no actions threatened or pending alleging noncompliance therewith. j. LITIGATION. Except as set forth on Schedule 5.2j hereto, there is no suit, claim, action, proceeding or arbitration pending or, to the Company's Knowledge, threatened against (i) any of Sellers that seeks to enjoin or obtain damages in respect of the transactions contemplated hereby, or (ii) the Company. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency specifically against or specifically affecting the Business or the Company, except as disclosed on Schedule 5.2j. k. NO BROKERS. Except as described on Schedule 5.2k, the Company has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the sale of the Stock and the transactions contemplated by this Agreement. l. CONSENTS. Except (a) as set forth on Schedule 5.2l hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC Applications, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of any Seller or the Company is required in connection with the execution and delivery of this Agreement by Sellers or the consummation of the transactions contemplated hereby (including any consents required under any Company Material Contract as a result of the change in control contemplated hereby). m. TAX MATTERS. (a) Except as set forth on Schedule 5.2m(a) hereto: (i) All Tax Returns required to be filed by or with respect to the Company have been filed when due in a timely fashion, and all Tax Returns required to be filed by or with respect to the Company for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to the Company are true, correct and complete in all material respects. (ii) The Company has paid in full on a timely basis all Taxes owed by the Company, whether or not shown on any Tax Return, and the Company will have paid prior to the Closing Date all Taxes owed with respect to Taxable Periods 15 ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) The Company's liability for unpaid Taxes did not, as of the date of the Financial Statements exceed the liability for such Taxes (excluding reserves for deferred Taxes) set forth on the Financial Statements. The Company has no liability for unpaid income Taxes other than its Tax liability attributable to the Company's allocable share of MMP's items of income, gain, loss, deduction and credit accruing through the date hereof. The Company's actual liability for unpaid Taxes (determined consistently with Section 2.2(b)(iv)) will not as of the Closing Date exceed its liability for such Taxes reflected in the Closing Date Tax Liabilities (as finally determined pursuant to Section 2.2(b)(ii). (iv) The Company has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to the Company and the Company has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is currently in effect with respect to the assessment, collection or payment of Taxes of the Company or for which the Company is liable. (vii) No extension of the time within which to file any Tax Return of the Company is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted, or assessed against the Company. (ix) There are no liens on the assets of the Company relating or attributable to Taxes (except liens for Taxes not yet due). (x) The Company is not and has not been at any time during the preceding five years a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (xi) There is no agreement or consent made under Section 341(f) of the Code affecting the Company. 16 (xii) The Company has not agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. (xiii) The Company is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and the Company has not assumed the Tax liability of any other entity or person under contract. (xiv) The Company is not and has not at any time been a member of an affiliated group filing a consolidated federal income tax return and does not have any liability for the Taxes of another entity or person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise. (xv) Except for MMP and RLLP, the Company is not a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xvi) None of the Company's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (b) Sellers have furnished or otherwise made available to Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to the Company since January 1, 1994; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to the Company relating to Taxes. (c) Schedule 5.2m(c) contains complete and accurate descriptions of (i) the Company's basis in its assets, (ii) the amount of any net operating loss, net capital loss and any other Tax carryovers of the Company and (iii) material Tax elections made by or with respect to the Company. The Company has no net operating losses or other Tax attributes presently subject to limitation under Code Sections 382, 383 or 384, or the federal consolidated return regulations. n. DIVIDENDS. Since December 31, 1996, no dividends have been declared, issued or otherwise approved by the Board of Directors of the Company in respect of the Stock. o. ACCOUNTS RECEIVABLE. The Company has no accounts receivable other than amounts due as Tax refunds from certain Tax Authorities. 17 p. COMPANY ASSETS. The Company owns no other assets other than cash or cash equivalents received or due from Tax refunds, 31% of the equity of MTR, 3,069,000 Class A Membership Units of MMP, and a 2% limited partnership interest in RLLP. q. REPRESENTATIONS AS TO THE COMPANY INTERESTS. (i) The Company is the record and the beneficial owner of 3,069,000 Class A Membership Units (out of a total 11,631,431 Membership Units) of MMP, thirty-one (31) shares (out of a total one hundred (100) issued and outstanding shares) of the issued and outstanding shares of MTR and a 2% limited partnership interest in RLLP (collectively, the "Company Interests"); (ii) the Company holds of record and owns beneficially the Company Interests free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.2q hereof, all of which will be released at or before the Closing; (iii) the Company has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of the Company; (iv) this Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (v) except as described on Schedule 5.2q, the Company Interests are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. 5.3. REPRESENTATIONS AND WARRANTIES AS TO THE MMP AND THE FCC LICENSEE ENTITIES. Sellers, MMP and the Company, jointly and severally, hereby represent and warrant to Purchaser as to MMP and the FCC Licensee Entities as follows: a. MMP ORGANIZATION AND GOOD STANDING. MMP is a limited liability company duly organized and validly existing under the laws of Virginia and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. To the extent required by law, MMP is qualified as a foreign limited liability company and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification. MMP owns 98% of the outstanding partnership interests in the FCC Licensee Entities. 18 b. CAPITALIZATION OF MMP. The designations of each class of the membership units of MMP and the number of authorized and issued and outstanding membership units thereof is as described on Schedule 5.3b. All membership units have been validly issued and are fully paid and nonassessable and are held of record by the respective members of MMP as set forth on Schedule 5.3b. Except as described on Schedule 5.3b, (i) there are no other issued or outstanding equity securities of MMP; (ii) there are no membership or value appreciation rights, phantom membership rights, profit participation rights, or other similar rights with respect to membership units outstanding; and (iii) there are no other issued or outstanding membership interests or other securities of MMP convertible or exchangeable at any time into equity securities of MMP. Except as set forth in the Operating Agreement of MMP as amended, MMP is not subject to any commitment or obligation that would require the issuance or sale of additional membership interests or membership units of MMP at any time under options, subscriptions, warrants, rights or any other obligations. Schedule 5.3b sets forth the equity interests in any corporation, partnership, limited liability company, joint venture or other entity owned by MMP. c. ORGANIZATION AND CAPITALIZATION OF THE FCC LICENSE ENTITIES. Each FCC License Entity is a limited partnership duly organized and validly existing under the laws of the Commonwealth of Virginia and has full partnership power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. Each FCC License Entity is qualified as a foreign corporation and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect. No FCC License Entity owns any direct or indirect subsidiaries. MMP is the sole general partner and owns ninety-eight percent (98%) of the partnership interests of each of the FCC License Entities. MTC is the sole limited partner and owns two percent (2%) of the partnership interests of each of the FCC License Entities other than RLLP. The Company is the sole limited partner and owns two percent (2%) of the partnership interests of RLLP. All such partnership interests have been validly issued and are fully paid and nonassessable and are held of record by the respective partners as set forth above. There are no (i) other issued or outstanding equity securities of any FCC License Entity, (ii) partnership or value appreciation rights, phantom partnership rights, profit participation rights, or other similar rights with respect to partnership interests outstanding and (iii) other issued or outstanding partnership interests or other securities of any FCC License Entity convertible or exchangeable at any time into equity securities of such FCC License Entity. No FCC License Entity is subject to any commitment or obligation that would require the issuance or sale of additional partnership interests of any FCC License Entity at any time under options, subscriptions, warrants, rights or any other obligations. No FCC License Entity holds any equity interest in any 19 corporation, partnership, limited liability company, joint venture or other entity. d. NO CONFLICTS. Except as described on Schedule 5.3d, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of organization or operating agreement of MMP or the limited partnership agreements of the FCC Licensee Entities, (ii) violate any provision of applicable material law, rule and regulation, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any material agreement, indenture, mortgage or instrument to which either MMP or any FCC Licensee Entity is a party or to which any of their property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would have a MMP Material Adverse Effect. e. REAL PROPERTY. The MMP Real Property owned and all leaseholds and other interests in MMP Real Property used or useful in the Business and all buildings, structures, towers, and improvements thereon used or useful in the business and operations of the Stations are listed on Schedule 5.3e to this Agreement and, except for Permitted Encumbrances and as disclosed in Schedule 5.3e to this Agreement, MMP has good and marketable fee simple title (insurable at standard rates by a reputable national title insurer) to all fee estates included in the Real Property, and good title to all other MMP Real Property, in each case clear of all liens. The FCC Licensee Entities own no real property, leaseholds or other interests in real property. No portion of the MMP Real Property or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or, to MMP's Knowledge, threatened. MMP has a valid leasehold interest in all leased property and subleases to which it is a party, and MMP is the owner and holder of all the leased property purported to be granted by such leases and subleases. The MMP Real Property and the leases and subleases listed on Schedule 5.3e constitute all of the real property owned, leased or used by MMP in the business and operations of the Stations, which is material to the business and operations of the Stations. The Sellers have delivered or caused to be delivered to the Purchaser correct and complete copies of the deeds, leases and subleases listed in Schedule 5.3e. With respect to each lease and sublease listed in Schedule 5.3e: 20 (a) the lease or sublease is legal, valid, binding, enforceable, and in full force and effect in all material respects subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with several principles of equity (whether applied by a court of law or equity); (b) MMP and, to MMP's knowledge, no other party to the lease or sublease is in material breach or default, and no event has occurred which, with notice or lapse of time, would constitute a material breach or default or permit termination, modification, or acceleration thereunder; (c) MMP and, to MMP's knowledge, no other party to the lease or sublease has repudiated any material provision thereof; (d) MMP is not a party to and, to MMP's knowledge, there are no material disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; (e) except as set forth on Schedule 5.3e, MMP has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold; and (f) all facilities leased or subleased thereunder material to the operation of the Stations have received all approvals of governmental authorities (including material licenses and permits) required in connection with the operation thereof, and have been operated and maintained in accordance with applicable laws, rules, and regulations in all material respects. f. PERSONAL PROPERTY. Schedule 5.3f lists as of the date hereof all items of Personal Property having a fair market value in excess of $5,000.00. Except as set forth on Schedule 5.3f hereto, MMP has good and marketable title to all of its material items of tangible personal property and assets used or useful by MMP located on its premises or shown on the MMP Financial Statements are free and clear of all liens, security interests and encumbrances other than those that would not materially affect Purchaser's use or ownership of such personal property after the Closing. The tangible personal property of MMP has been maintained in accordance with normal industry practice and is in good condition and repair given the age and use of such property (subject to normal wear and tear) and is adequate for its present use by MMP. 21 g. FINANCIAL STATEMENTS. MMP has provided or made available to Purchaser copies of the MMP Financial Statements. The MMP Financial Statements have been prepared in accordance with GAAP consistently applied with prior periods except in the case of the unaudited MMP Financial Statements, the absence of year-end audit adjustments and notes. The MMP Financial Statements present fairly the financial position of MMP as at and for the periods indicated therein, and are consistent with the books and records of MMP. Except as set forth on Schedule 5.3g hereto, since December 31, 1996, there has not been any Material Adverse Effect on the business, financial condition, operations, or results of operations of MMP taken as a whole. Without limiting the generality of the foregoing, since that date, except as described on Schedule 5.3g: (i) MMP has not sold, leased, transferred, or assigned any material assets, tangible or intangible, outside the ordinary course of business; (ii) MMP has not entered into any material agreement, contract, lease, or license outside the ordinary course of business; (iii) MMP has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which MMP is a party or by which MMP is bound; (iv) MMP has not imposed any security interest upon any of its assets, tangible or intangible; (v) MMP has not made any material capital expenditures outside the ordinary course of business; (vi) MMP has not made any material capital investment in, or any material loan to, any other Person outside the ordinary course of business; (vii) MMP has not created, incurred, assumed, or guaranteed more than $45 million in aggregate indebtedness for borrowed money and capitalized lease obligations; (viii) MMP has not granted any license or sublicense of any material rights under or with respect to any Intellectual Property; (ix) there has been no change made or authorized in the operating agreement of MMP; (x) MMP has not experienced any material damage, destruction, 22 or loss (whether or not covered by insurance) to its property; (xi) MMP has not made any loan to, or entered into any other transaction with, any of its managers, officers, and employees outside the ordinary course of business; (xii) MMP has not entered into any employment contract outside the ordinary course of business or collective bargaining agreement, written or oral, or modified the terms of any such existing contract or agreement; (xiii) MMP has not granted any increase in the base compensation of any of its members outside the ordinary course of business; (xiv) MMP has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its managers, officers, and employees (or taken any such action with respect to any other MMP Plan or MMP Benefit Arrangement); (xv) MMP has not made any other material change in employment terms for any of its members or employees outside the ordinary course of business; (xvi) MMP has not made or changed any material Tax election or taken any other action with respect to Taxes not in the ordinary course of business and consistent with past practice; (xvii) MMP has not made any distributions other than in the ordinary course of business, and has not made any non-pro rata distributions; (xviii) MMP has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and (xix) except as contemplated by this Agreement, the Investors Agreement, the Management Agreement, the MTC Agreement, and Assignment and Assumption Agreement by and between MMP and the Max Media LLC II Distribution Agreement, MMP has not committed to any of the foregoing. h. FCC. MMP and the FCC Licensee Entities have been and currently are operated in material compliance with the terms of the FCC Licenses, the Communications Act of 1934, as amended, and applicable rules, regulations and policies of the FCC ("FCC Rules and Regulations"). All FCC Licenses, a true and complete list of which is set forth on Schedule 5.3h, and true and complete copies of each of which have 23 been delivered to Purchaser, are valid and in full force and effect. Except as set forth on Schedule 5.3h, no application, action or proceeding is pending for the renewal or modification of any of the FCC Licenses and, to Sellers' and MMP's Knowledge, there is not now before the FCC any investigation or complaint against MMP or the FCC Licensee Entities relating to the Stations, the unfavorable resolution of which would impair the qualifications of the FCC Licensee Entities to hold any FCC Licenses. Except as set forth on Schedule 5.3h, there is no proceeding pending before the FCC, and there is no outstanding notice of violation from the FCC with respect to the Stations. Except as set forth on Schedule 5.3h, no order or notice of violation has been issued by any governmental entity which permits, revocation, adverse modification or termination of any FCC License. Except as set forth on Schedule 5.3h and except for those conditions or restrictions appearing on the face of the FCC Licenses, or other licenses, none of the FCC Licenses or other licenses is subject to any restriction or condition which would limit the operation of the Stations as currently operated. The FCC Licenses listed in Schedule 5.3h are currently in effect and are not subject to any liens, or other encumbrances. No license renewal applications are pending with respect to any of the FCC Licenses. As of the date hereof, Sellers, the Company, MMP, and the FCC License Entities have no reason to believe that the FCC would not renew the FCC Licenses in the ordinary course for a full license term without any adverse conditions, upon the timely filing of appropriate applications and payment of the required filing fee. As of the date hereof, Sellers, the Company, MMP and the FCC Licensee Entities have no reason to believe that the FCC would not grant the FCC Application in the ordinary course without any adverse conditions. All documents required by 47 C.F.R. Section 73.3526 to be kept in each Station's public inspection files are in such file, and such file will be maintained in proper order and complete up to and through the Closing Date. i. INTELLECTUAL PROPERTY. Set forth on Schedule 5.3i is a complete list of all Intellectual Property owned by or licensed to MMP on the date hereof material to the operations of the Stations. To MMP's Knowledge, except as otherwise set forth on Schedule 5.3i hereto, MMP owns such Intellectual Property free and clear of any royalty, lien, encumbrance or charge and does not interfere with the rights of others. Except as set forth on Schedule 5.3i, MMP has not received any written notice or written claim that any such Intellectual Property is not valid or enforceable, or of any infringement upon or conflict with any patent, trademark, service mark, copyright or trade name of any third party by MMP. Except as set forth on Schedule 5.3i, MMP has not given any notice of infringement to any third party with respect to any of the Intellectual Property and to MMP's Knowledge no such infringement exists. There is no Intellectual Property owned by or licensed to the FCC Licensee Entities. j. EMPLOYEE BENEFIT PLANS. With respect, as applicable, to Benefit Plans and Benefit Arrangements: 24 (a) Schedule 5.3j completely and accurately lists all MMP Plans and MMP Benefit Arrangements currently in existence and specifically identifies any that are Qualified Plans. Since January 1, 1996 (the date of formation of MMP), MMP has maintained or contributed solely to the Qualified Plans listed on Schedule 5.3j. The Qualified Plans listed on Schedule 5.3j have always qualified in form and operation under Code Section 401(a) and have a currently applicable determination letter from the Internal Revenue Service, and its trust has always been exempt under Code Section 501, and nothing has occurred with respect to such plan and trust that could cause the loss of such qualification or exemption or the imposition of any liability, lien, penalty, or tax under ERISA or the Code. (b) Each MMP Plan and each MMP Benefit Arrangement has been maintained in accordance with its constituent documents and with all applicable provisions of the Code, ERISA and other domestic and foreign laws, including federal, state, and foreign securities laws and all laws respecting reporting and disclosure. No MMP Plan holds employer securities. (c) Neither MMP nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV of ERISA. Neither MMP nor any ERISA Affiliate has never made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37)). MMP has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement that is not a MMP Benefit Arrangement or with respect to any Benefit Plan sponsored or maintained (or that has been or should have been sponsored or maintained) by any ERISA Affiliate; and no facts exist that could reasonably be expected to result in such liability, as a result of termination, withdrawal or funding waiver with respect to any such plan, program, or arrangements. (d) There are no pending claims or lawsuits by, against, or relating to any non-MMP Benefit Plans or non-MMP Benefit Arrangements that would, if successful, result in liability for MMP, and no claims or lawsuits (other than routine benefit claims) have been asserted, instituted or, to the knowledge of Sellers and the Company after due inquiry of MMP, threatened by, against, or relating to any MMP Plan or MMP Benefit Arrangement, and MMP has advised Sellers and the Company that MMP does not have knowledge of any fact that could form the basis for any such claim or lawsuit. MMP Plans and MMP Benefit Arrangements are not presently under audit or examination (and have not received notice of a potential audit or examination) by any governmental authority, and no matters are pending with respect to the Qualified Plan under any governmental compliance programs. 25 (e) No MMP Plan or MMP Benefit Arrangement contains any provision or is subject to any law that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions this Agreement contemplates, and MMP has not declared or paid any bonus or other incentive compensation or established any severance plan, program, or arrangement in contemplation of the transactions contemplated by this Agreement, the Investors Agreement, the Management Agreement or the MTC Agreement. (f) With respect to each MMP Plan, there have been no violations of Code Section 4975 or ERISA Sections 404 or 406 as to which successful claims would result in any liability for MMP or any Person required to be indemnified by it. (g) MMP has made all required contributions to each MMP Plan as of the last day of each plan's most recent fiscal year, all benefits accrued under any unfunded MMP Plan or MMP Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with generally accepted accounting principles; and all monies withheld from employee paychecks with respect to MMP Plans have been transferred to the appropriate plan within the timing required by governmental regulations. (h) MMP and its ERISA Affiliates have complied with the health continuation rules of Code Sections 4980B (and its predecessor) and with Code Section 5000. No employee or former employee of MMP nor beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits subject to reporting under Statement of Financial Accounting Standards No. 106, other than as required by Code Section 4980B or other applicable law. (i) There are no contracts, agreements, plans or arrangements, including but not limited to the provisions of this Agreement, covering any employee or former employee of MMP that, individually or collectively, could give rise to the payment of any amount (or portion thereof) that would not be deductible pursuant to Code Sections 280G, 404 or 162. 26 (j) The FCC Licensee Entities employ no employees and do not and have not in the past maintained or contributed to any Benefit Plans or Benefit Arrangements. k. LABOR. Except as set forth on Schedule 5.3k, with respect to employees of and service providers to MMP and the FCC Licensee Entities: (a) MMP has been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice. (b) The employees of MMP are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against, or currently being negotiated by, MMP or, to MMP's Knowledge, no labor representation organization effort exists nor has there been any such activity within the past three years. (c) All Persons classified by MMP and the FCC Licensee Entities as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and MMP has fully and accurately reported their compensation on IRS Forms 1099 when required to do so. (d) Since December 31, 1996, except as described on Schedule 5.3k(d), no employee of or group of employees, the loss of whom would have significant adverse effect on the business of MMP or the FCC Licensee Entities, has notified MMP of his or their intent to (A) terminate his or their relationship with MMP or the FCC Licensee Entities, or (B) make any demand for material payments or modifications of his or their arrangements with MMP. (e) There is no charge or compliance proceeding actually pending or, to the knowledge of MMP, threatened against MMP or the FCC Licensee Entities before the Equal Employment Opportunity Commission or any state, local, or foreign agency responsible for the prevention of unlawful employment practices. (f) The FCC Licensee Entities do not employ, and have not in the past, employed employees. 27 l. INSURANCE. Schedule 5.3l hereto contains a list of all insurance policies concerning the Business and describes coverage (including whether occurrence or claims made), other than employee-benefit related insurance policies. All such policies are legal, valid, binding, enforceable and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by court of law or equity). There are no existing breaches or defaults with respect to such policies, and no notice of cancellation or termination has been received. m. MATERIAL CONTRACTS. Schedule 5.3m hereto contains a list of all the Material Contracts of MMP and the FCC Licensee Entities (other than cash agreements for the sale of advertising time and retransmission consent agreements) and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts are legal, valid and binding obligations of MMP or the FCC Licensee Entities, as the case may be, enforceable in accordance with their terms and in full force and effect. There exists no default or event which, with notice or lapse of time, or both, would constitute a default by any party to any such Material Contract or which would permit termination, modification or acceleration. Neither MMP nor the FCC Licensee Entities have received notice, nor to MMP's Knowledge, does any party to any Material Contract intend to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. n. COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.3n, MMP and the FCC Licensee Entities are in material compliance with all material applicable Federal, state and local laws, rules and regulations, and there are no actions threatened or pending alleging noncompliance therewith. o. LITIGATION. Except as set forth on Schedule 5.3o hereto, there is no suit, claim, action, proceeding or arbitration pending or, to MMP's Knowledge, threatened against MMP or the FCC Licensee Entities that seeks to enjoin or obtain damages in respect of MMP's conduct of the Business or operation of the Stations, or the transactions contemplated hereby. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency against or affecting the Business, MMP or the FCC Licensee Entities, except as disclosed on Schedule 5.3o. p. CONSENTS. Except (a) as set forth on Schedule 5.3p hereto, (b) for filings pursuant to the H-S-R Act, or (c) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of MMP or the FCC Licensee Entities is required in connection with the execution and delivery of this 28 Agreement by Sellers or the consummation of any of the transactions contemplated hereby (including any consents required under any MMP or FCC Licensee Entities contract as a result of the change in control contemplated hereby). q. ENVIRONMENTAL. Except as set forth on Schedule 5.3q hereto: (a) All of the operations of MMP at or from any MMP Real Property comply in all material respects with applicable Environmental Laws. MMP has not engaged in or permitted any operations or activities upon any of the MMP Real Property for the purpose of or involving the treatment, storage, use, generation, release, discharge, emission, or disposal of any Hazardous Substances at the MMP Real Property, except in substantial compliance with applicable Environmental Laws. (b) None of the MMP Real Property is listed or, to MMP's Knowledge, proposed for listing on the National Priorities List pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., or any similar inventory, register or identification of sites requiring investigation or remediation maintained by any state or other governmental authority. MMP has not received any notice from any governmental entity or third party of any actual or threatened Environmental Liabilities with respect to the MMP Real Property or the conduct of the Business. (c) To MMP's Knowledge, after due inquiry, there are no conditions existing at the MMP Real Property that require, or which with the giving of notice or the passage of time or both would likely require remedial or corrective action, removal or closure pursuant to the Environmental Laws. (d) To MMP's Knowledge, after due inquiry, MMP has all the material permits, authorizations, licenses, consents and approvals necessary for the current conduct of the Business and for the operations on, in or at the MMP Real Property which are required under applicable Environmental Laws and are in substantial compliance with the terms and conditions of all such permits, authorizations, licenses, consents and approvals. (e) To MMP's Knowledge, after due inquiry, there are no Hazardous Substances present on or in the MMP Real Property or at any geologically or hydrologically adjoining property, including any Hazardous Substances contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether movable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the MMP Real Property or such adjoining property, or incorporated into any structure therein or thereon. Neither 29 MMP or any other Person for whose conduct it is or may be held responsible, nor to MMP's Knowledge after due inquiry or any other Person, has permitted or conducted, or was aware of, any Hazardous Substances, or any illegal activity conducted with respect to the MMP Real Property or any other properties or assets (whether real, personal, or mixed) in which MMP has or had an interest. r. TAX MATTERS. (a) Except as set forth on Schedule 5.3r(a) hereto: (i) All Tax Returns required to be filed by or with respect to MMP have been filed when due in a timely fashion, and all Tax Returns required to be filed by or with respect to MMP for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to MMP are correct and complete in all material respects. (ii) MMP has paid in full on a timely basis all Taxes owed by it, whether or not shown on any Tax Return, and MMP will have paid prior to the Closing Date all Taxes payable with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) MMP's liability for unpaid Taxes (including any liability of MMP for unpaid Taxes of any other Entity or Person), (a) did not, as of the date of the MMP Financial Statements, exceed the current liability accruals for such Taxes (excluding reserves for deferred Taxes) set forth on the MMP Financial Statements, (b) does not exceed such accruals as adjusted on the books of MMP for transactions and events through the date hereof in accordance with the past custom and practice of MMP, and (c) will not, as of the Closing Date, exceed its liability for such Taxes as reflected in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii). (iv) MMP has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (v) No Tax Proceeding is currently pending with respect to MMP and MMP has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. 30 (vi) No waiver or extension of any statute of limitations is currently in effect or has been requested with respect to the assessment, collection or payment of Taxes of MMP or for which MMP is liable. (vii) No extension of the time within which to file any Tax Return of MMP is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted or assessed against MMP. (ix) There are no liens on the assets of MMP relating or attributable to Taxes (except liens for Taxes not yet due). (x) MMP is and has since its formation been classified as a partnership for U.S. federal income tax purposes and has in effect a valid election under Section 754 of the Code. (xi) MMP has not agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. (xii) MMP is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and MMP has not assumed the Tax liability of any other entity or person under contract. (xiii) MMP does not have any liability for the Taxes of another entity or person as a transferee or successor, or otherwise. (xiv) Except for itself and the FCC Licensee Entities, MMP is not and has not at any time been a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xv) None of MMP's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (xvi) The FCC Licensee Entities' sole asset is the FCC Licenses, and the FCC Licensee Entities are not and have not been required to file Tax Returns or pay Taxes. 31 (b) Sellers have furnished or otherwise caused to be made available to Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to MMP since January 1, 1996; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to MMP relating to Taxes. (c) Schedule 5.3r(c) contains complete and accurate descriptions of (i) MMP's basis in its stock of MTR and its tax capital account in MMP, and (ii) material Tax elections made by or with respect to MMP. s. ACCOUNTS RECEIVABLE. All accounts receivable of MMP that are reflected on the MMP Financial Statements or on the accounting records of MMP as of the Closing Date (collectively, the "MMP Accounts Receivable") represent or will represent valid obligations arising from sales actually made or services actually performed in the ordinary course of business. Unless paid prior to the Closing Date, the MMP Accounts Receivable are or will be as of the Closing Date current and collectable net of the respective reserve shown on the MMP Financial Statements or on the accounting records of MMP as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the MMP Accounts Receivable as of the Closing Date than the reserve reflected in the MMP Financial Statements represented of the MMP Accounts Receivable reflected therein and will not represent a MMP Material Adverse Effect in the composition of such MMP Accounts Receivable in terms of aging). Subject to such reserves, each of the MMP Accounts Receivable either has been or will be collected in full, without any setoff, within ninety (90) days after the day on which it first becomes due and payable. There is no contest, claim, or right of setoff, other than returns in the ordinary course of business, under any contract with any obligor of an MMP Accounts Receivable relating to the amount or validity of such MMP Accounts Receivable. MMP shall deliver on the Closing Date a complete and accurate list of all MMP Accounts Receivable as of the Closing Date. t. REPRESENTATIONS AS TO MMP INTERESTS. (i) MMP is the record and the beneficial owner of a 98% general partnership interest in each of the Television Licensees; (ii) MMP holds of record and owns beneficially these interests free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.3t hereof, all of which will be released at or before the Closing; (iii) MMP has full power and authority to enter into this Agreement, and the consummation of the transactions contemplated hereby has been duly authorized by all necessary action on the part of MMP; (iv) this Agreement has been duly executed and delivered by MMP and constitutes a legal, valid and binding obligation of MMP, enforceable against MMP in accordance with its 32 terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); and (v) except as described on Schedule 5.3t, MMP's interests in the Television Licensees are not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. 5.4. REPRESENTATIONS AND WARRANTIES AS TO MTR. Sellers and the Company, jointly and severally, hereby represent and warrant to Purchaser as to MTR as follows: a. ORGANIZATION AND GOOD STANDING. MTR is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has full corporate power and authority to carry on its business as it is now being conducted and to own and use the assets owned and used by it. MTR is not qualified as a foreign corporation in any foreign jurisdiction. b. CAPITALIZATION. The designations of each class of the capital stock of MTR and the number of authorized and issued and outstanding shares thereof is as described on Schedule 5.4b. All the shares of capital stock of MTR have been validly issued and are fully paid and nonassessable and are held of record by the respective shareholders as set forth on Schedule 5.4b hereto. Except as described on Schedule 5.4b, (i) no shares of capital stock of MTR are held in treasury, (ii) there are no other issued or outstanding equity securities of MTR, (iii) there are no stock appreciation rights, phantom stock rights, profit participation rights, or other similar rights with respect to shares outstanding; and (iv) there are no other issued or outstanding securities of MTR convertible or exchangeable at any time into equity securities of MTR. MTR is not subject to any commitment or obligation that would require the issuance or sale of additional shares of capital stock of MTR at any time under options, subscriptions, warrants, rights or any other obligations. Except for its ownership interest in MMP, MTR holds no equity interests in any corporation, partnership, limited liability company, joint venture or other entity owned by MTR. c. NO CONFLICTS. Neither the execution and delivery of this Agreement by Sellers, MMP and the Company nor the consummation of the transactions contemplated hereby will (a) violate any provision of the articles of incorporation or by-laws of MTR, (b) violate any provision of applicable law, rule and regulation, which violation would prevent or interfere with Sellers' ability to perform hereunder, or (c) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, 33 mortgage or instrument to which MTR is a party or to which its property is subject, or constitute a default thereunder, where such conflict, breach, right of termination, acceleration or default would prevent or materially interfere with the Company's ownership of 31% of the equity of MTR. d. FINANCIAL MATTERS. Except as set forth on Schedule 5.4.d hereto, since January 1, 1996 (the date MTR first held any assets), there has not been any material adverse effect on the business, financial condition, operations or results of operations of MTR taken as a whole. Without limiting the generality of the foregoing, since that date: (i) MTR has not sold, leased, transferred, or assigned any material assets, tangible or intangible, outside the ordinary course of business; (ii) MTR has not entered into any material agreement, contract, lease, or license outside the ordinary course of business; (iii) MTR has not accelerated, terminated, made material modifications to, or canceled any material agreement, contract, lease, or license to which MTR is a party or by which MTR is bound; (iv) MTR has not imposed any security interest upon any of its assets, tangible or intangible; (v) MTR has not made any material capital expenditures outside the ordinary course of business; (vi) MTR has not made any material capital investment in, or any material loan to, any other Person other than MMP; (vii) MTR has not created, incurred, assumed, or guaranteed any indebtedness for borrowed money and capitalized lease obligations; (viii) MTR has not granted any license or sublicense of any material rights under or with respect to any Intellectual Property; (ix) there has been no change made or authorized in the charter or bylaws of MTR; 34 (x) other than its initial issuance of Stock to the Company and MTC, MTR has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; (xi) MTR has not declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; (xii) MTR has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property; (xiii) MTR has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees outside the ordinary course of business; (xiv) MTR, since its formation, has had no employees; (xv) MTR has not made or changed any material Tax election or taken any other action with respect to Taxes not in the ordinary course of business and consistent with past practices; (xvi) MTR has not adopted any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; and (xvii) except as set forth in this Agreement and the MTC Agreement, MTR has not committed to any of the foregoing. e. EMPLOYEE BENEFIT PLANS. MTR does not, and has not in the past, instituted or maintained any Benefit Arrangement or Benefit Plan. Neither MTR nor any ERISA Affiliate has sponsored, maintained, or had any liability (direct or indirect, actual or contingent) with respect to any Benefit Plan subject to Title IV of ERISA. Neither MTR nor any ERISA Affiliate has ever made or been obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37). MTR has no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement. f. LABOR. Prior to the date of this Agreement, MTR has not employed any employees. 35 g. INSURANCE. MTR maintains no insurance policies. h. MATERIAL CONTRACTS. Schedule 5.4h hereto contains a list of all the Material Contracts and true copies of such agreements have been furnished to Purchaser or have been made available to Purchaser. All Material Contracts listed on Schedule 5.4h are legal, valid and binding obligations of MTR enforceable in accordance with their terms and in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the right of creditors generally and the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). There exists no default or event which, with notice or lapse of time, or both, would constitute a default by any party to any such Material Contract or which would permit termination, modification or acceleration. MTR has not received notice (or otherwise has knowledge) that any party to any Material Contract intends to cancel or terminate any such agreement or to exercise or not to exercise any option to renew thereunder. i. COMPLIANCE WITH LAWS. MTR is in material compliance with all applicable Federal, state and local laws, rules and, regulations, and to MTR's knowledge, there are no actions threatened or pending alleging noncompliance therewith. j. LITIGATION. There is no suit, claim, action, proceeding or arbitration pending or threatened against MTR. There is no outstanding citation, order, judgment, writ, injunction, or decree of any court, government, or governmental or administrative agency against or affecting MTR. k. CONSENTS. No filing, consent, approval or authorization of any governmental authority or of any third party on the part of MTR is required in connection with the execution and delivery of this Agreement by Sellers, the Company and MMP or the consummation of any of the transactions contemplated hereby (including any consents required under any MTR contract as a result of the change in control contemplated hereby). l. TAX MATTERS. (a) Except as set forth on Schedule 5.4l(a) hereto: (i) All Tax Returns required to be filed by or with respect to MTR have been filed when due in a timely fashion, and all Tax Returns required to be filed by or with respect to MTR for Taxable Periods ending on or before December 31, 1997 will have been filed prior to the Closing Date, even if such Tax Returns are not yet due. All Tax Returns filed by or with respect to MTR are true, correct and complete in all material respects. 36 (ii) MTR has paid in full on a timely basis all Taxes owed by it, whether or not shown on any Tax Return, and MTR will have paid prior to the Closing Date all Taxes payable with respect to Taxable Periods ending on or before December 31, 1997, even if such Taxes are not yet due. (iii) MTR has no liability for unpaid income Taxes other than its Tax liability attributable to MTR's allocable share of MMP's items of income, gain, loss, deduction and credit accruing through the date hereof. MTR's actual liability for unpaid Taxes (determined consistently with Section 2.2(b)(iv)) will not as of the Closing Date exceed its liability for such Taxes as reflected in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii). (iv) MTR has withheld and paid over to the proper governmental authorities all Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid to any employee, independent contractor, creditor or other third party. (V) No Tax Proceeding is currently pending with respect to MTR and MTR has not received notice from any Tax Authority that it intends to commence a Tax Proceeding. (vi) No waiver or extension of any statute of limitations is currently in effect with respect to the assessment, collection or payment of Taxes of the MTR or for which MTR is liable. (vii) No extension of the time within which to file any Tax Return of MTR is currently in effect. (viii) No deficiency for Taxes has been proposed, asserted, or assessed against MTR. (ix) There are no liens on the assets of MTR relating or attributable to Taxes (except liens for Taxes not yet due). (x) MTR is not and has not been at any time during the preceding five years a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (xi) There is no agreement or consent made under Section 37 341(f) of the Code affecting MTR. (xii) MTR has not agreed to, nor is it required to, make any adjustments under Section 481(a) of the Code as a result of a change in accounting methods. (xiii) MTR is not and has not at any time been a party to a tax sharing, tax indemnity or tax allocation agreement, and MTR has not assumed the Tax liability of any other entity or person under contract. (xiv) MTR is not and has not at any time been a member of an affiliated group filing a consolidated federal income tax return and does not have any liability for the Taxes of another entity or person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, or otherwise. (xv) Except for MTR's ownership of 100,000 Class C Membership Units of MMP, MTR is not a party to any joint venture, partnership or other arrangement that is treated as a partnership for U.S. federal income tax purposes. (xvi) None of MTR's assets are treated as "tax exempt use property" within the meaning of Section 168(h) of the Code. (b) Sellers have furnished or otherwise made available to Purchaser correct and complete copies of (i) all income, franchise and other material Tax Returns filed by or with respect to MTR since January 1, 1996; and (ii) all examination reports, statements of deficiencies and closing agreements with respect to MTR relating to Taxes. (c) Schedule 5.4l(c) contains complete and accurate descriptions of (i) MTR's basis in its assets, (ii) the amount of any net operating loss, net capital loss and any other Tax carryovers of MTR and (iii) material Tax elections made by or with respect to MTR. MTR has no net operating losses or other Tax attributes presently subject to limitation under Code Sections 382, 383 or 384, or the federal consolidated return regulations. m. DIVIDENDS. Since its formation, no dividends have been declared, issued or otherwise approved by the Board of Directors of MTR. The Company has no accounts receivable other than amounts due as Tax refunds from certain Tax Authorities. n. MTR ASSETS. Except for the 100,000 Class C Membership Units of 38 MMP and cash or cash equivalents received or due from Tax refunds, MTR owns no other assets and has not engaged in any business other than in connection with its ownership of the 100,000 Class C Membership Units. o. REPRESENTATIONS AS TO MTR INTERESTS. (i) MTR is the record and beneficial owner of 100,000 Class C Membership Units (out of a total 11,631,431 Membership Units) of MMP; (ii) MTR holds of record and owns beneficially this interest free and clear of any lien, security interest, pledge or encumbrance other than those set forth on Schedule 5.4o hereof, all of which will be released at or before the Closing; and (iii) except as described on Schedule 5.4o, MTR's interest in MMP is not subject to any option(s) warrant(s), voting trusts, outstanding proxies, registration rights agreement(s), or other agreements regarding voting rights. SECTION 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER ------------------------------------------- Purchaser hereby represents and warrants to Sellers, the Company and MMP that: 6.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland. Purchaser has full corporate power and authority to carry on its business as it is now being conducted. 6.2. EXECUTION AND EFFECT OF AGREEMENT. Purchaser has full corporate power and authority to enter into this Agreement. The consummation of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity). 6.3. NO CONFLICTS. Except as described on Schedule 6.3 hereof, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any of the provisions of the articles of incorporation or by-laws of Purchaser, (ii) violate any provision of applicable law, rule or regulation, which violation would prevent or interfere with Purchaser's ability to perform hereunder, or (iii) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or 39 any agreement, indenture, mortgage or instrument to which Purchaser is a party or to which its property is subject, or constitute a default thereunder, except where such conflict, breach, right of termination, acceleration or default would not have a material adverse effect on the business or financial condition of Purchaser or prevent or materially interfere with Purchaser's ability to perform hereunder. 6.4. CONSENTS. Except (i) as set forth on Schedule 6.4 hereto, (ii) for filings pursuant to the H-S-R Act, or (iii) the FCC Application, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of Purchaser is required in connection with the execution and delivery of this Agreement by Purchaser or the consummation of any of the transactions contemplated hereby. 6.5. LITIGATION. Except as set forth on Schedule 6.5 hereto, there is no suit, claim, action, proceeding or arbitration pending or, to Purchaser's Knowledge, threatened against Purchaser which seeks to enjoin or obtain damages in respect of the transactions contemplated hereby. 6.6. NO BROKERS. Neither Purchaser nor anyone acting on its behalf has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the purchase of the Stock and the transactions contemplated by this Agreement. 6.7. PURCHASER QUALIFICATIONS. Except as otherwise disclosed on Schedule 6.7, Purchaser is legally and financially qualified to be the Licensee of, acquire, own and operate the Stations under the Communications Act and the rules, regulations and policies of the FCC. Purchaser knows of no fact that would, under existing law and the existing rules, regulations, policies and procedures of the FCC, (a) disqualify Purchaser as an assignee of the FCC Licenses or as the owner and operator of the Stations, or (b) cause the FCC to fail to approve in a timely fashion the application for the FCC Consent. Except as described on Schedule 6.7, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses to Purchaser, nor will processing pursuant to any exception or rule or general applicability be requested or required in connection with the consummation of the transactions contemplated by this Agreement Purchaser will have on hand at the Closing, adequate financial resources to consummate the transactions contemplated by this Agreement, the Investors Agreement, the Management Agreement and the MTC Agreement. 40 SECTION 7 ADDITIONAL PROVISIONS REGARDING REPRESENTATIONS AND WARRANTIES ---------- 7.1. LIMITATION; SURVIVAL. Except as otherwise provided in Section 3.2 of the Indemnification Escrow Agreement, and subject to the provisions of Section 10.3, the representations and warranties herein and the obligations of the parties shall survive the Closing for a period ending on the earlier to occur of (i) 15 calendar months after the Closing Date and (ii) October 31, 1999, but in no event shall the period be less than 12 calendar months after the Closing Date; and provided further, however, that representations and warranties relating to any claims as to which notice shall have been given pursuant to Section 10.4 on or before such date shall survive until the final resolution of such claims. SECTION 8 TAX MATTERS ----------- 8.1. SECTION 338 ELECTION. Purchaser shall not make an election under Section 338 of the Code (or any comparable provision of state, local or foreign law) with respect to the purchase of stock in the Company as provided herein. 8.2. TAX RETURNS. (a) Sellers shall prepare or cause to be prepared and file or cause to be filed, within the time (including extensions) and manner provided by law, all Tax Returns of the Company, MTR, MMP, and the FCC Licensee Entities that are required to be filed on or before the Closing Date. In addition, Sellers shall prepare or cause to be prepared and file or cause to be filed prior to the Closing Date all Tax Returns for Taxable Periods of the Company, MTR, MMP, and the FCC Licensee Entities for Taxable Periods ending on or before December 31, 1997, even if such Tax Returns are not yet due. Each of the Company, MTR, MMP and the FCC Licensee Entities shall pay or cause to be paid all Taxes shown as due on its Tax Returns. Purchaser shall have an opportunity to review and consent to the filing of all such Tax Returns, which consent shall not be unreasonably withheld or delayed. (b) Purchaser shall prepare or cause to be prepared and file or cause to be filed, within the time and manner provided by law, all Tax Returns of the Company, MTR, MMP, and the FCC Licensee Entities (i) for Taxable Periods ending on or before the Closing Date that are due after the Closing Date, except as otherwise provided in 41 Section 8.2a, and (ii) for Taxable Periods beginning before and ending after the Closing Date ("Straddle Periods"). Purchaser shall pay or cause to be paid all Taxes shown as due on such Tax Returns; provided that this sentence shall not in any way limit or affect Purchaser's rights to indemnification under other provisions of this Agreement. Purchaser shall provide Sellers a reasonable opportunity to review and consent to the filing of such Tax Returns, which consent shall not be unreasonably withheld or delayed. Purchaser shall not file amended Tax Returns with respect to Taxable Periods ending on or before the Closing Date or Straddle Periods without Sellers' consent; provided, however, that Purchaser may file amended Tax Returns for such Taxable Periods without Sellers' consent if (i) such amended Tax Returns are filed to correct errors or omissions in previously filed Tax Returns that either constitute or are related to a breach of any representation or warranty set forth in Sections 5.2m, 5.3r or 5.4l (determined without regard to the limitation on the survival of such representations and warranties set forth in Section 7.1), or (ii) the filing of such amended Tax Return would not increase the Taxes of Sellers or Taxes for which Sellers have indemnification responsibility hereunder by more than $25,000. (c) All Tax Returns prepared and filed pursuant to this Section 8.2 shall be prepared and filed in accordance with applicable law and in a manner consistent with past practices of the Company, MTR, and MMP (to the extent consistent with applicable law). 8.3. APPORTIONMENT. The parties agree to cause the Company, MTR, MMP, and the FCC Licensee Entities to file all Tax Returns for any Taxable Period that would otherwise be a Straddle Period on the basis that the relevant Taxable Period consists of two periods, one ending as of the close of business on the Closing Date and one beginning the day after the Closing Date, unless the relevant Tax Authority will not accept a Tax Return filed on that basis. For purposes of apportioning any Tax to the portion of any Straddle Period that ends on the Closing Date, the determination shall be made assuming that there was a closing of the books as of the close of business on the Closing Date and that the taxable years of the Company, MTR, MMP and the FCC Licensee Entities ended on that date, except that real, personal and intangible property Taxes shall be apportioned ratably on a daily basis between the portions of the Straddle Period in question. 8.4. COOPERATION IN TAX MATTERS. Sellers and Purchaser shall (a) cooperate fully, as reasonably requested, in connection with the preparation and filing of all Tax Returns prepared and filed pursuant to Section 8.2; (b) make available to the other, as reasonably requested, all information, records or documents with respect to Tax matters pertinent to the Company, MTR, MMP and the FCC Licensee Entities for all Taxable Periods ending on or before the Closing Date and Straddle Periods; and (c) preserve 42 information, records or documents relating to Tax matters pertinent to the Company, MTR, MMP and the FCC Licensee Entities that is in their possession or under their control until the expiration of any applicable statute of limitations. 8.5. CERTAIN TAXES. Sellers shall timely pay all transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees arising from or relating to the sale and transfer of the Stock, and Sellers shall at their own expense file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees. If required by applicable law, Purchaser will join in the execution of any such Tax Returns and other documentation. 8.6. FIRPTA. Sellers shall deliver to Purchaser at the Closing a certificate or certificates in form and substance satisfactory to Purchaser, duly executed and acknowledged, certifying all facts necessary to exempt the transactions contemplated hereunder from withholding under Section 1445 of the Code. 8.7. SECTION 754 ELECTION. Purchaser may at any time after the Closing Date, in its sole and absolute discretion, cause MMP and any of the FCC Licensee Entities to make a Code Section 754 Election with respect to the Taxable Period in which the Closing occurs or later Taxable Periods. 8.8. CLOSING DATE ACTIONS. Following the Closing, Purchaser shall not cause the Company, MTR, MMP or the FCC Licensee Entities to take any actions on the Closing Date other than in the ordinary course of their business, except (i) such actions as are expressly contemplated by this Agreement, including the repayment of MMP's Funded Debt, and (ii) such actions as would not increase Taxes for which Sellers have indemnification responsibility hereunder. SECTION 9 ADDITIONAL COVENANTS AND UNDERTAKINGS ------------------------------------- 9.1. FURTHER ASSURANCES AND ASSISTANCE. Purchasers, Sellers, the Company and MMP (and MMP shall cause the FCC Licensee Entities) to agree that each will execute and deliver to the other any and all documents, in addition to those expressly provided for herein, that may be necessary or appropriate to implement the provisions of this Agreement, whether before, at, or after the Closing. The parties agree to cooperate with each other to any extent reasonably required in order to accomplish fully the transactions herein contemplated. 9.2. ACCESS TO INFORMATION. The Company and MMP, from and after the date of 43 this Agreement and until the Closing Date or termination pursuant to Section 14.1, shall give Purchaser and Purchaser's employees and counsel full and complete access upon reasonable notice during normal business hours, to all officers, employees, offices, properties, agreements, records and affairs of the Company, MMP, the FCC Licensee Entities or otherwise relating to the Business, shall provide Purchaser with all financial statements of the Company, the FCC Licensee Entities and MMP which are currently prepared in the ordinary course of business, which shall be prepared and delivered to Purchaser each month between the date hereof and the Closing Date, and shall provide copies of such information concerning the Company, MMP, the FCC Licensees and the Business as Purchaser may reasonably request; provided, however, that the foregoing shall not permit Purchaser or any agent thereof to (i) disrupt the Business, or (ii) contact any employee of the Company or MMP without providing reasonable prior notice to Sellers and allowing a representative of the Company or MMP to be present. The Company and Sellers will use their commercially reasonable efforts to obtain the consent of its auditors to permit inclusion of the Financial Statements and the MMP Financial Statements in applicable securities filings of Sinclair Broadcast Group, Inc. ("SBGI"). If Purchaser requests, it shall have the immediate right, without causing unreasonable disruption to the Business, to have the access provided for in the first sentence hereof to conduct an audit of each Station's financial information, and, subject to the foregoing, the Company, MMP and Sellers shall cooperate with Purchaser's reasonable requests in connection with such audit, including, without limitation, giving all reasonable consents thereto as long as any expenses thereof are borne by Purchaser. 9.3. CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as contemplated by this Agreement, from and after the date hereof, Sellers, the Company and MMP shall cause the Business to be conducted in the ordinary course. Except as contemplated by this Agreement or as consented to by Purchaser (which consent shall not unreasonably be withheld), from and after the date hereof, Sellers, the Company, and MMP shall act and cause the FCC Licensee Entities to act, as follows: (a) The Company and MMP will not adopt or cause the FCC Licensee Entities to adopt any material change in any method of accounting or accounting practice, except as contemplated or required by GAAP; (b) The Company shall not change or amend its charter or by-laws and MMP shall not change or amend the operating agreement dated as of January 1, 1996, as amended February 14, 1997 or cause or allow any of the FCC Licensee Entities to change or amend any limited partnership agreement; (c) Except (i) for the disposition of obsolete equipment in the ordinary course of business, (ii) the transfer of the Excluded Assets, (iii) the transfers of the MMP II 44 Licenses to MMP II and the distribution of MMP II to MTC or (iv) as set forth on Schedule 9.3(c) hereto, neither Company nor MMP shall sell, mortgage, pledge or otherwise dispose of any assets or properties owned, leased or used in the operation of the Business; (d) Neither the Company nor MMP or the FCC Licensee Entities will merge or consolidate with, agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity; (e) MMP will not merge or consolidate with, or agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity or cause the FCC Licensee Entities to do likewise; (f) Neither the Company nor MMP or the FCC Licensee Entities will authorize for issuance, issue or sell any additional shares of its capital stock or any securities or obligations convertible or exchangeable into shares of its capital stock or issue or grant any option, warrant or other right to purchase any shares of its capital stock; (g) Neither the Company nor MMP or the FCC Licensee Entities will incur, or agree to incur, any debt for borrowed money other than draws under the Company's or MMP's, as the case may be, existing revolving credit agreements; (h) Neither the Company nor MMP or the FCC Licensee Entities will change its historical practices concerning the payment of accounts payable; and (i) Neither the Company nor MMP or the FCC Licensee Entities will declare, issue, or otherwise approve the payment of dividends or distributions of any kind in respect of the Stock or redeem, purchase or otherwise acquire any of its stock. (j) The Company and MMP shall maintain the existing insurance coverages on the assets of the Stations or other policies providing substantially similar coverages. (k) The Company and MMP will not permit any increases in the compensation of any of the employees of the Company or MMP except as required by law or existing contract or agreement or enter into or amend any Company Plan, MMP Plan, Company Benefit Arrangement, or MMP Benefit Arrangement other than as contemplated by MMP's operating budgets and in accordance with the past practice. (l) Neither the Company nor MMP or the FCC Licensee Entities shall 45 enter into or renew any contract or commitment relating to the Stations or the assets of the Company or MMP, or incur any obligation that will be binding on Purchaser after Closing, except in the ordinary course of business, and MMP shall not enter into, modify, amend, renew, or change any contract with respect to programming for the Station for any period after the Closing Date without the prior approval of Purchaser. (m) Neither the Company nor MMP or the FCC Licensee Entities shall enter into any transactions with any Affiliate of the Company or any Seller that will be binding upon Purchaser, or the Station following the Closing Date. (n) The Company and MMP shall use all commercially reasonable efforts to maintain the assets of the Stations or replacements thereof in good operating condition and adequate repair, normal wear and tear excepted. (o) The Company and MMP shall, in connection with the operation of the Stations, make expenditures materially consistent with the estimates of expenses set forth in MMP's operating budgets of the Stations and, including, without limitation, expenditures in respect of promotional, programming and engineering activities for the Station (and any employee expenditures related to such activities) for any period covered by the current operating budgets of the Stations. (p) Neither the Company nor MMP shall make or allow MTR or the FCC Licensee Entities to make or change any material Tax election, amend any Tax Return, or take or omit to take any other action not in the ordinary course of business and consistent with past practice that would have the effect of increasing any Taxes of Purchaser or any of its Affiliates, or any Taxes of the Company or MMP for any Post-Closing Tax Period. (q) Except as provided by Section 2.2 hereof and the MMP II Distribution, the Company, MMP and the FCC Licensee Entities shall not make distributions other than in the ordinary course of business and consistent with past practice, and shall not make non-pro rata distributions. (r) MMP shall not enter into or renew any Tradeout Agreement that would be binding on Purchaser after the Closing Date, except in the ordinary course of business, as contemplated by MMP's operating budgets and in accordance with past practice. (s) Except as provided in Section 9.3(r) above, MMP shall not enter into or renew any Time Sales Agreement except in the ordinary course of business and which are for cash at prevailing rates for a term not exceeding twelve (12) months. 46 (t) MMP shall not acquire or enter into or renew any Local Marketing Agreement or Time Brokerage Agreement or similar agreement, or Network Affiliation Agreement, without the prior approval of Purchaser other than as contemplated by this Agreement, the Management Agreement, the MTC Agreement, and the Investor Agreement. (u) Neither the Company nor MMP shall enter into or become subject to any employment, labor, union or professional service contract not terminable at will, or any bonus, pension, insurance, profit sharing, incentive, deferred compensation, severance pay, retirement, hospitalization, employee benefit, or other similar plans, or increase the compensation payable or to become payable to any employee, except in the ordinary course of business, other than any value appreciation rights agreement with current employees of MMP, all of which liabilities shall be paid by MMP at or prior to Closing. (v) Neither the Company nor MMP or the FCC Licensee Entities shall take any action which may jeopardize the validity or enforceability of or rights under the FCC Licenses. (w) Before Closing, MMP shall pay all one-time fees under Section 3.1 of the Time Brokerage Agreements ("LMAs") (aggregating $1,430,000.00) and MMP shall amend the LMAs with the LMA Stations to reflect the payment by MMP before the Closing of the fees set forth in Section 3.1 of the LMAs (aggregating $1,430,000.00) and the reduction of continuing fees as a result of such payments. 9.4. H-S-R ACT. Each of Purchaser and Sellers shall, within ten Business Days following the date hereof, file duly completed and executed Pre-Merger Notification and Report Forms as required under the H-S-R Act and shall otherwise use their respective best efforts to comply promptly with any requests made by the Federal Trade Commission ("FTC") or the Department of Justice ("DOJ") pursuant to the H-S-R Act or the regulations promulgated thereunder. Sellers shall cause MMP, to the extent required by law, to join in or provide information in connection with such filing, including, but not limited to, any response to any request by the FTC or DOJ. All filing fees and other similar payments in connection with the H-S-R Act shall be split equally by Purchaser and the Sellers. 9.5. FCC APPLICATION. (a) Each of Purchaser, MMP and Sellers shall, within seven Business Days following the date hereof, file with the FCC the FCC Application; provided that the parties shall cooperate with each other in the preparation of the FCC Application and shall 47 in good faith and with due diligence take all reasonable steps necessary to expedite the processing of the FCC Application and to secure such consents or approvals as expeditiously as practicable; and provided further that MMP shall cause the FCC Licensee Entities, to the extent deemed reasonably necessary by counsel to Purchaser to join in and provide information in connection with the FCC Application and comply with the immediately preceding provisions and 9.5(b) below. If the Closing shall not have occurred for any reason within the initial effective periods of the granting of FCC approval of the FCC Application, and no party shall have terminated this Agreement under Section 14, the parties shall jointly request and use their respective best efforts to obtain one or more extensions of the effective periods of such grants. No party shall knowingly take, or fail to take, any action the intent or reasonably anticipated consequence of which would be to cause the FCC not to grant approval of the FCC Application. (b) Sellers, the Company and MMP, as the case may be, shall publish (and cause the FCC Licensee Entities to publish) the notices required by the FCC Rules and Regulations relative to the filing of the FCC Application. Copies of all applications, documents and papers filed after the date hereof and prior to the Closing, or filed after the Closing with respect to the transaction under this Agreement, by Purchaser , Sellers, MMP, or the FCC Licensee Entities with the FCC shall be mailed to the other simultaneously with the filing of the same with the FCC. Each party shall bear its own costs and expenses (including the fees and disbursements of its counsel) in connection with the preparation of the portion of the application to be prepared by it and in connection with the processing of that application. All filing and grant fees, if any, paid to the FCC, shall be split equally by Purchaser and the Sellers. None of the information contained in any filing made by Purchaser or Sellers with the FCC with respect to the transaction contemplated by this Agreement shall contain any untrue statement of a material fact. (c) FCC APPLICATIONS TO TRANSFER CERTAIN FCC LICENSES. Sellers, the Company and MMP shall cause the FCC Licensee Entities holding the FCC Licenses for Television Stations WKEF-TV in Dayton, Ohio, WEMT-TV in Greeneville, Tennessee within five (5) Business Days following the date hereof, to file with the FCC the MMP II FCC Applications and take all reasonable steps necessary to expedite the processing of the MMP II FCC Applications to secure the Consent of the FCC to the transfer of control of the FCC Licenses from MMP to MTC. 9.6. BOOKS AND RECORDS. Following the Closing, Purchaser shall permit each Seller (a) to have reasonable access to the books and records of Purchaser and those retained or maintained by the Company relating to the operation of the Business prior to the Closing or after the Closing to the extent related to transactions or events occurring prior to the Closing, and (b) to have reasonable access to employees of the Company and Purchaser to obtain information relating to such matters. Purchaser shall maintain such books and 48 records for a period of four (4) years following the Closing. 9.7. EMPLOYEES AND EMPLOYEE BENEFITS. Purchaser is not planning or contemplating, and has not made or taken, any decisions or actions concerning the employees of the Stations after the Closing Date that would require the service of notice under the Worker Adjustment and Retraining Notification Act of 1988, as amended, (the so-called WARN Act) or any other similar law. 9.8. INTERRUPTION OF BROADCAST TRANSMISSION. (a) In the event of any loss, damage or impairment, confiscation or condemnation of any of the assets of the Stations prior to the completion of the Closing that interferes with the normal operation of the Stations, MMP shall notify Purchaser of same in writing immediately, specifying with particularity the loss, damage or impairment, confiscation or condemnation incurred, the cause thereof, if known or reasonably ascertainable, and the insurance coverage. MMP shall apply the proceeds of any insurance policy, judgment or award with respect thereto and take such other commercially reasonable actions, as determined in its sole discretion, as are necessary to repair, replace or restore such assets of any Station so damaged to their prior condition as soon as possible after such loss, damages or impairment, confiscation or condemnation. (b) If before the Closing Date, due to damage or destruction of the assets of any Station (other than WMMP-TV in the Charleston, South Carolina market), the regular broadcast transmission of one (1) or more Television Stations or two (2) or more Radio Stations in the normal and usual manner is interrupted for a period of twelve (12) continuous hours or more, MMP shall give prompt written notice thereof to Purchaser. If on the Closing Date, due to damages or destruction of the assets of one (1) or more Television Stations (other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more Radio Stations the regular broadcast transmission of one (1) or more Television Stations (other than WMMP-TV in the Charleston, South Carolina market) or two (2) or more Radio Stations in the normal and usual manner is interrupted such that the regular broadcast signal of any such Station (including its effective radiated power) is diminished in any material respect, then (i) MMP shall immediately give written notice thereof to Purchaser; and (ii) Purchaser shall have the right, by giving prompt written notice to the other, to postpone the Closing Date for a period of up to sixty (60) days provided, however, that the Closing shall occur no later than ten (10) Business Days after regular broadcast transmission has been restored. (c) In the event any one (1) or more Television Stations (other than WMMP-TV in Charleston, South Carolina market) or two (2) or more Radio Stations normal and usual transmission has not been resumed by the Closing Date as postponed 49 pursuant to section (b) above, Purchaser may, pursuant to Section 14.1(e), terminate this Agreement by written notice to the Sellers' Agent. Notwithstanding the foregoing, however, Purchaser may, at its option, proceed to close this Agreement and complete the restoration and replacement of any damaged assets of the Station in question after the Closing Date, MMP shall deliver or assign to Purchaser all insurance or other proceeds received in connection therewith to the extent such proceeds are received by or payable to the Company or MMP and have not therefore been used in or committed to the restoration or replacement of the assets. (d) If before the Closing Date, due to damage or destruction of the assets the regular broadcast transmission of any Station (other than WMMP-TV in the Charleston, South Carolina market) in the normal and usual manner is interrupted for a period of seven (7) continuous days or more, MMP shall give prompt written notice thereof (the "Interruption Notice") to Purchaser. Upon receipt of the Interruption Notice, Purchaser shall have the right, in its sole and absolute discretion, by giving prompt written notice thereof to Sellers and MMP within two (2) Business Days of the date of the Interruption Notice, to terminate this Agreement with the effect specified in Section 14.2(b) hereof. (e) Until the Closing Date, the Company and MMP will maintain and cause MMP to maintain the existing insurance coverages listed on Schedule 5.3l on the Stations and each Station's assets. 9.9. INTERPRETATION OF CERTAIN PROVISIONS. Purchaser has not relied and is not relying on the specification of any dollar amount in any representation or warranty made in this Agreement or any Schedule hereto to indicate that such amounts, or higher or lower amounts, are or are not material, and agrees not to assert in any dispute or controversy between the parties hereto that specification of such amounts indicates or is evidence as to whether or not any obligation, item or matter is or is not material for purposes of this Agreement and the transactions contemplated hereby. 50 9.10. COLLECTION OF ACCOUNTS RECEIVABLE. (a) At the Closing, Sellers' Agents shall designate Purchaser as its agent solely for the purposes of collecting the MMP Accounts Receivable. Purchaser will collect the MMP Accounts Receivable during the period beginning on the Closing Date and ending on the 180th day after the Closing Date (the "Collection Period") with the same care and diligence Purchaser uses with respect to its own accounts receivable and hold all such MMP Accounts Receivable in trust for Sellers until remitted by Purchaser to the Indemnification Escrow Agent or the Collections Account pursuant hereto. Purchaser shall not make any referral or compromise of any of the MMP Accounts Receivable to a collection agency or attorney for collection and shall not settle or adjust the amount of any of the MMP Accounts Receivable without the written approval of Sellers' Agent. If, during the Collection Period, Purchaser receives monies from an account debtor of Purchaser that is also an account debtor of MMP with respect to any MMP Accounts Receivable, Purchaser shall credit the sums received to the oldest account due, except where an account is disputed by the account debtor as properly due, and the account debtor has so notified Purchaser in writing, in which case, payments received shall be applied in accordance with the account debtor's instructions; provided that upon resolution of such dispute if any amounts in dispute are received by Purchaser, Purchaser shall remit such amounts to the Indemnification Escrow Agent in accordance with the Indemnification Escrow Agreement up to the amount of the Additional Indemnification Amount Deposit and, thereafter, to the Collections Account. (b) On the ninetieth (90th) day after the Closing Date and on or before the fifth Business Day after the end of each full fifteen (15) day period thereafter during the Collection Period, Purchaser shall deliver to Sellers' Agents a list of the amounts collected by Purchaser before the end of such period with respect to the Accounts Receivable. On or before the fifth Business Day after the end of the Collection Period, Purchaser shall deliver to Sellers' Agents a list of all of the Accounts Receivable that remain uncollected. (c) Sellers' Agents shall establish and maintain during the Collection Period (and for as long after the Collection Period as Sellers deem appropriate) a bank account (the "Collections Account") at a commercial bank in Norfolk, Virginia, as notified in writing by Sellers' Agents to Purchaser for the deposit of collections of the MMP Accounts Receivable in accordance with this Section 9.10. Sellers' Agents shall have sole disbursement authority over the Collections Account. On the ninetieth (90th) day after the Closing Date (or if such day is not a Business Day, on the next succeeding Business Day), Purchaser shall (i) deposit with the Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement all amounts collected with respect to 51 any MMP Accounts Receivable, not to exceed the excess of $12,750,000 over the Initial Deposit (the "Additional Indemnification Amount Deposit"), and (ii) deposit in the Collections Account any other MMP Accounts Receivable collected by Purchaser as of such date. On and after the ninetieth (90th) day after the Closing Date until the expiration of the Collections Period, within five (5) Business Days of the end of each full fifteen (15) day period, Purchaser shall deposit all amounts collected with respect to the Accounts Receivable with the Indemnification Escrow Agent pursuant to the Indemnification Escrow Agreement until the total of all amounts deposited pursuant to the previous sentence and this sentence equals the Additional Indemnification Amount Deposit and, thereafter, in the Collections Account. Sellers' Agents shall be entitled to dispose of all amounts deposited in the Collections Account from time to time as it chooses, in its sole discretion, and Purchaser and the Indemnification Escrow Agent shall have no rights therein; provided, however, that Purchasers shall have no liability whatsoever to Sellers with respect to Sellers' Agents disposition of any amounts disbursed by Sellers' Agent from the Collections Account. (d) After the expiration of the Collection Period, Purchaser shall have no further obligation hereunder other than (1) so long as Sellers' Agents continue to maintain the Collections Account, to deposit in such account any payments with respect to any of the MMP Accounts Receivable that Purchaser subsequently receives, and (2) thereafter, to remit directly to Sellers' Agents any payments with respect to any of the MMP Accounts Receivable that Purchaser subsequently receives. (e) Any MMP Accounts Receivable remaining uncollected 180 days after the Closing Date shall be transferred to Sellers' Agents, together with all files concerning the collection or attempt to collect such MMP Accounts Receivable hereunder, and Purchaser shall thereafter have no further responsibility with respect thereto. (f) Purchaser shall have no right to setoff any amounts collected for MMP Accounts Receivable against any amounts owed to Purchaser by Sellers; provided that this Section 9.10 shall not be deemed to limit the right of Purchaser to make claims against the Indemnification Amount in accordance with, and subject to, the terms and conditions of this Agreement and the Indemnification Escrow Agreement. 9.11. OTHER ACQUISITIONS. Without limiting any other provisions of this Agreement, prior to the Closing, without the prior written consent of Sellers' Agents, neither Purchaser nor any of its subsidiaries or any party acting directly or indirectly by or on behalf of any of them shall acquire or enter into any agreement to acquire a television station or radio station in any markets in which any Television Station or Radio Station currently broadcasts, if such acquisition would materially delay the granting of the FCC 52 Application; provided, however, that nothing in this Section 9.11 shall be construed to preclude Purchaser proceeding to closing with respect to any transaction pending as of the date hereof. 9.12. PAYMENT OF CERTAIN LIABILITIES PRIOR TO CLOSING. Sellers, the Company, and MMP shall comply in all respects with their obligations under Section 2.2(b) of this Agreement. 9.13. [RESERVED] 9.14. VALUE APPRECIATION RIGHTS AND INCENTIVE FEES. Before Closing, MMP shall make all payments, discharge all obligations and terminate any and all Value Appreciation Rights Agreements ("VARS"), and the Management Incentive Agreements ("Incentive Agreements"), including, but not limited to, the VARS and Incentive Agreements listed on Schedule 5.3j or Schedule 5.3m. SECTION 10 INDEMNIFICATION --------------- 10.1. INDEMNIFICATION OF PURCHASER BY SELLERS. (a) Subject to Section 10.3 hereof after the Closing Date, each Seller, jointly and severally, shall indemnify and hold Purchaser harmless from and against any and all Losses, however incurred, which arise out of or result from any breach by such Seller of any representation or warranty of such Seller as to itself, himself or herself, in Section 5.1 of this Agreement. (b) Subject to Section 10.3 hereof after the Closing Date, Sellers shall jointly and severally indemnify and hold Purchaser harmless from and against any and all Losses, howsoever incurred, which arise out of or result from: (i) any breach of any representation or warranty of Sellers set forth in Sections 5.2, 5.3 or 5.4 of this Agreement other than any representation or warranty of any Seller set forth in Section 5.1 of this Agreement; provided, however, for purposes of this Section 10.1(b)(i), the representation set forth in Sections 5.2c and 5.3d will be deemed not to include the requirement of a MMP Material Adverse Effect; (ii) the material failure by Sellers to perform any covenant of Sellers contained herein; 53 (iii) breaches by Seller, the Company, MMP, MTR or any of the FCC License Entities of any other agreements and certificates specifically contemplated hereby; (iv) any and all Taxes of the Company, MTR, MMP and the FCC Licensee Entities (including any liability of the Company, MTR, MMP or the FCC Licensee Entities for Taxes of any other entity or person) for any Pre-Closing Tax Period except to the extent that such Taxes are specifically identified in the Closing Date Tax Liabilities as finally determined pursuant to Section 2.2(b)(ii) (excluding reserves for deferred Taxes); (v) [Reserved] (vi) any liabilities under the Shareholder Settlement Agreements; or (vii) the Closing Date Liabilities, to the extent the Closing Date Liabilities exceed (A) the aggregate cash, cash equivalents and other cash items retained as provided by Section 2.2(b), and (B) payments made from the Indemnification Escrow as provided by Section 2.2(b)(iii); (c) For purposes of Section 10.1(b)(iv), Taxes of the Company and MTR for Pre-Closing Tax Periods shall be deemed to include Taxes payable by the Company, MTR, Purchaser, or Purchaser's Affiliates that are attributable to items of income, gain, loss, deduction, and credit of MMP and the FCC Licensee Entities accruing through the Closing Date, determined on the basis of a closing of the books of MMP and the FCC Licensee Entities as of that date, notwithstanding that such items may be reported in Taxable Periods ending after the Closing Date. 10.2. INDEMNIFICATION OF SELLERS BY PURCHASER. Subject to Section 10.3 hereof after the Closing, Purchaser shall indemnify and hold Sellers harmless from and against any and all Losses, howsoever incurred, which arise out of or result from: (a) any breach by Purchaser of any representation or warranty of Purchaser set forth in Section 6 of this Agreement; or (b) the material failure by Purchaser to perform any covenant of Purchaser contained herein. 54 (c) any and all Taxes of the Company, MTR, MMP and the FCC Licensee Entities (including any liability of the Company, MTR, MMP or the FCC Licensee Entities for Taxes of any other persons) for any Post-Closing Tax Period except to the extent that (i) such Taxes should have been but were not specifically identified in the Closing Date Liabilities or are described in Section 10.1(c), or (ii) such Taxes arise out of, result from or are attributable to a breach of any representation, warranty or covenant of Sellers set forth in this Agreement. 10.3. LIMITATIONS AND OTHER PROVISIONS REGARDING INDEMNIFICATION OBLIGATIONS. Sellers' obligation to indemnify Purchaser pursuant to Section 10.1 shall be subject to all of the following limitations: (a) Notwithstanding anything contained in this Agreement or applicable law to the contrary, Purchaser agrees that the payment of any claim (whether such claim is framed in tort, contract, or otherwise) made by Purchaser for indemnification hereunder subsequent to the Closing Date, for whatever reason, shall be limited to, and shall only be made from, the Indemnification Amount in accordance with the Indemnification Escrow Agreement and, except for claims against the Indemnification Amount, Purchaser waives and releases, and shall have no recourse against, Sellers as a result of the breach of any representation, warranty, covenant or agreement of Sellers contained herein, or otherwise arising out of or in connection with the transactions contemplated hereby or the operation of the Stations, and such indemnification shall be the sole and exclusive remedy for Purchaser with respect to any such claim for indemnification after the Closing Date; provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Sellers' fraud. The Indemnification Escrow shall be disbursed in accordance with the Indemnification Escrow Agreement. (b) Anything in this Agreement or any applicable law to the contrary notwithstanding, it is understood and agreed by Purchaser that, other than with respect to Sellers (but not including any partner, director, officer, employee, agent or Affiliate Sellers (including any shareholder, director, officer, employee, agent or Affiliate of the Sellers)) as expressly provided for in Section 10.1, no partner, director, officer, employee, agent or Affiliate of Sellers (including any shareholder, director, officer, employee, agent or Affiliate of Sellers) shall have (i) any personal liability to Purchaser as a result of the breach of any representation, warranty, covenant or agreement of Sellers contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Stations, or (ii) any personal obligation to indemnify Purchaser for any of Purchaser's claims pursuant to Section 10.1 and Purchaser waives and releases and shall have no recourse against any of such parties described in this 55 Section 10.3(c) as a result of the breach of any representation, warranty, covenant or agreement of Sellers contained herein or otherwise arising out of or in connection with the transactions contemplated hereby or thereby or the operations of the Stations; provided, however, that nothing herein shall be deemed to limit any rights or remedies that Purchaser may have for Sellers' fraud. (c) Notwithstanding any other provision of this Agreement to the contrary, Sellers shall not be liable to Purchaser in respect of any indemnification hereunder until the aggregate amount of Losses of Purchaser under this Agreement, the Management Agreement, the MTC Agreement and the Investors Agreement exceeds Two Hundred Fifty Thousand Dollars ($250,000.00) (the "Basket Amount"), and then only to the extent of the excess of Losses over the amount of One Hundred Twenty Five Thousand Dollars ($125,000.00); provided, however, that this paragraph shall not apply to (i) payments pursuant to Section 2.2(b)(iii), (ii) indemnification pursuant to Section 10.1(b)(iv), 10.1(b)(vi) and 10.1(b)(vii) (to the extent indemnification pursuant to Section 10.1(b)(vii) relates to an item either disclosed on a Schedule and/or set forth on the Estimate Certificate or the Accountant's Certificate), or (iii) indemnification pursuant to Sections 10.1(b)(i) for breaches of the representations and warranties set forth in Sections 5.2m, 5.3r, and 5.41. (d) In determining the amount of any Tax or other Loss for which indemnification is provided under this Agreement, such Loss shall be (i) net of any insurance recovery made by the indemnified party, (ii) reduced to take into account any net Tax benefit realized by the indemnified party arising from the deductibility of such Tax or Loss, and (iii) increased to take account of any net Tax cost incurred by the indemnified party arising from the receipt of indemnification payments hereunder. Any indemnification payment hereunder shall initially be made without regard to this paragraph and shall be reduced to reflect any net Tax benefit or increased to reflect any net Tax cost only after the indemnified party has actually realized such benefit or cost. For purposes of this Agreement, an indemnified party shall be deemed to have "actually realized" a net Tax benefit or net Tax cost to the extent that, and at such time as, the amount of Taxes payable by such indemnified party is (x) reduced below the amount of Taxes that such indemnified party would have been required to pay but for the deductibility of such Tax or Losses, and (y) increased above the amount of Taxes that such indemnified party would have been required to pay but for the receipt of such indemnification payments. The amount of any reduction hereunder shall be adjusted to reflect any final determination (which shall include the execution of Form 870-AD or successor form) with respect to the indemnified party's liability for Taxes. Any indemnity payments under this Agreement shall be treated as an adjustment to the Purchase Price for Tax purposes, unless a final determination with respect to the indemnified party or any of its affiliates causes any such payment not to be treated as an adjustment to the Purchase Price. 56 (e) No claim for indemnification for Losses shall be made after expiration of the applicable period set forth in Section 7.1 hereof. (f) Anything to the contrary in this Section 10.3 notwithstanding, the terms, conditions and limitations set forth in this Section 10.3 do not apply to or limit Purchaser's rights under Section 14.2. 10.4. NOTICE OF CLAIM; DEFENSE OF ACTION. (a) An indemnified party shall promptly give the Sellers' Agent notice of any matter which an indemnified party has determined has given or could give rise to a right of indemnification under this Agreement, stating the nature and, if known, the amount of the Losses, and method of computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right to indemnification is claimed or arises; provided that the failure of any party to give notice promptly as required in this Section 10.4 shall not relieve any indemnifying party of its indemnification obligations except to the extent that such failure materially prejudices the rights of such indemnifying party. The indemnified party shall give continuing notice promptly thereafter of all developments coming to Sellers' Agent's attention materially affecting any matter relating to any indemnification claims. (b) Except as otherwise provided in Section 10.5, the obligations and liabilities of an indemnifying party under this Section 10 with respect to Losses arising from claims of any third party that are subject to the indemnification provided for in this Section 10, shall be governed by and contingent upon the following additional terms and conditions: (i) With respect to third party claims, promptly after receipt by an indemnified party of notice of the commencement of any action or the presentation or other assertion of any claim which could result in any indemnification claim pursuant to Section 10.1 or 10.2 hereof, such indemnified party shall give prompt notice thereof to Sellers' Agent and the indemnifying part(ies) shall be entitled to participate therein or, to the extent that it desires, assume the defense thereof with its own counsel. (ii) If the indemnifying part(ies) elects to assume the defense of any such action or claim, the indemnifying part(ies) shall not be liable to the indemnified party for any fees of other counsel or any other expenses, in each case incurred by such indemnified party in connection with the defense thereof. (iii) The indemnifying part(ies) shall be authorized, without consent of the indemnified party being required, to settle or compromise any such action or claim, provided that such settlement or compromise includes an unconditional release of the 57 indemnified party from all liability arising out of such action or claim. (iv) Whether or not an indemnifying part(ies) elects to assume the defense of any action or claim, the indemnifying part(ies) shall not be liable for any compromise or settlement of any such action or claim effected without its consent, such consent not to be unreasonably withheld. (v) The parties agree to cooperate to the fullest extent possible in connection with any claim for which indemnification is or may be sought under this Agreement, including, without limitation, making available all witnesses, pertinent records, materials and information in its possession or under its control relating thereto as is reasonably requested by the other party. 10.5 TAX CONTESTS. (a) If any party receives written notice from any Taxing Authority of any Tax Proceeding with respect to any Tax for which the other party is obligated to provide indemnification under this Agreement, such party shall give prompt written notice thereof to the other party; provided, however, that the failure to give such notice shall not affect the indemnification provided hereunder except to the extent that the failure to give such notice materially prejudices the indemnifying party. (b) Sellers, acting through Sellers' Agents, shall have the right, at their own expense, to control and make all decisions with respect to any Tax Proceeding relating solely to Taxes of the Company and MTR for Taxable Periods ending on or before the Closing Date; provided, that Purchaser and counsel of its own choosing shall have the right, at Purchaser's own expense, to participate fully in all aspects of the prosecution or defense of such Tax Proceeding; and provided further that Sellers shall not settle any such Tax Proceeding without the prior written consent of Purchaser if such settlements could increase the past, present or future Tax liability of Purchaser or any of its Affiliates, or any Tax liability of the Company or MTR for any Post-Closing Tax Period by an amount greater than $25,000. (c) Sellers, acting through Sellers' Agents, shall have the right, at their own expense, to jointly control and participate with Purchaser in all Tax Proceedings relating to Taxes of the Company or MTR for a Straddle Period. If Sellers exercise such right, neither party shall settle any such Tax Proceeding without the prior written consent of the other. (d) If Sellers, acting through Sellers' Agents, do not exercise their right to assume control of or participate in any Tax Proceeding as provided under this Section 58 10.5, Purchaser may, without waiving any rights to indemnification hereunder, defend or settle the same in such manner as it may deem appropriate in its sole and absolute discretion. (e) Purchaser shall control all Tax Proceedings relating to Taxes or Tax Returns of MMP and the FCC Licensee Entities. In the case of Tax Proceedings relating solely to Taxable Periods of MMP ending on or before the Closing Date and Straddle Periods of MMP, Purchaser shall keep Sellers fully informed as to the status of any such Tax Proceeding and shall not settle such a Tax Proceeding without the prior written consent of Sellers, which consent shall not be unreasonably withheld; provided that Sellers' Agents' consent to a settlement shall only be required if such settlements could increase Sellers' Taxes or Taxes for which Sellers' Agents have indemnification responsibility hereunder by an amount greater than $25,000. (f) In the event that the provisions of this Section 10.5 and the provisions of Section 10.4(b) conflict or otherwise each apply by the terms, this Section 10.5 shall exclusively govern all matters concerning Taxes. SECTION 11 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE ----------------------------------------------------------- 11.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER. The obligation of Purchaser to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Sellers shall have complied in all material respects with their agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Sellers contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Purchaser shall have received a certificate of one of Sellers' Agents, dated as of the Closing Date and signed by Sellers Agent, certifying as to the fulfillment of the condition set forth in this Section 11.1(a) ("Sellers' Bring-Down Certificate"). (b) No statute, rule or regulation, or order of any court or administrative agency shall be in effect which restrains or prohibits Purchaser from consummating the transactions contemplated hereby and no action or proceeding shall be pending wherein an unfavorable ruling would affect any right to own the Stock or the assets of the Station. 59 (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) All consents identified on Schedules 5.2h, 5.3e and 5.3m as required consents shall have been received. (e) The Final Order approving the applications for transfer of control of the FCC Licenses (other than the MMP II Licenses) shall have been obtained. All the material conditions contained in the Final Order required to be satisfied on or prior to the Closing Date shall have been duly satisfied and performed. Notwithstanding the foregoing, other than conditions relating the broadcast industry generally, if the consent of the FCC is conditional or qualified in any manner that has a material adverse effect on Purchaser or requires Purchaser or any of its subsidiaries to divest any television or radio station owned, operated or programmed by Purchaser or any of its subsidiaries. Purchaser may, nevertheless, in its sole discretion, require the consummation of the transactions contemplated by this Agreement, but shall not be required to do so. (f) Sellers shall have delivered to Purchaser at the Closing each document required by Section 12.1 hereof. (g) Since the date of this Agreement through the Closing Date, there shall not have been either a Material Adverse Effect with respect to the Company or a MMP Material Adverse Effect with respect to the business, operations, properties, assets, or condition of MMP, and no event shall have occurred or circumstance exist that reasonably could be expected to result in either a Material Adverse Effect or an MMP Material Adverse Effect. (h) The transfer of the FCC Licenses for Television Stations WKEF-TV in Dayton, Ohio and WEMT-TV in Greeneville, Tennessee to MMP II and the distribution of MMP II to MTC shall have occurred pursuant to the Assignment and Assumption Agreement and the Distribution Agreement substantially in the form attached hereto as Exhibit C, and MMP and MMP II shall have entered into one or more Time Brokerage Agreements generally in the form attached (subject to such revisions, additions and deletions as determined by counsel to MMP II and Purchaser prior to the Closing) hereto as Exhibit D. (i) The closings under the Investors Agreement, the MTC Agreement and the Management Agreement shall have occurred or will occur simultaneously with the Closing. (j) Sellers, the Company or MMP, as the case may be, shall have 60 complied with their obligations under Section 9.12. 11.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS. The obligation of Sellers to consummate the Closing is subject to the fulfillment or waiver, on or prior to the Closing Date, of each of the following conditions precedent: (a) Purchaser shall have complied in all material respects with its agreements and covenants contained herein to be performed at or prior to the Closing, and the representations and warranties of Purchaser contained herein shall be true and correct in all material respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date, except that representations and warranties that were made as of a specified date shall continue on the Closing Date to have been true as of the specified date, and Seller shall have received a certificate of Purchaser, dated as of the Closing Date and signed by an officer of Purchaser, certifying as to the fulfillment of the condition set forth in this Section 11.2(a) ("Purchaser's Bring-Down Certificate"). (b) No statute, rule or regulation or order of any court or administrative agency shall be in effect which restrains or prohibits Sellers from consummating the transactions contemplated hereby. (c) All applicable waiting periods under the H-S-R Act shall have expired or been terminated. (d) The issuance by the FCC of a Final Order approving the applications for transfer of control of the FCC Licenses contemplated by this Agreement shall have occurred, and there shall have been duly satisfied and performed on or prior to the Closing Date all the material conditions contained in the Final Order required to be so satisfied; provided, however, Purchaser, in its sole discretion, may waive the necessity of a "Final Grant" by the FCC and close following an "Initial Grant". (e) Purchaser shall have delivered to Sellers at the Closing the Purchase Price and each document required by Section 12.2 hereof. (f) The closings under the Investors Agreement, the MTC Agreement and the Management Agreement shall have occurred or occur simultaneously with the Closing. SECTION 12 DELIVERIES AT THE CLOSING ------------------------- 12.1. DELIVERIES BY SELLERS. At the Closing, Sellers will deliver or cause to be 61 delivered at the Closing to Purchaser: (a) Sellers' Bring-Down Certificate; (b) a legal opinion of Clark & Stant, P.C., counsel to Sellers', the Company and MMP substantially in the form attached as Exhibit E hereto; (c) a legal opinion of counsel to the FCC Licensee Entities in the form attached hereto as Exhibit F; (d) stock certificates evidencing the Stock, together with stock powers, dated as of the Closing Date and executed by the respective Sellers, transferring the Stock to Purchaser; (e) the original corporate minute books, stock registry and seal of each of the Company; (f) a certificate as to the existence of the Company issued by the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; (g) a certificate as to the existence and good standing of MMP issued by the Secretary of the State Corporation Commission of the Commonwealth of Virginia not more than five (5) Business Days before the Closing Date and certificates issued by the appropriate governmental authorities in each jurisdiction in which MMP is qualified to do business and a certificate as to the existence for each of the FCC Licensee Entities of the Secretary of the State Corporation Commission of the Commonwealth of Virginia dated not more than five (5) Business Days before the Closing Date; (h) receipt for Purchase Price; 62 (i) resignations of each of the officers and directors of the Company effective as of the Closing Date; (j) the certificate(s) required by Section 8.6; (k) a copy of any instrument evidencing any consents received; (l) the Indemnification Escrow Agreement duly executed by Sellers and Sellers' Agent; (m) a copy of any instrument evidencing any consent received, including, but not limited to, estoppel certificates from MMP's landlords with respect to the Real Property; (n) RESERVED; (o) the Estimate Certificate; (p) the employee releases with respect to the VARS and Incentive Agreements duly executed by each employee to such Agreements; (q) the amendments to the LMAs in a form reasonably satisfactory to Purchaser duly executed by the necessary parties thereto as contemplated by Section 9.3(w); and (r) evidence reasonably satisfactory to Purchaser that the Limited Partnership Agreements of the FCC Licensee Entities have been amended, and that sufficient actions have been taken by or with respect to MMP, to require allocation of items of income, gain, loss, deduction and credit with respect to transferred interests in the FCC Licensee Entities and MMP based on the interim closing of the books method authorized by Code Section 706 and the regulations promulgated thereunder; (s) release and indemnity agreements property executed by MTC and the shareholders of MTC in a form reasonably satisfactory to Purchaser releasing MMP from all liabilities for Taxes of such persons under certain Assignment and Assumption Agreements dated as of January 1, 1996, and indemnifying and holding harmless MMP from and against all such liabilities; and (t) such other documents as Purchaser shall reasonably request. 63 12.2. DELIVERIES BY PURCHASER. Purchaser will deliver or cause to be delivered at the Closing to Sellers, the Disbursing Agent or the Indemnification Escrow Agent, as the case may be: (a) Purchaser's Bring-Down Certificate; (b) a legal opinion of Thomas & Libowitz, P.A., counsel to Purchaser, substantially in the form attached as Exhibit G hereto; (c) the Purchase Price as required pursuant to Section 3.1 hereof; (d) the Indemnification Escrow Agreement duly executed by Purchaser; (e) a certificate as to the existence and good standing of the Purchaser issued by the Maryland Department of Assessments and Taxation of the State of Maryland dated as of the Closing Date; (f) one or more fully executed Time Brokerage Agreements as negotiated pursuant to Section 11.1(h) hereof; and (g) such other documents as the Company shall reasonably request. SECTION 13 EXPENSES -------- Except as provided in Sections 9.4 and 9.5, each party will pay its own fees, expenses, and disbursements and those of its counsel in connection with the subject matter of this Agreement (including the negotiations with respect hereto and the preparation of any documents) and all other costs and expenses incurred by it in the performance and compliance with all conditions and obligations to be performed by it pursuant to this Agreement or as contemplated hereby. SECTION 14 TERMINATION ----------- 14.1 TERMINATION. This Agreement may be terminated: (a) At any time by mutual written consent of Purchaser and Sellers; 64 (b) By either Purchaser or Sellers, if the terminating party is not in default or breach in any material respect of its obligations under this Agreement, if the Closing hereunder has not taken place on or before October 31, 1998, except where the Closing has been postponed pursuant to the provisions of Section 9.8, in which case the applicable date shall be upon the expiration of the period referred to in Section 9.8(b) (the "Termination Date"); (c) by Sellers, if Sellers are not in default or breach in any respect of their obligations under this Agreement, if all of the conditions in Section 11.2 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.8); (d) by Purchaser, if Purchaser is not in default or breach in any material respect of its obligations under this Agreement, if all of the conditions set forth in Section 11.1 have not been satisfied or waived by the date scheduled for the Closing (as such date may be postponed pursuant to Section 9.8); (e) by Purchaser, pursuant to Section 9.8. 14.2 PROCEDURE AND EFFECT OF TERMINATION. (a) In the event of termination of this Agreement by either or both Purchaser and/or Sellers pursuant to Sections 9.8 or 14.1 hereof, prompt written notice thereof shall forthwith be given to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any of the parties hereto, but subject to and without limiting any other rights of the parties specified herein in the event a party is in default or breach in any material respect of its obligations under this Agreement. If this Agreement is terminated as provided herein, all filings, applications and other submissions relating to the transactions contemplated hereby as to which termination has occurred shall, to the extent practicable, be withdrawn from the agency or other Person to which such filing is made. (b) If this Agreement is terminated pursuant to Section 14.1(d), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser and Purchaser shall have the right to pursue all remedies available hereunder at law or in equity, including, without limitation, the right to seek specific performance and/or actual monetary damages, but excluding consequential and incidental damages. In recognition of the unique character of the property to be sold hereunder, and the damages which Purchaser will suffer in the event of a termination pursuant to the foregoing Sections of this Agreement, Sellers hereby waive any defense that Purchaser has an adequate remedy at law for the breach of this Agreement by Sellers. 65 (c) If this Agreement is terminated pursuant to Section 14.1(c) and Purchaser shall be in breach in any material respect of its representations, warranties, covenants, agreements, or obligations set forth in this Agreement, then and in that event, Sellers shall have the right to retain the amount delivered by Purchaser pursuant to Section 3.1(1) as liquidated damages, and as the sole and exclusive remedy of Sellers as a consequence of Purchaser's default (which aggregate amount the parties agree is a reasonable estimate of the damages that will be suffered by Sellers as a result of the default by Purchaser and does not constitute a penalty), the parties hereby acknowledging the inconvenience and nonfeasability of otherwise obtaining inadequate remedy. (d) If this Agreement is terminated pursuant to Sections 14.1(a), 14.1(b) and 14.1(e), the payment made by Purchaser pursuant to Section 3.1(1) shall be returned to Purchaser. (e) A notice of termination made under any provision of Section 14.1 of this Agreement shall be deemed to be a notice of termination under the termination provisions of the Investor Agreement, the Management Agreement and the MTC Agreement. (f) In the event of a default by either party that results in a lawsuit or other proceeding for any remedy available under this Agreement, the prevailing party, to the extent it is the prevailing party, shall be entitled to reimbursement from the other party of its reasonable legal fees and expenses, whether incurred in arbitration, at trial, or on appeal. SECTION 15 NOTICES ------- All notices, requests, consents, payments, demands, and other communications required or contemplated under this Agreement shall be in writing and (a) personally delivered or sent via telecopy (receipt confirmed), or (b) sent by Federal Express or other reputable overnight delivery service (for next Business Day delivery), shipping prepaid, as follows: To Purchaser: SINCLAIR COMMUNICATIONS, INC. ------------ 2000 W. 41st Street Baltimore, Maryland 21211 Attention: David D. Smith Telecopy: (410) 467-5043 Telephone: (410) 662-1008 66 with copies Sinclair Communications, Inc. (which shall not constitute 2000 W. 41st Street notice) to: Baltimore, Maryland 21211 Attention: General Counsel Telecopy: (410) 662-4707 Telephone: (410) 662-1422 and Thomas & Libowitz, P.A. Suite 1100 100 Light Street Baltimore, Maryland 21202 Attention: Steven A. Thomas Telecopy: (410) 752-2046 Telephone: (410) 752-2468 To Sellers' Agents: Anthony R. Ignaczak ------------------ Quad-C, Inc. 230 East High Street Charlottesville, Virginia 22902 Telecopy: (804) 979-1145 Telephone: (804) 979-9227 Allen B. Rider, III Colonnade Capital, L.L.C. 13th Floor 901 East Byrd Richmond, Virginia 23219 Telecopy: (804) 782-6606 Telephone: (804) 782-3512 Stephen W. Burke Clark & Stant, P.C. Suite 900 One Columbus Center Virginia Beach, Virginia 23462 Telecopy: (757) 473-0395 Telephone: (757) 499-8800 67 or to such other Persons or addresses as any Person may request by notice given as aforesaid. Notices shall be deemed given and received at the time of personal delivery or completed telecopying, or, if sent by Federal Express or such other overnight delivery service one Business Day after such sending. SECTION 16 SELLERS' AGENTS --------------- 16.1. SELLERS' AGENTS. Each of the Sellers hereby irrevocably appoints Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke (herein called the "Sellers' Agents") as his, her or its agent and attorney-in-fact to take any action required or permitted to be taken by such Seller under the terms of this Agreement, including, without limiting, the generality of the foregoing, the payment of expenses relating to the transactions contemplated by the Agreement, and the right to waive, modify or amend any of the terms of this Agreement in any respect, whether or not material, and agrees to be bound by any and all actions taken by the Sellers' Agents on his or its behalf. Any action to be taken by the Sellers' Agents shall be unanimous. In the event of the death, incapacity or liquidation of any of Sellers' Agents, such person or entity shall not be replaced, and the remaining Sellers' Agents shall continue in that capacity. The Sellers agree jointly and severally to indemnify the Sellers' Agents from and against and in respect of any and all liabilities, damages, claims, costs, and expenses, including, but not limited to attorneys' fees, arising out of or due to any action by them as the Sellers' Agents and any and all actions, proceedings, demands, assessments, or judgments, costs, and expenses incidental thereto, except to the extent that the same result from bad faith or gross negligence on the part of the Sellers' Agents. Purchaser shall be entitled to rely exclusively upon any communications given by the Sellers' Agents on behalf of any Seller, and shall not be liable for any action taken or not taken in reliance upon the Sellers' Agents. Purchaser shall be entitled to disregard any notices or communications given or made by Sellers unless given or made through the Sellers' Agents. SECTION 17 MISCELLANEOUS ------------- 17.1. HEADINGS. The headings contained in this Agreement (including, but not limited to, the titles of the Schedules and Exhibits hereto) have been inserted for the convenience of reference only, and neither such headings nor the placement of any term hereof under any particular heading shall in any way restrict or modify any of the terms or provisions hereof. Terms used in the singular shall be read in the plural, and vice versa, and 68 terms used in the masculine gender shall be read in the feminine or neuter gender when the context so requires. 17.2. SCHEDULES AND EXHIBITS. All Annexes, Schedules and Exhibits attached to this Agreement constitute an integral part of this Agreement as if fully rewritten herein. 17.3. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. 17.4. ENTIRE AGREEMENT. This Agreement, the Investors Agreement, the Management Agreement, the MTC Agreement and the FCC Licensee Transfer Agreement, the Annexes, Schedules and Exhibits and the documents to be delivered hereunder and thereunder constitute the entire understanding and agreement between the parties hereto concerning the subject matter hereof. All negotiations and writings between the parties hereto are merged into this Agreement, the Investors Agreement, the Management Agreement, the MTC Agreement, the FCC Licensee Transfer Agreement, and there are no representations, warranties, covenants, understandings, or agreements, oral or otherwise, in relation thereto between the parties other than those incorporated herein or to be delivered hereunder. 17.5. GOVERNING LAW. This Agreement is to be delivered in and should be construed in accordance with and governed by the laws of the Commonwealth of Virginia without giving effect to conflict of laws principles. 17.6. MODIFICATION. This Agreement cannot be modified or amended except in writing signed by each of the Purchaser and Sellers' Agent. 17.7. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights and obligations hereunder shall be assigned, delegated, sold, transferred, sublicensed, or otherwise disposed of by operation of law or otherwise, without the prior written consent of each of the other parties hereto; provided, however, that Purchaser may assign its rights and obligations hereunder to one or more subsidiaries so long as Purchaser is not relieved of its obligations hereunder; and provided further that any change of control in respect of Purchaser's parent, SBGI, shall not require the consent of Sellers. In the event of such permitted assignment or other transfer, all of the rights, obligations, liabilities, and other terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against, the respective successors and assigns of the parties hereto, whether so expressed or not. 69 17.8. WAIVER. Any waiver of any provision hereof (or in any related document or instrument) shall not be effective unless made expressly and in a writing executed in the name of the party sought to be charged. The failure of any party to insist, in any one or more instances, on performance of any of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any rights granted hereunder or of the future performance of any such term, covenant, or condition, but the obligations of the parties with respect hereto shall continue in full force and effect. 17.9. SEVERABILITY. The provisions of this Agreement shall be deemed severable, and if any part of any provision is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, such provision may be changed, consistent with the intent of the parties hereto, to the extent reasonably necessary to make the provision, as so changed, legal, valid, binding, and enforceable. If any provision of this Agreement is held to be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety or partially or as to any party, for any reason, and if such provision cannot be changed consistent with the intent of the parties hereto to make it fully legal, valid, binding and enforceable, then such provisions shall be stricken from this Agreement, and the remaining provisions of this Agreement shall not in any way be affected or impaired, but shall remain in full force and effect. 17.10. ANNOUNCEMENTS. From the date of this Agreement, all further public announcements relating to this Agreement or the transactions contemplated hereby will be made only as agreed upon jointly by the parties hereto, except that nothing herein shall prevent any Seller or any Affiliate thereof or Purchaser from making any disclosure in connection with the transactions contemplated by this Agreement if required by applicable law or otherwise as a result of its, or its Affiliate's, being a public company, provided that prior notice of such disclosure is given to the other party hereto. 17.11. SPECIFIC PERFORMANCE. Sellers acknowledge that Purchaser will have no adequate remedy at law if Sellers fail to perform their obligation to consummate the sale of Stock contemplated under this Agreement. In such event, Purchaser shall have the right, in addition to any other rights or remedies it may have, to specific performance of this Agreement. 17.12 FEES AND EXPENSES. Except as otherwise provided in this Agreement, each party shall pay their own expenses incurred in connection with the authorization, preparation, execution, and performance of this Agreement and the exhibits, Schedules, and other documentation, including all fees and expenses of counsel, accountants, and each party shall be responsible for all fees and commissions payable to any finder, broker, adviser, or other similar Person retained by or on behalf of such party; provided, however, 70 that all transfer taxes, recordation taxes, sales taxes, and document stamps in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Sellers and all other filing fees (including all FCC and H-S-R Act filing fees), and other charges levied by any governmental entity in connection with the transactions contemplated by this Agreement shall be paid one-half (1/2) by Purchaser and one-half (1/2) by Sellers. Purchaser hereby waives compliance with the provisions of any applicable bulk transfer law. 17.13 THIRD PARTY BENEFICIARIES. Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns. 17.14 INTERPRETATION. The Purchaser and Sellers acknowledge and agree that the preparation and drafting of this Agreement and the Exhibits hereto are the result of the efforts of all parties to this Agreement and every covenant, term, and provision of this Agreement shall be construed according to its fair meaning and shall not be construed against any particular party as the drafter of such covenant, term, and/or provision. The Purchaser and Sellers agree that this Agreement is to be construed in a manner consistent with the terms of the Investors Agreement, the Management Agreement and the MTC Agreement. [SIGNATURE PAGES TO FOLLOW --REST OF PAGE LEFT INTENTIONALLY BLANK] 71 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date and year first written above. SINCLAIR COMMUNICATIONS, INC., a Maryland corporation By ------------------------------------------------- its ---------------------------------------- AARDVARKS UNLIMITED, INC., a Virginia corporation By ------------------------------------------------- its ---------------------------------------- COMMONWEALTH INVESTORS, L.P., a Virginia limited partnership By: its general partner Riverfront Partners By ------------------------------------------------- its ---------------------------------------- QUAD-C PARTNERS L.P., a Delaware limited partnership By: its general partner Quad-C X, L.C. By ------------------------------------------------- its ---------------------------------------- 72 QUAD-C OFFSHORE INVESTORS L.P., a Delaware limited partnership By: its general partner Quad-C X, L.C. By ------------------------------------------------- its ---------------------------------------- QUAD-C PARTNERS II, L.P., a Virginia limited partnership By: its general partner Quad-C XI, L.C. By ------------------------------------------------- its ---------------------------------------- 73 ANNEX 1 DEFINITIONS ----------- As used in the attached Stock Purchase Agreement, the following terms shall have the corresponding meaning set forth below: "Affiliate" of, or a Person "Affiliated" with, a specified Person, means a Person who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. "Agreement" has the meaning set forth in the preamble. "Allocable Portion" shall mean 0% in the case of each of Investors and the Company, 96.470% in the case of MTC and 3.530% in the case of Management. "Basket Amount" has the meaning set forth in Section 10.3(c). "Benefit Arrangement" shall mean any benefit arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Benefit Plan, including without limitation, employment agreements, severance agreements, executive compensation arrangements, including but not limited to stock options, restricted stock rights and performance unit awards, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discounts, employee loans, employee banking privileges, any plans subject to Section 125 of the code, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. "Benefit Plan" shall have the meaning given in Section 3(3) of ERISA. 74 "Broadcast Time Sales Agreement" shall mean all contracts and agreements pursuant to which MMP has sold commercial air time on the Stations for cash. "Business" means the business of owning and operating the Stations. "Business Day" means any day on which banks in New York City are open for business. "Cash Price" shall mean the excess of $252 million over the Funded Debt immediately prior to the Closing. "CERCLA" has the meaning set forth in Section 5.3q of the Agreement. "Closing" has the meaning set forth in Section 4 of the Agreement. "Closing Date Liabilities" has the meaning set forth in Section 2.2(b) of the Agreement. "Closing Date Tax Liabilities" shall have the meaning set forth in Section 2.2(b)(iv) of this Agreement. "Closing Date" has the meaning set forth in Section 4 of the Agreement. "Closing Date Estimated Accounts Receivable" has the meaning of an amount equal to the Sellers' good faith estimate of Accounts Receivable of MMP as of the Closing Date, which have been outstanding for no more than 120 days, as set forth in the Certificate of Sellers' Agent delivered to Purchaser five (5) days before the Closing Date. "Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time. "Company" has the meaning set forth in the recitals to the Agreement. "Company Benefit Arrangement" shall mean any Benefit Arrangement sponsored or maintained by the Company or with respect to which the Company has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former directors, employees, or agents of the Company. "Company Interests" shall have the meaning set forth in Section 5.2q. 75 "Company Plan" shall mean, as of the Closing Date, any Benefit Plan for which the Company is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Benefit Plan maintained by the Company or to which the Company is obligated to make payments, in each case with respect to any present or former employees of the Company. Company Plan shall include any Qualified Plan terminated within the preceding six years. "Consents" means the consents, permits, or approvals of government authorities and other third parties necessary to lawfully and validly transfer the Stock and the Station assets to Purchaser to maintain the validity and effectiveness (any default or violation of the terms thereof) of any Material Contract and any licenses (including, without limitation, the FCC Licenses) to be transferred to Purchaser, or otherwise to consummate the transactions contemplated by this Agreement. "Deposit Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. "Disbursing Agent" means Allen B. Rider, III, Anthony R. Ignaczak, and Stephen W. Burke. "Disbursement Agreement" means that certain Disbursement Agreement dated not later thirty (30) days prior to the Closing, among the Disbursing Agent and the Sellers. "Environment" means any surface or subsurface physical medium or natural resource, including air, land, soil (surface or subsurface), surface waters, ground waters, wetlands, stream and river sediments, rock and biota. "Environmental Laws" means any federal, state, or local law, legislation, rule, regulation, ordinance or code of the United States or any subdivision thereof relating to the injury to, or the pollution or protection of, human health and safety or the Environment. "Environmental Liability" means any loss, liability, damage, cost or expense arising under any Environmental Law. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean any Person that together with the Company or MMP, as applicable, would be or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any general partnership of which the Company or MMP, as applicable, is or has been a general partner. 76 "Estimate Certificate" shall have the meaning set forth in Section 2.2(b)(i). "Excluded Assets" shall have the meaning set forth in Section 2.2. "FCC" has the meaning set forth in the recitals to the Agreement. "FCC Applications" means the applications requesting the approval and consent of the FCC to (i) the transfer of the FCC Licenses pursuant to the MMP II Transfers, and (ii) the transfer of control of the FCC Licenses to Purchaser or its assignee for those Television Stations and Radio Stations not included in the MMP II Transfers. "FCC Licenses" means those licenses, permits and authorizations issued by the FCC to the FCC Licensee Entities in connection with the business and operations of the Stations (together with any renewals, extensions, modifications or additions thereto between the date of this Agreement and the Closing Date. "FCC Licensee Entities" shall have the meaning set forth in the Recitals. "FCC Rules and Regulations" has the meaning set forth in Section 5.3h of the Agreement. "Final Order" means action by the FCC as to which no further steps (including those of appeal or certiorari) can be taken in any action or proceeding to review, modify or set the determination aside, whether under Section 402 or 405 of the Communications Act, or otherwise. "Financial Statements" means the unaudited balance sheet of the Company at December 31, 1996, and the statement of operations for the year then ended. "GAAP" means generally accepted accounting principles. "Funded Debt" means indebtedness of MMP for borrowed money, including any and all fees, costs or other payments associated with its payoff or retirement, other than (i) any indebtedness due after the Closing Date with respect to program contract liabilities, and (ii) Closing Date Liabilities. "Hazardous Substances" means petroleum, petroleum products, petroleum-derived substances, radioactive materials, hazardous wastes, polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any materials containing asbestos, and any materials or substances regulated or defined as or included in the definition of "hazardous substances, "hazardous materials," "hazardous constituents," "toxic substances," "pollutants, "pollutants," "contaminants" or any similar denomination intended to classify substances by 77 reason of toxicity, carcinogenicity, ignitability, corrosivity or reactivity under any Environmental Laws. "H-S-R Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Initial Deposit" means $12,750,000 less an amount equal to the lesser of $6,375,000 or ninety percent (90%) of the Closing Date Estimated Accounts Receivable. "Initial Grant" means the date of the publication of the FCC "Public Notice" announcing the grant of the "Assignment Applications" for the FCC License to be transferred hereunder which contain no conditions materially adverse to Purchaser. The term "Public Notice" and "Assignment Applications" have the same meaning herein as are generally given the same under existing FCC rules, regulation and procedures. "Intellectual Property" means the patents, patent applications, trademark registrations and applications therefor, service mark registrations and applications therefor, copyright registrations and applications therefor and trade names that are (i) owned by the Company and (ii) material to the continued operation of the Business. "IRS" means the Internal Revenue Service. "Incentive Agreements" has the meaning set forth in Section 9.14. "Indemnification Amount" means $12,750,000.00 deposited or collected pursuant to the Indemnification Escrow Agreement. "Indemnification Escrow Agreement" has the meaning set forth in Section 3.1 of the Agreement. "Indemnification Escrow" has the meaning set forth in Section 3.1 of the Agreement. "Investors Agreement" has the meaning set forth in the Recitals. "Investors" has the meaning set forth in the Recitals. "Knowledge or knowledge" shall mean with respect to the Company, MMP, MTR and the FCC Licensee Entities the actual knowledge (without any requirement of inquiry except as otherwise provided in the Agreement) of A. E. Loving, Jr., John A. Trinder, Charles A. McFadden, Larry Saunders, Dick Lamb, David J. Wilhelm and Jacquelyn D. Smullen, the general managers of the Stations, the managers and officers of MMP, and the 78 officers and directors of the Company. "LMA Stations" shall have the meaning set forth in the Recitals. "Losses" means any loss, liability, damage, cost or expense (including, without limitation, reasonable attorneys' fees and expenses) but exclusive of incidental or consequential damages. "MMP Accounts Receivable" has the meaning given in Section 5.3s. "MMP's Benefit Arrangements" means any Benefit arrangement sponsored or maintained by MMP or by the FCC Licensee Entities or with respect to which MMP or the FCC Licensee Entities has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing Date, in each case with respect to any present or former director, employees, or agent of MMP or the FCC Licensee Entities. "MMP's Benefit Plan" means, as of the Closing Date, any Benefit Plan for which MMP or the FCC Licensee Entities is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA) or any Benefit Plan maintained by MMP or the FCC Licensee Entities or which MMP or the FCC Licensee Entities is obligated to make payments, in each case with respect to any present or former employees of MMP or the FCC Licensee Entities. MMP's Benefit Plan shall include any Qualified Plan terminated within the preceding six (6) years. "MMP II FCC Applications" means the application requesting the approval and consent of the FCC to the transfer of control of Television Stations WKEF-TV and WEMT-TV from MMP to MTC. "MMP Financial Statements" means the audited consolidated balance sheet of MMP at December 31, 1996, the audited consolidated statements of operations cash flows for the year then ended, all notes thereto and the independent auditor's audit report thereon, together with the unaudited balance sheet of MMP at September 30, 1997 and the unaudited statement of operations for the nine (9) months then ended. "MMP Material Adverse Effect" shall mean a material adverse effect on the business, or financial condition of any Television Station with the exception of WMMP-TV in the Charleston, South Carolina market or the Radio Stations taken as a whole. "MMP Real Property" means all real property owned or leased by MMP. "MTC" shall have the meaning set forth in the Recitals. 79 "MTC Agreement" shall have the meaning set forth in the Recitals. "MTR" has the meaning set forth in the Recitals. "Management Agreement" shall have the meaning set forth in the Recitals. "Material Adverse Effect" shall mean a material adverse effect on the business, or financial condition of the Company taken as a whole. "Material Contract" means all agreements to which the Company or MMP is a party or by or to which it or its assets or properties are bound, except: (i) agreements for the cash sale of advertising time with a term of less than six months, (ii) agreements cancelable on no more than 90 days' notice without material penalty, or (iii) agreements which are otherwise immaterial to the Business and the Station. "Permitted Encumbrances" shall mean liens for taxes not yet due and payable; landlord's liens; liens for property taxes not delinquent; statutory liens that were created in the ordinary course of business; restrictions or rights required to be granted to governmental authorities or otherwise imposed by governmental authorities under applicable law; zoning, building or similar restrictions relating to or effecting property, including leasehold interests; all liens of record as of the date of this Agreement, but only if such liens do not materially effect the ownership or use of the MMP Real Property or leasehold interests and real property owned by others and operating leases for personal property and leased interests in property leased to others; liens and encumbrances on the MMP Real Property, currently of record as of the date hereof, and other liens or encumbrances on the MMP Real Property, in any case that individually or in the aggregate do not materially effect the current use and enjoyment thereof in the operation of any Station. "Person" means a natural person, a governmental entity, agency or representative (at any level of government), a corporation, partnership, joint venture or other entity or association, as the context requires. "Pre-Closing Tax Period" means any Taxable Period or portion thereof that ends on or before the Closing Date. 80 "Post-Closing Tax Period" means any Taxable Period or portion thereof beginning after the Closing Date. "Pro Rata Share" shall mean 26.9433% in the case of Investors, 1.6167% in the case of Management, 26.6519% in the case of the Company, and 44.7881% in the case of MTR. "Purchase Price" shall mean the sum of (a) the Pro Rata Share of the excess of the Cash Price over 40% of the Step Up, plus (b) the Allocable Portion of 40% of the Step Up. "Purchaser" has the meaning set forth in the preamble to the Agreement. "Purchaser's Bring-Down Certificate" has the meaning set forth in Section 11.2(a) of the Agreement. "Purchaser's Knowledge" means the actual knowledge of the officers of Purchaser. "Qualified Plan" shall mean any Company Plan or MMP Plan that meets, purports to meet, or is intended to meet the requirements of Section 401(a) of the Code. "RLLP" shall have the meaning set forth in the Recitals. "Radio Stations" shall have the meaning set forth in the Recitals. "Real Property" means any real property owned or leased by the Company. "Related Agreement" means any document delivered at the Closing and any contract which is to be entered into at the Closing or otherwise pursuant to this Agreement, including the Escrow Agreement. "Sellers" has the meaning set forth in the preamble to the Agreement. "Sellers' Bring-Down Certificate" has the meaning set forth in Section 11.1(a) of this Agreement. "Shareholder Settlement Agreements" shall have the meaning set forth in Section 2.2(b). "Stations" has the meaning set forth in the recitals to the Agreement. "Step Up" shall mean the amount of Code Section 754 basis step-up, calculated as the present value (determined using an 8.0% discount rate over a 15-year period assuming 81 straight line amortization) of 45.812% of the Cash Price minus (or plus in the case of a negative) the aggregate tax basis capital accounts of MTR and Management in MMP immediately prior to the Closing. "Stock" has the meaning set forth in the recitals to the Agreement. "Straddle Period" shall have the meaning set forth in Section 8.2 of this Agreement. "Tax" or "Taxes" means all taxes, including, but not limited to, income (whether net or gross), excise, property, sales, transfer, gains, gross receipts, occupation, privilege, payroll, wage, unemployment, workers' compensation, social security, occupation, use, value added, franchise, license, severance, stamp, premium, windfall profits, environmental (including taxes under Code Sec. 59A), capital stock, withholding, disability, registration, alternative or add-on minimum, estimated or other tax of any kind whatsoever (whether disputed or not) imposed by any Tax Authority, including any related charges, fees, interest, penalties, additions to tax or other assessments. "Tax Authority" means any federal, national, foreign, state, municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body or other authority exercising any taxing or tax regulatory authority. "Tax Liability" means any liability for a Tax. "Taxable Period" means any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any applicable statute, rule or regulation. "Tax Proceeding" means any audit, examination, claim or other administrative or judicial proceeding relating to Taxes or Tax Returns. "Tax Returns" means all returns, reports, forms, estimates, information returns and statements (including any related or supporting information) filed or to be filed with any Tax Authority in connection with the determination, assessment, collection or administration of any Taxes. "Television Licensee" shall have the meaning set forth in the Recitals. "Television Stations" shall have the meaning set forth in the Recitals. "Termination Date" shall have the meaning set forth in Section 14.1(b). 82 "Trade-out Agreements" shall mean all contracts and agreements (excluding program contracts) pursuant to which MMP has sold, traded or bartered commercial air time on the Stations in consideration for any property or services in lieu of or in addition to cash. "VARS" has the meaning set forth in Section 9.14. 83 EX-10.67 12 EXHIBIT 10.67 AGREEMENT AND PLAN OF MERGER AMONG SULLIVAN BROADCAST HOLDINGS, INC., SINCLAIR BROADCAST GROUP, INC., and ABRY PARTNERS, INC. (as Stockholder Representative) EFFECTIVE AS OF FEBRUARY 23, 1998 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER is entered into on March 16, 1998, but is effective as of February 23, 1998, among Sullivan Broadcast Holdings, Inc., a Delaware corporation ("Sullivan"), Sinclair Broadcast Group, Inc., a Maryland corporation ("Sinclair"), on behalf of itself and a subsidiary to be formed by it pursuant to Section 1.A below, and ABRY Partners, Inc., a Delaware corporation ("ABRY Partners"), solely in its capacity as the Stockholder Representative referred to in this Agreement. WHEREAS, the parties to this Agreement are among the parties to an Agreement and Plan of Merger dated as of February 23, 1998 (the "Prior Agreement"), and the parties to the Prior Agreement have agreed to restate the Prior Agreement by entering into this Agreement and certain other agreements; NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows, effective as of the date of the Prior Agreement: ARTICLE I THE SPIN-OFF TRANSACTIONS 1.A. FORMATION OF MERGER SUB. On or prior to March 20, 1998, Sinclair will form a wholly-owned Subsidiary which will be a Delaware corporation. Such Subsidiary will be the "Merger Sub" referred to in this Agreement. Sinclair will cause such Subsidiary to become a party to this Agreement, the Indemnity Agreement, the Earnest Money Escrow Agreement, the Estimate Escrow Agreement and the Indemnity Escrow Agreement by executing and delivering to Sullivan a counterpart thereof. 1.B. SULLIVAN TWO SPIN-OFF. At or prior to the time of the Closing, so long as all required Consents of the FCC for the Sullivan Two Spin-Off are then effective and any other required Consent for the Sullivan Two Spin-Off has been obtained and is then effective, Sullivan will, and will cause its Subsidiaries to, take such actions as may be required to (1) cause the capital stock of Sullivan Two to be distributed to the holders of the Sullivan Common Share Equivalents immediately prior to such distribution, with each such holder receiving a number of shares of common stock which is equal to the number of shares of common stock of Sullivan then held by such holders (on a fully-diluted, as-exercised basis) and with such shares of common stock of Sullivan Two having the same relative voting rights as such shares of common stock of Sullivan which are then held by each of them (on a similar fully-diluted, as-exercised basis), and (2) cause the FCC Authorizations relating to the Sullivan Two Stations and the other assets described in the attached Exhibit A to be transferred to Sullivan Two in consideration for a promissory note of Sullivan Two in a principal amount equal to the amount specified on the attached Exhibit A. The transactions described the preceding sentence are referred to as the "Sullivan Two Spin-Off." 1 1.C SULLIVAN THREE SPIN-OFF. At or prior to the time of the Closing, so long as all required Consents of the FCC for the Sullivan Three Spin-Off are then effective and any other required Consent for the Sullivan Three Spin-Off has been obtained and is then effective, Sullivan will, and will cause its Subsidiaries to, take such actions as may be required to (1) cause the capital stock of Sullivan Three to be distributed to the holders of the Sullivan Common Share Equivalents immediately prior to such distribution, with each such holder receiving a number of shares of common stock which is equal to the number of shares of common stock of Sullivan then held by such holders (on a fully-diluted, as-exercised basis) and with such shares of common stock of Sullivan Three having the same relative voting rights as such shares of common stock of Sullivan which are then held by each of them (on a similar fully-diluted, as-exercised basis), and (2) cause the FCC Authorizations relating to the Sullivan Three Stations and the other assets described in the attached Exhibit B to be transferred to Sullivan Three in consideration for a promissory note of Sullivan Three in a principal amount equal to the amount specified on the attached Exhibit B. The transactions described in the preceding sentence are referred to as the "Sullivan Three Spin-Off," and each of the Sullivan Two Spin-Off and the Sullivan Three Spin- Off is referred to as a "Spin-Off." 1.D SPIN-OFF TAXES. Sullivan and its Subsidiaries will be responsible for the payment of any Tax arising solely by reason of either Spin-Off (a "Spin-Off Tax"). To the extent not paid at the Effective Time, the liability of Sullivan and its Subsidiaries (if any) for any Spin- Off Tax arising by reason of the Sullivan Three Spin-Off (as determined in accordance with Section 3.D(6)) will be reflected in the computation of the Current Liabilities. ARTICLE II THE MERGER 2.A GENERAL. Upon and subject to the terms and conditions stated in this Agreement, on the Closing Date, effective as of the Effective Time, the Merger Sub will merge with and into Sullivan in accordance with the terms and conditions of this Agreement. Sullivan will be the corporation which survives such merger (the "Merger") and in such capacity is sometimes referred to in this Agreement as "Post-Merger Sullivan." 2.B EFFECT ON SULLIVAN SHARE EQUIVALENTS. Immediately after the Closing, effective at the Effective Time, subject to the terms and conditions of this Agreement (1) the Merger will be effected by the filing with the Secretary of the State of Delaware of a Certificate of Merger; (2) each Sullivan Share Equivalent outstanding at the Effective Time, by said occurrence and with no further action on the part of the holder thereof, will be transformed and converted into the right to receive the Merger Consideration for such Sullivan Share Equivalent, without interest or any similar payment thereon or with respect thereto, upon surrender of the certificate representing such Sullivan Share Equivalent; (3) each share of common stock of the Merger Sub outstanding immediately prior to the Effective Time will, by said occurrence and with no further action on the part of the holder thereof, be transformed and converted into one share of common stock of Post-Merger Sullivan, so that immediately thereafter Sinclair will be the sole and exclusive owner of all equity securities of Post-Merger Sullivan; and (4) Post-Merger Sullivan will be the owner of the business, assets, rights, privileges, immunities, powers, franchises and other attributes of Sullivan 2 and the Merger Sub. 2.C CERTIFICATE OF INCORPORATION. Immediately after the Effective Time, the certificate of incorporation of Post-Merger Sullivan will be the certificate of incorporation of the Merger Sub as in effect immediately prior to the Effective Time. 2.D BYLAWS. Immediately after the Effective Time, the bylaws of Post-Merger Sullivan will be the bylaws of the Merger Sub as in effect immediately prior to the Effective Time. 2.E BOARD OF DIRECTORS AND OFFICERS. The board of directors and officers of the Merger Sub immediately prior to the Effective Time will be the board of directors and the officers, respectively, of Post-Merger Sullivan immediately after the Effective Time, and such individuals will serve in such positions for the respective terms provided by applicable Legal Requirements or in the bylaws of Post-Merger Sullivan until their respective successors are elected and qualified. 2.F NAME. The name of Post-Merger Sullivan will be designated by Sinclair. 2.G EXCHANGE PROCEDURES. At or after the Closing, each holder of record of Sullivan Share Equivalents will deliver to Post-Merger Sullivan for cancellation the certificate(s) representing such Sullivan Share Equivalents (the "Old Sullivan Certificates"). Upon surrender of any Old Sullivan Certificate for cancellation, subject to the provisions of this Agreement, (a) the holder of such Old Sullivan Certificate will receive in exchange therefor the Merger Consideration for the Sullivan Share Equivalents represented by such Old Sullivan Certificate, and (b) such Old Sullivan Certificate will be canceled. Until surrendered as contemplated by this Section 2.G, each Old Sullivan Certificate will, at and after the Effective Time, be deemed to represent only the right to receive, upon surrender of such Old Sullivan Certificate, the Merger Consideration for the Sullivan Share Equivalents represented by such Old Sullivan Certificate. 2.H NO FURTHER RIGHTS; TRANSFER OF SULLIVAN STOCK. The Merger Consideration paid for any Sullivan Share Equivalent in accordance with the terms of this Agreement will be deemed to have been paid in full satisfaction of all rights pertaining to such Sullivan Share Equivalent. At the Effective Time, the stock transfer books of Sullivan will be closed and no transfer of Sullivan Share Equivalents will thereafter be made. ARTICLE III MERGER CONSIDERATION AND CLOSING 3.A MERGER CONSIDERATION. (1) AMOUNT FOR ALL SULLIVAN SHARE EQUIVALENTS IN THE AGGREGATE. The amount of the aggregate "Merger Consideration" for all Sullivan Share Equivalents will an amount equal to the result of: 3 (a) (i) the sum of (x) the product of the Cash Flow Multiplier and the Annualized Trailing Cash Flow plus (y) if the Cash Flow Multiplier is 12.00 and the Annualized Trailing Cash Flow is not less than the amount of the Target Cash Flow, then $2,620,000, plus (ii) the KOKH Amount, plus (iii) the Adjustment Amount (the amount described in this clause (a) being the "Base Merger Consideration") plus (b) an amount equal to the Sullivan Receivable Proceeds (the "Receivable Merger Consideration"), which amount will be payable as provided in Section 3.G; provided that, if the Closing occurs on or prior to September 21, 1998, then the amount described in clauses (a)(i) above will not exceed $970,000,000. Subject to Section 3.A(4), the "Cash Flow Multiplier" means (x) 12.00, if the Closing occurs on or prior to June 23, 1998; (y) 12.25, if the Closing occurs after June 23, 1998 and on or prior to September 21, 1998; and (z) 12.5, if the Closing occurs after September 21, 1998. The "Target Cash Flow" means $78,115,000 plus the amount of all discretionary contributions actually made by Sullivan and its Subsidiaries to the 401(k) Plan with respect to any period after December 31, 1997. (2) AMOUNT FOR ANY PARTICULAR SULLIVAN SHARE EQUIVALENT. With respect to any particular Sullivan Share Equivalent, the "Merger Consideration" means the portion of the aggregate Merger Consideration for all Sullivan Share Equivalents which is equal to the amount that the holder of such Sullivan Share Equivalent would receive in respect of such Sullivan Share Equivalent if: (a) all Sullivan Rights outstanding immediately prior to the Effective Time were converted into or exercised or exchanged for Sullivan Shares to the fullest extent permitted by the terms of such Sullivan Rights, immediately prior to the Effective Time, (b) Sullivan (instead of the Old Sullivan Stockholders) received an amount equal to the aggregate Merger Consideration for all Sullivan Share Equivalents and applied a portion of such aggregate Merger Consideration to the redemption in full, in accordance with the provisions of its certificate of incorporation, of all preferred stock of Sullivan, if any, which is outstanding immediately prior to the Effective Time, and (c) Sullivan thereafter distributed to the holders of the Sullivan Shares outstanding immediately prior to the Effective Time (after giving effect to the conversions, exercises and exchanges referred to in clause (a) above and the redemption described in clause (b) above), in accordance with the provisions of its certificate of incorporation, an amount equal to the aggregate Merger Consideration for the Sullivan Share Equivalents reduced by the amount required to effect the redemption described in clause (b) above, reduced, in the case of any Sullivan Right, by the exercise price (if any) payable upon the exercise of such Sullivan Right as described in clause (a) above. Sullivan will cause the 4 holders of all Sullivan Rights to accept the Merger Consideration for such Sullivan Right in consideration for the cancellation of such Sullivan Right. (3) FORM OF MERGER CONSIDERATION. (A) FOR SULLIVAN PREFERRED STOCK. Subject to the provisions of Article II regarding the surrender of Old Sullivan Certificates, the amount of the aggregate Merger Consideration for the Sullivan Preferred Stock will be paid on behalf of the holders of Sullivan Preferred Stock on the Closing Date in cash by wire transfer of immediately available funds to such bank account(s) as the Stockholder Representative may designate to the Merger Sub not less than two (2) Business Days prior to the Closing Date. (B) FOR OTHER SULLIVAN SHARE EQUIVALENTS. Subject to the provisions of Article II regarding the surrender of Old Sullivan Certificates, the Receivable Merger Consideration will be paid as provided in Section 3.G, and: (i) at the option of the Merger Sub, up to One Hundred Million Dollars ($100,000,000) of the aggregate amount of the estimated Base Merger Consideration for the Sullivan Share Equivalents which are not Sullivan Preferred Stock (the "Sullivan Common Share Equivalents") will be paid to the holders of Sullivan Common Share Equivalents on the Closing Date (the "Old Sullivan Common Stockholders") by the issuance of validly-issued, fully-paid and nonassessable shares of Sinclair Common Stock which have been registered under the Securities Act (and which therefore will be tradeable on the Nasdaq National Market upon receipt thereof), and (ii) the remainder of the estimated amount of such aggregate Base Merger Consideration will be paid for the account of the Old Sullivan Common Stockholders on the Closing Date in cash by wire transfer of immediately available funds to such bank account(s) as the Stockholder Representative may designate to the Merger Sub not less than two (2) Business Days prior to the Closing Date. The portion of the Base Merger Consideration which is payable in respect of the Sullivan Common Share Equivalents is referred to as the "Sullivan Common Base Merger Consideration." For purposes of this Section 3.A(3)(b), shares of Sinclair Common Stock will be valued at the Average Trading Price. Notwithstanding the foregoing, the entire amount of the Sullivan Common Base Merger Consideration will be payable in cash in the manner provided in clause (ii) above if on the Closing Date shares of Sinclair Common Stock are not registered under the Securities Exchange Act, the registration described in clause (i) above has not been effected, and/or shares of Sinclair Common Stock are not traded on the Nasdaq National Market or a domestic national securities exchange. The respective portions of the Sullivan Common Base Merger Consideration which are payable in Sinclair Common Stock and cash will be allocated among the Old Sullivan Common 5 Stockholders pro rata according to the respective amounts of the Sullivan Common Base Merger Consideration to be received by them, as determined in accordance with Section 3.A(2); provided that, in lieu of issuing a fractional share of Sinclair Common Stock to any Old Sullivan Common Stockholder, Sinclair or the Merger Sub will pay the Stockholder Representative as provided in clause (ii) above (for the account of such Old Sullivan Stockholder) an amount in cash equal to a corresponding fraction of the Average Trading Price. (C) SHARE CERTIFICATES FOR ABRY FUND PARTNERS. Sinclair and the Merger Sub acknowledge that at or after the time of the Closing the ABRY Fund will distribute to its partners (who may in turn distribute to their partners, and so on) any or all of the shares of the Sinclair Common Stock which may be issuable to the ABRY Fund as part of the Sullivan Common Base Merger Consideration. At the request of the Stockholder Representative, the Merger Sub will cause to be issued and delivered to the Stockholder Representative (for the account of the ABRY Fund) certificates for any or all of such shares of Sinclair Common Stock, issued in such whole-number denominations and registered in such names or nominees, as the Stockholder Representative may request. Such certificates will be issued in whole number of shares only, and in lieu of any fractional share Sinclair or the Merger Sub will pay the Stockholder Representative (for the account of the ABRY Fund) an amount in cash equal to a corresponding fraction of the Average Trading Price. (D) ESCROW DEPOSIT UNDER CERTAIN CIRCUMSTANCES. Notwithstanding the foregoing, if the Estimated Receivable Amount set forth in Sullivan's Estimate Report (as it may be revised by Sullivan as provided in the penultimate sentence of Section 3.E(2)) is less than $24,000,000, then an amount equal to the excess of $24,000,000 over such Estimated Receivable Amount will be withheld from the cash portion of the Sullivan Common Base Merger Consideration to be paid to the Stockholder Representative pursuant to Section 3.A(3)(b) and will instead be deposited with the Estimate Escrow Agent as the Estimate Fund. (4) EFFECT OF DELAY. (A) IF CAUSED BY SULLIVAN. If the Closing is delayed (a "Delay") solely by reason of (i) a breach by Sullivan of its obligations under this Agreement, (ii) the failure of a Sullivan Consent to be obtained, (iii) any loss, damage, impairment, condemnation, confiscation or interruption described in Section 7.L(1) or 7.L(2), and/or (iv) a delay in the Grant of any Required FCC Consent for a Spin-Off, or in the expiration of the applicable waiting period under the Hart-Scott-Rodino Act, solely as a result of actions taken by Sullivan or its Subsidiaries (items described in clauses (i), (ii), (iii), and (iv) being "Causes"), then for purposes of determining the Cash Flow Multiplier and the amount described in Section 3.D(1)(b), the Closing will be deemed to have occurred on the day upon which it would have occurred but for such breach, failure, loss, damage, impairment, condemnation, confiscation or interruption. 6 (B) IF CAUSED BY GROSS REVENUE SHORTFALL. As part of the Cash Flow Report delivered pursuant to Section 7.C(1) for each of March, April and May of 1998, Sullivan will deliver to Sinclair its good faith determination of the amount of the Gross Revenues, determined as if the last day of the month in question were the Measurement Date (such amount being the "Estimated Gross Revenues" for such month). If the Estimated Gross Revenues for each of March, April and May of 1998 set forth in the corresponding Cash Flow Reports is less than the corresponding amount set forth in Section 10.E and all conditions to the Closing set forth in Articles IX and X (other than Section 10.E) have been satisfied or waived in writing (or would be satisfied by the delivery of documents or taking of other actions to be delivered or taken at the Closing) on June 23, 1998, then for purposes of determining the Cash Flow Multiplier, the Closing will be deemed to have occurred prior to June 23, 1998, if the Closing actually occurs on or prior to the fifth (5th) Business Day after the delivery of the Monthly Cash Flow Report for June, 1998. 3.B ANNUALIZED TRAILING CASH FLOW. (1) TRAILING CASH FLOW -- BASIC DEFINITION. Subject to Sections 3.B(2), 3.B(3), 3.B(4), 3.B(5), 3.B(6), and 13.Q, the "Trailing Cash Flow" means the amount of (a) the consolidated net operating income of Sullivan and its Subsidiaries for the period (the "Measurement Period") beginning on January 1, 1998 and ending on the earlier of (i) the last day of the last full calendar month ended prior to the Closing Date and (ii) August 31, 1998 (such earlier date being the "Measurement Date"), (b) increased by the amount of all non-recurring items incurred other than in the ordinary course of business, corporate overhead (including management and consulting fees, reimbursements paid or payable to ABRY Partners and all discretionary profit-sharing and 401(k) plan contributions), income taxes, interest expense, depreciation and amortization (including amortization in respect of Film Obligations) deducted in computing such net operating income, (c) reduced by the aggregate amount of all Film Obligations which were actually paid in cash pursuant to Program Contracts with respect to the Stations during such period and which became due after September 30, 1997 (determined under the terms and conditions of the related Program Contracts as in effect on December 31, 1997, or as initially entered into, if entered into after December 31, 1997), and (d) further reduced by the aggregate amount of all Film Obligations which were not paid in cash on or prior to the Measurement Date and which became due prior to the three-calendar-month-period ending on the Measurement Date (determined under the terms and conditions of the related Program Contracts as in effect on December 31, 1997, or as initially entered into, if entered into after December 31, 1997). 7 For purposes of clause (b) above, except as provided in Section 3.B(3), "corporate overhead" is understood and agreed to include all expenses incurred in connection with the activities of the Corporate Personnel and (without duplication) all expenses which are not incurred for the benefit of a single Station (with an LMA Station and the Owned Station serving the same market being considered a single "Station" for purposes of this sentence) and which would not be incurred for the benefit of a single Station under customary industry practice. (2) TREATMENT OF BARTER-RELATED ITEMS. Notwithstanding GAAP to the extent GAAP are to the contrary, the Trailing Cash Flow will be determined exclusive of the value of any consideration received in barter for time on any Station pursuant to any Trade and expenses pertaining to air time provided in barter for products or services pursuant to any Trade. (3) LOBBYING EXPENSES. For purposes of determining the Trailing Cash Flow, and notwithstanding GAAP to the extent GAAP are to the contrary, 50% (and only 50%) of the amounts paid or payable to Policy Communications, Inc. and which are attributable to the Measurement Period will be deemed to constitute a part of corporate overhead, and therefore will be added pursuant to clause (b) of Section 3.B(1). (4) TREATMENT OF CERTAIN CASCOM ITEMS. For purposes of determining the Trailing Cash Flow, and notwithstanding GAAP to the extent GAAP are to the contrary, any payment or accrual in respect of the "Cascom Bonus" (as that term is defined in the Executive Employment Agreement dated as of December 9, 1996 among Sullivan, Sullivan Broadcasting and Victor Rumore ("Rumore")) (so long as, by its terms, such Cascom Bonus will not continue to accrue after the Closing Date), and any expense relating to or arising out of the issuance in February, 1998 of shares of Sullivan Common Stock to Rumore, will be disregarded. (5) TREATMENT OF CERTAIN LMA PAYMENTS. For purposes of determining the Trailing Cash Flow, and notwithstanding GAAP to the extent GAAP are to the contrary, a portion of the amount payable by Sullivan or a Subsidiary of Sullivan under an Existing LMA for any period which is equal to the amount of the interest expense of the Person to whom such amount is payable for such period, plus the amount of all repayments of the principal amount of indebtedness of such Person from the proceeds of any such payment by Sullivan or a Subsidiary of Sullivan, will be treated as if it were interest expense of Sullivan and its Subsidiaries. (6) APPLICATION OF GAAP. Except as otherwise provided in this Agreement, the Trailing Cash Flow will be determined in accordance with GAAP. (7) ANNUALIZED TRAILING CASH FLOW DEFINED. The "Annualized Trailing Cash Flow" means the product of the Trailing Cash Flow multiplied by the amount (the "Annualization Factor") set forth below for the date which is the Measurement Date: 8 Measurement Date Annualization Factor ---------------- -------------------- March 31, 1998 5.81419 April 30, 1998 3.87381 May 31, 1998 2.90996 June 30, 1998 2.34386 July 31, 1998 2.02835 August 31, 1998 1.76026 3.C KOKH AMOUNT. The "KOKH Amount" means the result of: (1) $30,066,000, plus a yield on such amount from January 30, 1998 to the date of the Closing computed at the Yield Rate, plus (2) for each payment made by Sullivan or any of its Subsidiaries after January 30, 1998 in respect of the "Purchase Price" under the KOKH Purchase Agreement or any out-of-pocket expense incurred in connection with the transactions contemplated by the KOKH Purchase Agreement, the amount of such payment plus a yield on such amount from the date it was paid to the Closing Date (or, if earlier in the case of any such expense which is later reimbursed by Sinclair, the date it is reimbursed by Sinclair), computed at the Yield Rate, plus (3) for each capital contribution, loan or advance to Sullivan Broadcasting of Oklahoma City, Inc., a Delaware corporation ("SBOC"), or Sullivan Broadcasting License Holder, Inc., a Nevada corporation ("SBLH"), by Sullivan or another Subsidiary of Sullivan after January 30, 1998 and prior to the Closing, to the extent the proceeds thereof were used in connection with the operations of Station KOKH, the amount of such capital contribution, loan or advance, plus a yield on such amount from the date of such capital contribution, loan or advance to the Closing Date (or, if earlier, the date upon which such capital contribution, loan or advance is repaid) computed at the Yield Rate, less (4) the amount of each payment made to Sullivan or any of its Subsidiaries after January 30, 1998 pursuant to the KOKH Purchase Agreement representing a reduction in the "Purchase Price" thereunder or a reimbursement of expenses incurred by SBOC or SBLH, and less (5) the amount of any capital contribution, loan or advance described in clause (3) above which is repaid prior to the Adjustment Time. The "Yield Rate" will be 7.125% per annum. 3.D ADJUSTMENT AMOUNT. (1) BASIC DEFINITION. Subject to the provisions of Sections 3.D(2) through 3.D(6), the "Adjustment Amount" means: 9 (a) the result of the following, as of the Adjustment Time, for Sullivan and its Subsidiaries (including Sullivan Two and Sullivan Three, as if it each were a Subsidiary of Sullivan at the Adjustment Time), determined on a consolidated basis: (i) the aggregate amount of all cash, cash equivalents, marketable securities, prepaid expenses, deposits (other than film deposits, if any) held by others and any current assets (including amounts receivable from employees and independent contractors and co-op receivables, and amounts payable to Sullivan or any of its Subsidiaries by reason of the termination of any interest rate hedging arrangement, assuming such arrangement were terminated immediately prior to the Adjustment Time) not otherwise described in this clause (i), other than the Sullivan Receivables (collectively, but excluding the Sullivan Receivables, the "Current Assets"), reduced (below zero, if necessary) by (ii) the aggregate principal amount of all outstanding Funded Indebtedness and the aggregate principal amount of the outstanding indebtedness guaranteed by Sullivan Broadcasting pursuant to the Mission Guarantees, in each case together with the amount of all unpaid accrued interest thereon, unpaid commitment fees and costs incurred in connection with the termination of any interest rate hedging arrangements, assuming such arrangement were terminated immediately prior to the Adjustment Time, but excluding any change of control, prepayment or other premium in respect of any such indebtedness, and excluding in all events the indebtedness of Sullivan Two and Sullivan Three represented by the promissory notes issued by them in connection with the Spin-Offs, and further reduced (below zero, if necessary) by (iii) without duplication of any amount reflected in clause (ii) above, all trade accounts payable, accrued expenses (including accrued vacation pay) and other current liabilities (collectively, the "Current Liabilities"), and further reduced (below zero, if necessary) by (iv) the aggregate amount of the proceeds (net of taxes and disposition costs) of all Designated Sales (as that term is defined in Section 7.A(5)(a)(y) consummated after the date of this Agreement and prior to the Adjustment Time; increased by (b) the applicable amount set forth below, if the Closing occurs on or after October 21, 1998 Closing Date Amount ------------ ------ On or after October 21, 1998 but 10 prior to November 20, 1998 $10,000,000 On or after November 20, 1998 but prior to December 20, 1998 $20,000,000 On or after December 20, 1998 but prior to January 19, 1999 $30,000,000 On or after January 19, 1999 but prior to February 18, 1999 $40,000,000 On or after February 18, 1999 but prior to March 20, 1999 $50,000,000 On or after March 20, 1999 but prior to April 19, 1998 $60,000,000 On or after April 19, 1998 $70,000,000 and reduced by (c) the excess, if any, of (i) the product of $1,985,422 and a fraction, the numerator of which is the number of days during calendar year 1998 prior to the Closing Date and the denominator of which is 365, over (ii) the aggregate amount of the capital expenditures made by Sullivan and its Subsidiaries during calendar year 1998 and prior to the Adjustment Time. (2) CURRENT PORTION OF FUNDED INDEBTEDNESS. For purposes of determining the Adjustment Amount, and notwithstanding GAAP to the extent GAAP are to the contrary, the "Current Liabilities" will not include the current portion of any Funded Indebtedness or any accrued interest thereon. (3) TRANSACTION EXPENSES. For purposes of determining the Adjustment Amount, and notwithstanding GAAP to the extent GAAP are to the contrary, the "Current Liabilities" will include (i) all amounts incurred by Sullivan or any of its Subsidiaries (including on behalf of any Old Sullivan Stockholder, and including the fees and disbursements of advisors to Sullivan, Sullivan Two, Sullivan Three, the Old Sullivan Stockholders and the Stockholder Representative), in connection with the negotiation of, the execution of, the performance of Sullivan's, Sullivan Two's and Sullivan Three's obligations under, and the consummation or preparation for consummation of the transactions contemplated by, this Agreement and not paid prior to the Adjustment Time (all of which amounts Sinclair and Post-Merger Sullivan will pay and satisfy, or cause to be paid and satisfied, in full), other than any item which this Agreement specifies is to be at any Acquiring Party's expense, (ii) all amounts required to be paid by, or other obligations of Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan Three from and after the Adjustment Time pursuant to the various employment agreements among Sullivan, Sullivan 11 Broadcasting and the Corporate Personnel (each of whom it is understood will resign or be terminated as of the Effective Time), and (iii) all amounts required to be paid by Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan Three from and after the Adjustment Time in connection with the termination of employment by Sullivan and its Subsidiaries of the Corporate Personnel or any Non-Continuing Station Manager effective as of the Closing Date. (4) TRADE-OUT ITEMS. For purposes of determining the Adjustment Amount, and notwithstanding GAAP to the extent GAAP are to the contrary, with respect to Trade-Out Receivables and Trade-Out Payables: (a) the amount of Sullivan's or any of its Subsidiaries' obligations under, and the amount of the goods, services and other items to be received under, any Trade will be determined in accordance with standard industry valuation methods as of the date of this Agreement (provided that, in the case of goods, services and other items to be so received, no such item will be valued at an amount which is greater than the fair value of such item at the Adjustment Time); (b) the "Current Assets" will not include Trade-Out Receivables with respect to any Station; (c) the "Current Liabilities" will not include Trade-Out Payables with respect to any Station except to the extent (and only to the extent) that the aggregate amount of the Trade-Out Payables with respect to such Station as of the Adjustment Time exceeds the aggregate amount of the Trade-Out Receivables with respect to such Station as of the Adjustment Time by more than $50,000; and (d) for purposes of this Agreement (including clause (c) above), each Station which is a television translator station will be considered together with the related Station which is a full-power television station and all other related television translator stations. (5) PROGRAM PAYMENTS. For purposes of determining the Adjustment Amount, and notwithstanding GAAP to the extent GAAP are to the contrary, "Current Assets" and "Current Liabilities" will not include any amounts in respect of Film Obligations, except that: (a) the Current Liabilities will include the aggregate amount of all Film Obligations which become due prior to the first day of the calendar month which includes the Closing Date (determined under the terms and conditions of the related Program Contracts as then in effect) and which are not paid prior to the Adjustment Time; (b) the Current Liabilities will include an amount equal to (i) the aggregate amount of all Film Obligations which are not paid prior to the Adjustment Time and which become due during the calendar month which includes the Closing 12 Date (determined under the terms and conditions of the related Program Contracts as then in effect), multiplied by (ii) a fraction, the numerator of which is the number of days during such calendar month prior to, but not including, the Closing Date, and the denominator of which is the number of days during such calendar month;1 (c) the Current Assets will include an amount equal to (i) the aggregate amount of all Film Obligations which are paid prior to the Adjustment Time and which become due during the calendar month which includes the Closing Date (determined under the terms and conditions of the related Program Contracts as then in effect), multiplied by (ii) a fraction, the numerator of which is the number of days during such calendar month on and after, but not prior to, the Closing Date, and the denominator of which is the number of days during such calendar month;2 and (d) the Current Assets will include an amount equal to the aggregate amount of all Film Obligations which become due after the final day of the calendar month which includes the Closing Date (determined under the terms and conditions of the related Program Contracts as then in effect) and which are paid prior to the Adjustment Time. (6) TAX MATTERS. For purposes of determining the Adjustment Amount and notwithstanding GAAP to the extent GAAP are to the contrary: (A) CLOSING OF BOOKS. The Tax liabilities for each Straddle Period will be determined by closing the books and records of Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three as of the Adjustment Time, and by treating the portion of such Straddle Period ending on (and including) the day prior to the Closing Date and the portion of the Straddle Period beginning on the Closing Date as if they were separate Tax periods, and by employing accounting methods which are consistent with those employed in preparing the Tax Returns for Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three in prior periods except as otherwise required by applicable law, and which do not have the effect of distorting income or expenses (taking into account the transactions contemplated by this Agreement), except that Taxes based on items other than income or sales (for this purpose, a Tax imposed under alternative methods, at least one of which is based on income, will be considered an income Tax) will be computed for such Straddle Period by prorating on a time basis between the portion of the Straddle Period beginning on the first day of the applicable Straddle Period and ending on (and including) the day prior to the Closing Date and the period beginning on the Closing Date and ending on the last day of such Straddle Period; provided that (x) with respect to any Tax which is not - ------------------- 1 e.g., if the Closing occurs on June 20, 1998, then the fraction described in this clause (b) will be 19/30. 2 e.g., if the Closing occurs on June 20, 1998, then the fraction described in this clause (c) will be 11/30. 13 in effect during the entire Straddle Period, the proration of such Tax will be based on the period during the Straddle Period that such Tax was in effect, and (y) for all such purposes, the Sullivan Two Spin-Off will be deemed to have occurred after the Adjustment Time and the Sullivan Three Spin-Off will be deemed to have occurred prior to the Adjustment Time, with the effect that any liability for Spin-Off Taxes relating to the Sullivan Three Spin-Off, but not Spin-Off Taxes relating to the Sullivan Two Spin-Off, will constitute Current Liabilities. (B) DETERMINATION OF SPIN-OFF TAX LIABILITIES. The respective amounts of Sullivan's, its Subsidiaries', Sullivan Two's and Sullivan Three's aggregate liabilities for the Spin-Off Taxes arising from the Sullivan Two Spin- Off (the "Sullivan Two Spin-Off Tax Liability") and the Sullivan Three Spin-Off (the "Sullivan Three Spin-Off Tax Liability") will be determined by applying all available net operating losses and other items of deduction and credit (collectively, "Tax Benefits"). Those Tax Benefits which are permitted under the applicable Legal Requirements to be applied to reduce either the Sullivan Two Spin-Off Tax Liability or Sullivan Three Spin-Off Tax Liability (as distinct from those Tax Benefits which are only permitted to be applied to reduce one such Tax Liability but not the other) will be applied pro rata, based on the respective amounts of the Sullivan Two Spin-Off Tax Liability for the Tax in question and the Sullivan Three Spin-Off Tax Liability for the Tax in question determined prior to the application of such Tax Benefits. (7) APPLICATION OF GAAP. Except as otherwise provided in this Agreement, the Adjustment Amount will be determined in accordance with GAAP. 3.E ESTIMATES OF ANNUALIZED TRAILING CASH FLOW, KOKH AMOUNT AND ADJUSTMENT AMOUNT FOR CLOSING PURPOSES. (1) ESTIMATES TO BE GIVEN EFFECT. For purposes of determining the amount of Base Merger Consideration to be paid at the Closing, the Annualized Trailing Cash Flow, the KOKH Amount and the Adjustment Amount will be deemed to be equal to the Estimated Annualized Trailing Cash Flow, the Estimated KOKH Amount and the Estimated Adjustment Amount, respectively, determined under this Section 3.E. Notwithstanding this Section 3.E and Section 3.F, if the Annualized Trailing Cash Flow has been finally determined pursuant to Section 3.J, then the amount so finally determined will be used to determine the amount of the Sullivan Base Merger Consideration to be paid at the Closing and the ultimate amount of the Sullivan Common Base Merger Consideration, and the provisions of this Section 3.E and Section 3.F will apply only to the KOKH Amount and the Adjustment Amount and not the Annualized Trailing Cash Flow. For purposes of determining the Estimated Adjustment Amount, the aggregate amount of the Current Liabilities will be assumed to be $5,600,000 (unless Sullivan proposes a larger amount in Sullivan's Estimate Report). (2) SULLIVAN'S ESTIMATE REPORT. At least five Business Days prior to any date scheduled for the Closing pursuant to Section 3.H, Sullivan will prepare and deliver to 14 Sinclair a written report ("Sullivan's Estimate Report") setting forth in reasonable detail Sullivan's good faith estimates of the Annualized Trailing Cash Flow, the KOKH Amount and the Adjustment Amount as of such scheduled Closing date and Sullivan's good faith estimate of the gross amount of all Sullivan Receivables for which the date of the underlying invoice is not earlier than the 120th day prior to the Closing Date (the amount of such latter estimate being the "Estimated Receivable Amount"). After delivery of Sullivan's Estimate Report, Sullivan will (and will cause its Subsidiaries to) allow Sinclair and its legal and accounting representatives and advisors reasonable access to Sullivan's and its Subsidiaries' books and records to enable Sinclair to verify the accuracy of the estimated amounts set forth in Sullivan's Estimate Report. Sullivan will, in good faith, consider and make revisions to such estimated amounts, but will not be obligated to make any adjustment with which, in good faith, it does not agree. The estimates of the Annualized Trailing Cash Flow, the KOKH Amount and the Adjustment Amount set forth in Sullivan's Estimate Report," as they may be adjusted by Sullivan as described in the preceding sentence, will be the "Estimated Annualized Trailing Cash Flow," the "Estimated KOKH Amount" and the "Estimated Adjustment Amount," respectively, for the scheduled Closing date in question. 3.F FINAL DETERMINATION OF BASE MERGER CONSIDERATION AFTER THE CLOSING. (1) POST-CLOSING REPORT. On or prior to the one hundred tenth (110th) day after the Closing Date, Post-Closing Sullivan will prepare and submit to the Stockholder Representative consolidated and consolidating statements of income for Sullivan and its Subsidiaries for the period beginning on January 1, 1998 and ending on the Measurement Date and consolidated and consolidating balance sheets for Sullivan and its Subsidiaries (including each of Sullivan Two and Sullivan Three, as if it were a Subsidiary of Sullivan as of the Adjustment Time) as of the Adjustment Time, together with Post-Merger Sullivan's determination of the aggregate Base Merger Consideration (the "Post-Closing Report"); provided that, if the Annualized Trailing Cash Flow has been finally determined prior to the Closing pursuant to Section 3.J, then the Post-Closing Report need not contain such consolidated and consolidating statements of income. The Acquiring Parties will (and will cause their respective Subsidiaries to) allow the Stockholder Representative and its legal and accounting representatives and advisors reasonable access to Post-Merger Sullivan's and its Subsidiaries' books and records to enable the Stockholder Representative to timely review and dispute the contents of the Post-Closing Report. Post-Closing Sullivan's determination of the aggregate Sullivan Common Base Merger Consideration set forth in the Post-Closing Report will become final and binding upon the Parties and the Old Sullivan Common Stockholders on the thirtieth (30th) day after the Post-Closing Report is given to the Stockholder Representative unless, prior to such thirtieth (30th) day, the Stockholder Representative gives Post-Closing Sullivan written notice stating that the Stockholder Representative disagrees with such determination and stating in reasonable detail the nature, extent of, and basis for, the Stockholder Representative's disagreement and the Stockholder Representative's determination of the aggregate Sullivan Common Base Merger Consideration. (2) GOOD FAITH RESOLUTION. If the Stockholder Representative timely gives Post-Closing Sullivan such a dispute notice, then, during the thirty (30) days after the 15 Stockholder Representative gives such dispute notice, the Stockholder Representative and Post-Merger Sullivan will attempt in good faith to resolve such disagreement, and any mutual determination of the amount of the aggregate Sullivan Common Base Merger Consideration by the Stockholder Representative and Post-Merger Sullivan will be final and binding upon the Parties and the Old Sullivan Stockholders on the date of such mutual determination. (3) ARBITRATION OF DISPUTE. If any such dispute cannot be resolved by the Stockholder Representative and Post-Merger Sullivan on or prior to such thirtieth (30th) day, then such dispute will be referred to Ernst & Young, and such firm's determination of the aggregate Sullivan Common Base Merger Consideration will be final and binding upon the Parties and the Old Sullivan Common Stockholders on the date such firm's report of its determination of the aggregate Sullivan Common Base Merger Consideration has been delivered to Post-Merger Sullivan and the Stockholder Representative. (4) COMPUTATION AND ENTITLEMENT TO PAYMENT AFTER RESOLUTION. If the amount of the aggregate Sullivan Common Base Merger Consideration finally determined in accordance with this Section 3.F exceeds the amount of the estimated Sullivan Common Base Merger Consideration paid to the Stockholder Representative for the account of the Old Sullivan Common Stockholders at the Closing (disregarding the amount, if any, deposited in the Estimate Fund pursuant to Section 3.A(3)(d)) (the "Estimated Sullivan Common Base Merger Consideration"), then (subject to the provisions of Article II regarding the surrender of Old Sullivan Certificates) the Old Sullivan Common Stockholders will be entitled to receive the amount of such excess pursuant to Section 3.F(5). If the Estimated Sullivan Common Base Merger Consideration exceeds the amount of the aggregate Sullivan Common Base Merger Consideration finally determined in accordance with this Section 3.F, then (subject to the limitation set forth in Section 3.F(5)) Post-Merger Sullivan will be entitled to receive the amount of such excess pursuant to Section 3.F(5). Any amount which becomes payable pursuant to this Section 3.F(4) (except to the extent paid to Post-Merger Sullivan from the Estimate Fund) will constitute an adjustment of the aggregate Sullivan Common Base Merger Consideration paid at the Closing. (5) PAYMENT AFTER RESOLUTION. (A) IF PAYABLE TO THE OLD SULLIVAN STOCKHOLDERS. Any amount which becomes payable to the Old Sullivan Common Stockholders pursuant to Section 3.F(4) will be paid to the Stockholder Representative, for distribution by the Stockholder Representative to the Old Sullivan Common Stockholders, pro rata according to the remaining amounts of the Sullivan Common Base Merger Consideration payable to them. Any such amount will be paid to the Stockholder Representative from the amount (if any) deposited in the Estimate Fund pursuant to Section 3.A(3)(d), to the extent of the amount so deposited. If no such deposit is made, or if such deposit is made and the amount to be paid to the Old Sullivan Common Stockholders pursuant to Section 3.F(4) exceeds the amount so deposited, then the amount (or the remaining amount, as applicable) so payable (for the Old Sullivan Stockholders' benefit) will be paid by Post-Merger Sullivan. 16 (B) IF PAYABLE TO POST-MERGER SULLIVAN. Any amount which becomes payable to Post-Merger Sullivan pursuant to Section 3.F(4) will be paid from the amount (if any) deposited in the Estimate Fund pursuant to Section 3.A(3)(d), to the extent of the amount so deposited. If no such deposit is made, or if such deposit is made and the amount to be paid to Post-Merger Sullivan pursuant to Section 3.F(4) exceeds the amount so deposited, then the amount (or the remaining amount, as applicable) so payable to Post-Merger Sullivan may be recovered by Post-Merger Sullivan from either or both of (i) the proceeds of the Sullivan Receivables received by Sinclair and its Subsidiaries during the Collection Period as provided in Section 3.G(4) and (ii) the amounts deposited in the Indemnity Fund, and no additional amount will be payable to Post-Merger Sullivan (the amount, if any, deposited in the Estimate Fund pursuant to Section 3.A(3)(d), the amount of such proceeds of the Sullivan Receivables, and the amounts deposited in the Indemnity Fund pursuant to Section 3.G(4) being Post-Merger Sullivan's sole source of payment of any amount which may be owing to Post-Merger Sullivan by reason of the estimated amount of the aggregate Sullivan Common Base Merger Consideration paid to the Stockholder Representative at the Closing being greater than the Sullivan Common Base Merger Consideration as finally determined pursuant to this Section 3.F). (C) INTEREST ON CERTAIN AMOUNTS. Any amount payable by Post-Merger Sullivan pursuant to this Section 3.F(5) will bear interest at the rate of 18% per annum from the third (3rd) Business Day after the date upon which the aggregate Sullivan Common Base Merger Consideration is finally determined in accordance with this Section 3.F through and including the date upon which such amount and all such interest are paid in full (it being understood that in no event will interest be payable to any Old Sullivan Common Stockholder in respect of any period prior to the date upon which such Old Sullivan Common Stockholder surrenders the Old Sullivan Certificate representing the Sullivan Common Share Equivalent in question). (D) PAYMENT OF UNDISPUTED AMOUNT. To the extent the aggregate Sullivan Common Base Merger Consideration and the resulting amount of any payment which may be required pursuant to Section 3.F(4) are not in dispute, Post-Merger Sullivan may retain proceeds of Sullivan Receivables as provided in Section 3.G(4), Post-Merger Sullivan or the Stockholder Representative will be entitled to withdraw amounts from the Estimate Fund and/or the Indemnity Fund, and the Stockholder Representative will be entitled to receive payments from Post-Merger Sullivan (for the account of the Old Sullivan Common Stockholders) of the amounts payable to the Old Sullivan Common Stockholders, as the case may be.3 - ------------------- 3 By way of illustration, assume that (a) the Estimated Adjustment Amount is $20,000,000, (b) neither the amount of the Annualized Trailing Cash Flow nor the KOKH Amount is in dispute, and (c) no amount is deposited in the Estimate Fund. If the Post-Closing Report indicates that the 17 (E) PAYMENTS FROM ESCROW FUNDS. All payments made from the Estimate Fund or the Indemnity Fund pursuant to this Section 3.F(5) will be requested and made in accordance with the terms of the Estimate Escrow Agreement or the Indemnity Escrow Agreement, as applicable. Earnings on the amount (if any) deposited in the Estimate Fund or the Indemnity Fund will be paid to the Person(s) ultimately entitled to receive the amount so deposited, pro rata based on the respective portions of the amount deposited in such Fund to be paid to them. (6) COSTS OF DISPUTE RESOLUTION. The prevailing party in any determination pursuant to Section 3.F(3) will be entitled to recover from the non-prevailing party such prevailing party's reasonable attorneys' fees and disbursements in addition to any amount owing to it at the Closing, and the nonprevailing party also will be required to pay all other reasonable costs and expenses associated with such determination; provided that (a) if the independent public accounting firm which makes such determination is unable to determine that a party is the prevailing party, then such costs and expenses will be equitably allocated by such firm upon the basis of the outcome of such determination, and (b) if such firm is unable to allocate such costs and expenses in such a manner, then the costs and expenses of such arbitration will be paid one-half by Post-Merger Sullivan and one-half by the Stockholder Representative (on behalf of the Old Sullivan Stockholders), and each of them will pay the out-of-pocket expenses incurred by it. Such independent accounting firm may designate the prevailing party for purposes of this Section 3.F(6). 3.G SULLIVAN RECEIVABLES. (1) DEFINED. The "Sullivan Receivables" means all trade and other accounts and notes receivable of Sullivan and its Subsidiaries (including each of Sullivan Two and Sullivan Three, for this purpose) arising from the sale of advertising time (including so-called "infomercials") and other paid programming time on the Stations, determined on a consolidated basis as of the Adjustment Time. (2) COLLECTION AND APPLICATION. On, and during the 120 days after, the Closing Date (the "Collection Period"), Post-Merger Sullivan and Sinclair will, and will cause their respective Subsidiaries to, use reasonable efforts in accordance with their respective normal business practices (not including resorting to or threatening litigation) to collect the Sullivan Receivables, including issuing invoices for those Sullivan Receivables for which invoices have not been issued prior to the Closing Date. Collections from any Person which is a debtor with respect to any Sullivan Receivable (a "Sullivan Debtor") will be applied in the chronological order of the billings of Sullivan, Sullivan Two, Sullivan - ------------------- Adjustment Amount is $18,500,000 and the Stockholder Representative disputes that determination and asserts that the Adjustment Amount is $19,000,000, then only $500,000 is in dispute. In that case, even prior to the resolution of such dispute, Post-Merger Sullivan will be entitled to retain from the proceeds of the Sullivan Receivables as provided in Section 3.G(4), or withdraw from the Indemnity Fund, $1,000,000 (along with a proportionate share of the "Escrow Income" referred to in the Indemnity Escrow Agreement, in the case of such a withdrawal from the Indemnity Fund). 18 Three, Post-Merger Sullivan and their respective Subsidiaries, as applicable, to such Sullivan Debtor (i.e., to the oldest unpaid billing first) unless (i) such Sullivan Debtor disputes in writing its obligation to pay such billing, (ii) such Sullivan Debtor indicates in writing that such payment is to be applied in another, specified manner, or (iii) other facts or circumstances exist in light of which it would be reasonable to conclude that such Sullivan Debtor does not intend such payment to be applied in such a manner. (3) EFFORTS BY STOCKHOLDER REPRESENTATIVE OR OLD SULLIVAN STOCKHOLDERS. So long as Post-Merger Sullivan and Sinclair are in compliance with this Section 3.G, neither the Stockholder Representative nor any Old Sullivan Stockholder will make any direct solicitation of any Sullivan Debtor for purposes of collecting any Sullivan Receivable during the Collection Period, except as may be agreed to by Post-Merger Sullivan and the Stockholder Representative and except with respect to those Sullivan Receivables which may be or become more than 180 days past due and those Sullivan Receivables with respect to which Post-Merger Sullivan, Sinclair or any of their respective Subsidiaries has received written notice of a dispute from the related Sullivan Debtor (a copy of which notice Post-Merger Sullivan will promptly forward to the Stockholder Representative). (4) PAYMENT OF PROCEEDS. After the end of the Collection Period and on or prior to the 150th day after the Closing Date, Post-Merger Sullivan will pay over an amount equal to the aggregate proceeds received by Sinclair and its Subsidiaries in respect of Sullivan Receivables during the Collection Period, plus interest thereon computed as described below (collectively, the "Sullivan Receivable Proceeds"), as follows (without set-off in respect of any other liability or obligation of any Person, whether arising pursuant to this Agreement or otherwise except as expressly provided in this Section 3.G(4)): (a) the sum of (x) an amount equal to the aggregate amount of all Loss and Expense (as that term is defined in the Indemnity Agreement) asserted in writing pursuant to Section 2 of the Indemnity Agreement as recoverable under Section 3 of the Indemnity Agreement and (y) the amount which Post-Merger Sullivan asserts in good faith it will be owed pursuant to Section 3.F(4), if the amount of the aggregate Sullivan Common Base Merger Consideration has not been finally determined in accordance with Section 3.F (or, if less than such sum, the entire amount of the Sullivan Receivable Proceeds) will be paid to the Indemnity Escrow Agent and deposited in the Indemnity Fund, and (b) the remainder of the Sullivan Receivable Proceeds will be paid to the Stockholder Representative, for the account of the Old Sullivan Common Stockholders, as part of the Merger Consideration for the Sullivan Common Share Equivalents, in each case by wire transfer of immediately available funds to the account specified by the recipient thereof; provided that, from and after the time when the amount of the aggregate Sullivan Common Base Merger Consideration is finally determined in accordance with Section 3.F, if any amount is payable to Post-Merger Sullivan pursuant to Section 3.F(4) based on such determination, then Post-Merger Sullivan may retain from the aggregate 19 proceeds received by Sinclair and its Subsidiaries in respect of the Sullivan Receivables during the Collection Period the amount so owed to it, and the Sullivan Receivable Proceeds will be reduced by such amount. At the time of the payments described in clauses (a) and (b) above, Post-Merger Sullivan will deliver to the Stockholder Representative a report which specifies the application to the Sullivan Receivables and other accounts receivable of the collections received during the Collection Period. Interest will be computed on the full amount of the Sullivan Receivable Proceeds (exclusive of interest which is part thereof) from and after the 74th day after the Closing to the date upon which the payments described in clauses (a) and (b) above are made), at the rate of 7.125% per annum. (5) TRANSFER AFTER COLLECTION PERIOD. Immediately following the last day of the Collection Period, Post-Merger Sullivan and Sinclair will, and will cause their respective Subsidiaries to, transfer and assign to the Stockholder Representative (for the account of the Old Sullivan Common Stockholders) all rights with respect to the Sullivan Receivables to the extent they have not then been collected in full, together with all files concerning such Sullivan Receivables, and Post-Merger Sullivan, Sinclair and their respective Subsidiaries will have no further responsibilities pursuant to this Section 3.G with respect to any Sullivan Receivable except to remit to the Stockholder Representative (on behalf of the Old Sullivan Stockholders) as provided in Section 3.G(4) any Sullivan Receivable Proceeds received after the Collection Period. Such transfer, assignment and remittance will constitute a part of the payment of the Sullivan Common Merger Consideration. (6) ACCESS TO INFORMATION. During and after the Collection Period, the Acquiring Parties will, and will cause their respective Subsidiaries to, furnish the Stockholder Representative and its agents, representatives and advisors with all information (including reasonable access to their respective books and records) which the Stockholder Representative reasonably requests in order to monitor, confirm or dispute the Acquiring Parties' compliance with this Section 3.G. 3.H CLOSING TIME AND PLACE. Subject to Section 12.A, the consummation of the Merger and the payment of the Base Merger Consideration for Sullivan Share Equivalents to be paid at such time (the "Closing") will be held in the offices of Kirkland & Ellis, in New York, New York, at 10:00 a.m., local time, on the date determined pursuant to the following two sentences, or at such other place and/or at such other time and date as the Merger Sub and Sullivan may agree in writing. The Closing will occur on a date designated by the Merger Sub by written notice to Sullivan not less than ten Business Days in advance of such date (which designated date will be not later than the Expiration Date). Notwithstanding the foregoing, but subject to Section 12.A, if on a date for the Closing described in the preceding sentence or specified pursuant to this sentence any condition of the Merger Sub or Sullivan specified in Article IX or X has not been satisfied (and will not be satisfied by the delivery of documents at the Closing) or waived in writing, then the date for the Closing will be extended to any date specified by the Merger Sub to Sullivan with not less than 10 Business Days' notice to the other (subject to the Merger Sub's and Sullivan's respective conditions to the Closing set forth in Articles IX and X being satisfied or waived in writing on such specified date); provided that any such specified date will be on or prior to the Expiration Date. 20 3.I DELIVERIES AT THE CLOSING. All actions on the Closing Date (including those described in Sections 11.D and 11.E) will be deemed to occur simultaneously, and no document or payment to be delivered or made on the Closing Date will be deemed to be delivered or made until all such documents and payments are delivered or made to the reasonable satisfaction of Sullivan, the Merger Sub, the Stockholder Representative and their respective legal counsel. (1) DELIVERY OF EARNEST MONEY. At the Closing, to the extent then held by the Earnest Money Escrow Agent, the Earnest Money Fund (together with all Earnest Money Income, if any, received and held by the Earnest Money Escrow Agent and the right to receive all Earnest Money Income, if any, not yet received by the Earnest Money Escrow Agent) will be delivered to the Merger Sub. (2) DELIVERIES BY SULLIVAN. At the Closing, Sullivan will deliver to the Merger Sub the following: (a) the minute book, stock transfer book and other records relating to the internal corporate affairs of Sullivan and each Subsidiary of Sullivan (other than Sullivan Two and Sullivan Three) which are in Sullivan's and its Subsidiaries' possession, and resignations of the officers and directors of each of Sullivan and the Subsidiaries of Sullivan, which resignations will be effective as of the Effective Time; (b) all mortgage discharges or releases of Liens that, upon the repayment in full of all outstanding Funded Indebtedness and other obligations of Sullivan and its Subsidiaries (other than Sullivan Two and Sullivan Three) under the Sullivan Senior Debt Arrangements as described in Section 11.E and all other Funded Indebtedness of Sullivan and its Subsidiaries (other than Sullivan Two and Sullivan Three) and all related interest and other obligations, the release of the Mission Guarantees, any required execution and delivery thereof by Sullivan or a Subsidiary of Sullivan (other than Sullivan Two and Sullivan Three), and any requisite filing thereof, will be sufficient to cause the Station Assets held by Sullivan and its Subsidiaries (other than the assets and properties transferred in the Spin-Offs) and the capital stock of Sullivan's Subsidiaries (other than Sullivan Two and Sullivan Three) to be as described in the second sentence of Section 4.G(1) and in Sections 4.G(4) and 4.Q; (c) a certificate of the President or Chief Executive Officer of Sullivan dated the Closing Date to the effect that, except as specified in such certificate, to the best of such officer's knowledge, the conditions set forth in Sections 10.A(1) and 10.A(2) have been fulfilled; (d) a certificate of Sullivan dated the Closing Date to the effect that, except as specified in such certificate, the conditions set forth in Sections 10.A(1) and 10.A(2) have been fulfilled; (e) a certified copy of the resolutions or action by written consent 21 of the board of directors and stockholders of Sullivan authorizing the Merger and Sullivan's execution, delivery and performance of this Agreement; (f) certificates as to the existence and/or good standing of Sullivan and each of its Subsidiaries (other than Sullivan Two and Sullivan Three), in each case issued by the Secretary of State or a comparable official of each jurisdiction specified for such corporation on the attached Schedule 4O and dated on or after the fifth Business Day prior to the Closing Date, certifying as to the existence and/or good standing of such corporation in such jurisdictions; (g) one or more opinions of counsel or special counsel to Sullivan, each dated the Closing Date, as to the matters set forth in the attached Exhibit C; and (h) such other documents, instruments and receipts as the Merger Sub may reasonably request in order to effectuate the Merger and the other transactions contemplated by this Agreement to be consummated at the Closing. Each of the foregoing will be reasonably satisfactory in form to the Merger Sub and its legal counsel. (3) DELIVERIES BY THE MERGER SUB. At the Closing, the Merger Sub will deliver or cause to be delivered to the Stockholder Representative stock certificates for Sinclair Common Stock (if shares of Sinclair Common Stock are to be part of the Merger Consideration) and cash as described in Section 3.A representing the aggregate Base Merger Consideration in respect of the Sullivan Share Equivalents, determined based upon the Estimated Annualized Trailing Cash Flow (or the Annualized Trailing Cash Flow, if it has been finally determined pursuant to Section 3.J), the Estimated KOKH Amount and the Estimated Adjustment Amount (subject to the provisions of Article II), together with the following: (a) a certificate of an officer or similar official of the Merger Sub dated the Closing Date to the effect that, except as specified in such certificate, to the best of such officer's or official's knowledge, the conditions set forth in Section 9.A(1) and 9.A(2) have been fulfilled; (b) a certificate of an officer or similar official of Sinclair dated the Closing Date to the effect that, except as specified in such certificate, to the best of such officer's or official's knowledge, the conditions set forth in Sections 9.A(1) and 9.A(2) have been fulfilled; (c) a certificate of the Merger Sub dated the Closing Date to the effect that, except as specified in such certificate, the conditions set forth in Sections 9.A(1) and 9.A(2) have been fulfilled; (d) a certificate of Sinclair dated the Closing Date to the effect that, except as specified in such certificate, the conditions set forth in Sections 9.A(1) 22 and 9.A(2) have been fulfilled; (e) a certified copy of the resolutions or action by written consent of the board of directors and stockholders of the Merger Sub authorizing the Merger and the Merger Sub's execution, delivery and performance of this Agreement; (f) a certified copy of the resolutions or action by written consent of the board of directors of Sinclair authorizing Sinclair's execution, delivery and performance of this Agreement; (g) certificates as to the existence and/or good standing of Sinclair and the Merger Sub, in each case issued by the Secretary of State or a comparable official of such jurisdictions as Sullivan may reasonably request and dated on or after the fifth Business Day prior to the Closing Date, certifying as to the existence and/or good standing of such corporation in such jurisdictions; (h) one or more opinions of counsel or special counsel to Sinclair and the Merger Sub, each dated the Closing Date, as to the matters set forth in the attached Exhibit D; and (i) such other documents, instruments and receipts as Sullivan may reasonably request in order to effectuate the Merger and the other transactions contemplated by this Agreement to be consummated at the Closing (including the registration and issuance of any Sinclair Common Stock which is part of the Merger Consideration). Each of the foregoing will be reasonably satisfactory in form to Sullivan and its legal counsel. 3.J DETERMINATION OF TRAILING CASH FLOW AND GROSS REVENUES. (1) GROSS REVENUES DEFINED. The "Gross Revenues" for any period means the amount of the gross revenues of Sullivan and its Subsidiaries from all sources, determined in accordance with GAAP on a consolidated basis, but excluding revenues (other than from the sale of advertising or paid programming time on the Stations) of a non-recurring nature generated other than in the ordinary course of business. (2) EXAMINATION OF CASH FLOW REPORTS. Without limiting Section 7.C(2), Sullivan will (and will cause its Subsidiaries to) allow Sinclair and its legal and accounting representatives and advisors reasonable access to Sullivan's and its Subsidiaries' books and records to enable Sinclair to evaluate and dispute Sullivan's determination of the Trailing Cash Flow and the Gross Revenues set forth in each Cash Flow Report. Sullivan's determination of the Trailing Cash Flow or the Gross Revenues set forth in any Cash Flow Report will become final and binding upon the parties to this Agreement and the Old Sullivan Stockholders on the fifteenth (15th) Business Day after such Cash Flow Report is given to Sinclair unless, prior to such fifteenth (15th) Business Day, Sinclair gives 23 Sullivan written notice stating that Sinclair disagrees with such determination and stating in reasonable detail the nature, extent of, and basis for, Sinclair's disagreement and Sinclair's determination of the Trailing Cash Flow or Gross Revenues, as the case may be, for the period in question. (3) GOOD FAITH RESOLUTION. If Sinclair timely gives Sullivan such a dispute notice, then, during the five (5) Business Days after Sinclair gives such dispute notice, Sullivan and Sinclair will attempt in good faith to resolve such disagreement, and any mutual determination of the amount of the Gross Revenues or the Trailing Cash Flow, as the case may be, for the period in question by Sullivan and Sinclair will be final and binding upon the parties to this Agreement and the Old Sullivan Stockholders on the date of such mutual determination. (4) ARBITRATION OF DISPUTE. If any such dispute cannot be resolved by Sullivan and Sinclair on or prior to such fifth (5th) Business Day, then such dispute will be referred to Ernst & Young, and such firm's determination of the Gross Revenues or the Trailing Cash Flow, as the case may be, for the period in question will be final and binding upon the parties to this Agreement and the Old Sullivan Stockholders on the date such firm's report of its determination of the Gross Revenues or the Trailing Cash Flow, as the case may be, for such period has been delivered to Sullivan and Sinclair. (5) COSTS OF DISPUTE RESOLUTION. The prevailing party in any determination pursuant to Section 3.J(4) will be entitled to recover from the non-prevailing party such prevailing party's reasonable attorneys' fees and disbursements, and the nonprevailing party also will be required to pay all other reasonable costs and expenses associated with such determination; provided that (a) if the independent public accounting firm which makes such determination is unable to determine that a party is the prevailing party, then such costs and expenses will be equitably allocated by such firm upon the basis of the outcome of such determination, and (b) if such firm is unable to allocate such costs and expenses in such a manner, then the costs and expenses of such arbitration will be paid one-half by Sullivan and one-half by Sinclair, and each of them will pay the out-of-pocket expenses incurred by it. Such independent accounting firm may designate the prevailing party for purposes of this Section 3.J(5). (6) OUTDATED DETERMINATION. If the Trailing Cash Flow or the Gross Revenues for any period believed to be the Measurement Period are determined in accordance with this Section 3.J but such period is not the actual Measurement Period, then the Trailing Cash Flow or the Gross Revenues, as the case may be, will later be determined for the actual Measurement Period in accordance with this Section 3.J. 3.K MANDATORY PAYMENT TO SULLIVAN. (1) WHEN MANDATORY PAYMENT BECOMES OWING AND DUE. Except as provided in Section 12.B(4)(d), on the Approval Date a payment in the amount of Seventy Five Million Dollars ($75,000,000) will become owing to Sullivan by the Merger Sub. Whether or not this Agreement is thereafter terminated pursuant to Section 12.A, such 24 payment (the "Mandatory Payment") will be due and payable upon the termination of this Agreement pursuant to Section 12.A (or, if earlier, the later of June 23, 1998 and the fifth Business Day after the Approval Date), unless the Closing has occurred or the circumstances described in Section 12.B(4)(d) apply. If the Merger Sub does not pay such amount on or prior to such later date, then Sullivan may seek payment of such amount from the Earnest Money Fund (including by means a drawing under the Earnest Money Letter of Credit), in accordance with the terms of the Earnest Money Escrow Agreement, unless the circumstances described in Section 12.B(4)(d) exist. (2) RETURN OF EARNEST MONEY FUND. Upon the making of the Mandatory Payment, the Merger Sub will be entitled to a return of the Earnest Money Fund. Any such return to the Merger Sub of the Earnest Money Fund may be requested, and will be effected, in accordance with the terms of the Earnest Money Escrow Agreement. After receipt of the Mandatory Payment by Sullivan, at the Merger Sub's request Sullivan will execute and deliver to the Merger Sub such joint written instructions to the Earnest Money Escrow Agent as the Merger Sub may reasonably request in order to effect the return of the Earnest Money Fund to the Merger Sub. (3) TREATMENT OF MANDATORY PAYMENT. The Parties intend that, if the Mandatory Payment is required to be made, then the Mandatory Payment will become the property of Sullivan, for the benefit of its securityholders, and (whether or not the Closing occurs) will be required to be repaid by Sullivan only as expressly provided in Section 12.B(4)(d). If the Mandatory Payment is made, then the amount of the Mandatory Payment will constitute a prepayment of the portion of the aggregate Base Merger Consideration payable in respect of the Sullivan Share Equivalents and will be credited against the amount of such portion of the aggregate Base Merger Consideration to be paid at the Closing in cash. If this Agreement is terminated pursuant to Section 12.A after the Mandatory Payment is made, then Sullivan may retain the Mandatory Payment except under the circumstances described in Section 12.B(4)(d). If this Agreement is terminated pursuant to Section 12.A prior to the making of the Mandatory Payment, then the Mandatory Payment will thereupon become due and payable, except under the circumstances described in Section 12.A(4)(d), and the Earnest Money Fund will not be released (except to Sullivan) until the Mandatory Payment has been made. Unless this Agreement has been terminated pursuant to Section 12.A and Sullivan is entitled to retain the Mandatory Payment, Sullivan will not distribute or loan the proceeds of the Mandatory Payment to its stockholders or their respective Affiliates (other than Sullivan's Subsidiaries), but may utilize all or a portion of such proceeds to repay Indebtedness of Sullivan and its Subsidiaries (so long as the amount repaid may be reborrowed, subject to the satisfaction of customary conditions for the purpose of repaying such amount to Sinclair as provided in Section 12.B(4)(d)) or for any other purpose not prohibited hereunder. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SULLIVAN 25 Subject to Section 13.Q, Sullivan makes the following representations and warranties: 4.A ORGANIZATION. Sullivan is a corporation which is duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business or has similar status under the laws of each jurisdiction in which such qualification is required by applicable Legal Requirements. Sullivan has the power and authority to carry on the business being conducted by it, to own and operate the Station Assets owned and operated by it, and to enter into and consummate the transactions contemplated to be consummated by it pursuant to this Agreement. 4.B ACTION. Each action necessary to be taken by or on the part of Sullivan in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated to be consummated by Sullivan pursuant to this Agreement and necessary to make the same effective will be duly and validly taken by, and be effective at, the time by which such action is required to be taken. This Agreement has been duly and validly authorized, executed, and delivered by Sullivan and constitutes its valid and binding agreement, enforceable against Sullivan in accordance with and subject to its terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or similar laws affecting the rights of creditors generally and the availability of equitable remedies. 4.C FINANCIAL STATEMENTS. (1) DESCRIPTION OF STATEMENTS. Attached to this Agreement as Schedule 4C are copies of (a) the audited consolidated balance sheet of Sullivan as at December 31, 1996, and the related statements of operations and cash flows for the period from January 4, 1996 (the date upon which Sullivan acquired Act III) to December 31, 1996, and related notes, all reported on by Sullivan's independent certified public accountants (collectively, the "12/31/96 Financial Statements"), and (b) the internally prepared unaudited consolidated balance sheet of Sullivan as at September 30, 1997 and the related statement of operations for the nine-month period ended September 30, 1997 (the "9/30/97 Financial Statements"). (2) REPRESENTATIONS AS TO 1996 STATEMENTS. The 12/31/96 Financial Statements are, in all material respects, (a) as of December 31, 1996, correct, complete and in agreement with the books and records regularly maintained by Sullivan and its Subsidiaries, and (b) prepared in accordance with generally accepted accounting principles applied on a basis consistent with past practice throughout the year involved. The 12/31/96 Financial Statements present fairly, in all material respects, the financial position of Sullivan and its Subsidiaries as at December 31, 1996 and the results of the operations and cash flow of Sullivan and its Subsidiaries for the period covered thereby. (3) REPRESENTATIONS AS TO 1997 STATEMENTS. When they are delivered as provided in Section 7.C, the 12/31/97 Financial Statements will be, in all material respects, (a) as of December 31, 1997, correct, complete and in agreement with the books and records regularly maintained by Sullivan and its Subsidiaries, and (b) prepared in accordance with generally accepted accounting principles applied on a basis consistent with past practice throughout the year involved, and will present fairly in all material respects, the 26 financial position of Sullivan and its Subsidiaries as at December 31, 1997 and the results of the operations and cash flow of Sullivan and its Subsidiaries for the period covered thereby. (4) REPRESENTATIONS AS TO INTERIM STATEMENTS. Subject to the effect of year-end adjustments which normally would arise in the course of an audit, the 9/30/97 Financial Statements are, as of September 30, 1997, in all material respects, correct, complete and in agreement with the books and records regularly maintained by Sullivan and its Subsidiaries, and, taken together, present fairly, in all material respects, the financial position of Sullivan and its Subsidiaries as at September 30, 1997 and the results of the operations of Sullivan and its Subsidiaries for the nine months then ended. 4.D BUSINESS SINCE SEPTEMBER 30, 1997. Since September 30, 1997, except to the extent required or permitted by this Agreement or as set forth on the attached Schedule 4D, the business of the Stations has in all material respects been conducted in the ordinary course of business and in the same manner as it had been conducted by Sullivan and its Subsidiaries from January 4, 1996 (the date upon which Sullivan acquired Act III) through December 31, 1996. 4.E FCC AUTHORIZATIONS. As of the date of this Agreement, each Person specified in the attached Schedule 4E as the holder of an FCC Authorization has been authorized by the FCC to hold and is the holder of each of the FCC Authorizations specified for such Person on the attached Schedule 4E. Except as set forth on the attached Schedule 4E, (i) such FCC Authorizations constitute all of the licenses and authorizations required under the Communications Act, or the current rules, regulations, and policies of the FCC, for the operation of the Stations as now conducted; (ii) such FCC Authorizations are in full force and effect and are subject to or scheduled for renewal on the respective dates specified on the attached Schedule 4E (unless theretofore renewed after the date of this Agreement); (iii) such FCC Authorizations are valid for the full respective terms thereof; (iv) none of Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three has any reason to believe that such FCC Authorizations will not be renewed for a full and customary term in the ordinary course with no materially adverse conditions (except with respect to general rule-making and similar matters relating generally to television broadcast stations); (v) there is not pending, or, to the knowledge of Sullivan or any of its Subsidiaries, threatened, any action by or before the FCC to revoke, cancel, rescind, modify, or refuse to renew in the ordinary course any of the FCC Authorizations, and there is not now pending, or, to the knowledge of any such Person, threatened, issued, or outstanding by or before the FCC, any investigation, order to show cause, notice of violation, notice of apparent liability, or notice of forfeiture or complaint against Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan Three with respect to any Station; (vi) the Stations are operating in compliance, in all material respects, with the FCC Authorizations, the Communications Act, and the current rules, regulations and policies of the FCC; (vii) to the knowledge of Sullivan and its Subsidiaries, no Station (other than any Station which is a low-power television station) is short-spaced, on a grandfathered basis or otherwise, to any existing broadcast television station, outstanding construction permit or pending application therefor, domestic or international, or to any existing or proposed TV allotment, domestic or international; (viii) neither Sullivan, any of its Subsidiaries, Sullivan Two nor Sullivan Three has received any written notice to the effect that it is causing objectionable interference to the transmissions of any other television station or communications facility or has received any written complaints with respect thereto; 27 (ix) no other television station or communications facility is causing objectionable interference to any Station's transmissions or the public's reception of such transmissions; and (x) all documents required by 47 C.F.R. Section 73.3526 to be kept in each Station's public inspection file are in such file, and such file will be maintained in proper order and complete up to and through the Closing Date. Except with respect to Market Cable Systems that are parties to retransmission agreements, for each Station, there has been made a valid election of must carry with respect to each Market Cable System. Except as set forth on Schedule 4.E, no Market Cable System has advised Sullivan, its Subsidiaries, Sullivan Two or Sullivan Three of any signal quality deficiency or copyright indemnity or other prerequisite to cable carriage of any Station's signal, and no Market Cable System has declined or threatened to decline such carriage of such Station or failed to respond to a request for carriage of such Station or sought any form of relief from carriage of such Station from the FCC. Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three have filed with the FCC, on a timely basis, all material reports and other material filings required to be filed by them in connection with the Stations pursuant to the Communications Act and the rules, regulations and policies of the FCC. 4.F CONDITION OF ASSETS. Except as set forth on the attached Schedule 4F, the material tangible assets of Sullivan and its Subsidiaries and the improvements on the Realty which are used by them (a) are in all material respects in good and technically sound operating condition (ordinary wear and tear excepted) and are not in need of repair, (b) are in all material respects in a condition which would be sufficient to permit the owner thereof to operate or program the Stations (in the manner in which the Stations are operated or programmed by Sullivan and its Subsidiaries as of the date of this Agreement) in compliance with the terms of the FCC Authorizations, the Communications Act and current FCC rules and regulations, and (c) have in all material respects been maintained in a manner consistent with generally accepted standards of good engineering practice and to the knowledge of Sullivan, all applicable federal, state and local statutes, ordinances, rules and regulations, including, without limitation, all applicable tower painting and lighting requirements. 4.G TITLE, ETC. (1) REALTY. The attached Schedule 4G contains a description of all parcels of Realty owned by Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three (collectively, the "Owned Realty"). The Person designated as the "Titleholder" on the attached Schedule 4G has good and marketable fee title to such parcel, free and clear of all Liens, except for Permitted Encumbrances. Included in the attached Schedule 4G is a copy of the policy (if any) insuring the Titleholder's title thereto as of the date of this Agreement. Sullivan and its Subsidiaries have valid leasehold interests in all real property subject to the leases (the "Leases") described on the attached Schedule 4G. The attached Schedule 4G contains a description of all the material Leases to which Sullivan, any Subsidiary of Sullivan, Sullivan Two or Sullivan Three is a party as a tenant (or subtenant) or landlord with respect to any Station as of the date of this Agreement, other than any lease pursuant to which Sullivan or a Subsidiary (as lessor) leases space on a tower on terms which were customary when such lease was entered into. Neither Sullivan, any of its Subsidiaries, Sullivan Two nor Sullivan Three is in material default under any of the Leases, and Sullivan, any Sullivan Subsidiary, Sullivan Two or Sullivan Three is the holder of the leaseholds purported to be granted to it under the Leases under which it is a lessee. Each of the Leases (x) is valid as to Sullivan, 28 any Sullivan Subsidiary, Sullivan Two or Sullivan Three and, to the knowledge of Sullivan, is valid as to any other party thereto, (y) is in full force and effect and constitutes a legal and binding obligation of, and is legally enforceable against, Sullivan, any Sullivan Subsidiary, Sullivan Two or Sullivan Three and, to Sullivan's knowledge, each other party thereto, subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or similar laws affecting the rights of creditors generally and the availability of equitable remedies, and (z) grants substantially the leasehold interest it purports to grant, including any rights to nondisturbance and peaceful and quiet enjoyment that may be contained therein. To Sullivan's knowledge, each party other than Sullivan, any Sullivan Subsidiary, Sullivan Two or Sullivan Three is in compliance in all material respects with the provisions of the Leases. The Owned Realty and the real property subject to the Leases listed in the attached Schedule 4G constitute all of the real property owned, leased or used by Sullivan, any Sullivan Subsidiary, Sullivan Two or Sullivan Three in the business and operations of the Stations which is material to the businesses and operations of the Stations. (2) COMPLIANCE. The Owned Realty and its present uses comply in all material respects with all applicable zoning laws and ordinances and no material exemption or waiver thereunder will expire or be terminated by reason of the Merger. To the knowledge of Sullivan and its Subsidiaries, there exists no notice of any material uncorrected violations of housing, building, safety, or fire ordinances with respect to the Owned Realty or the real property leased by Sullivan or a Subsidiary pursuant to any Lease. Except as disclosed on the attached Schedule 4G, the Owned Realty is currently serviced by a community sewage system. (3) CONDEMNATION OR DISPOSITION. Neither Sullivan, any of its Subsidiaries, Sullivan Two nor Sullivan Three has received any notice of, and none of them has knowledge of, any pending, threatened, or contemplated condemnation proceeding affecting the Owned Realty or the real property leased by Sullivan or a Subsidiary pursuant to any Lease, or any part thereof, or of any sale or other disposition of the Owned Realty or any portion thereof in lieu of condemnation. (4) NON-REALTY. Taken together, Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three have good title to, or a valid leasehold in, the tangible assets (other than the Realty) and personal property included in the Station Assets, and all such assets and personal property will on the Closing Date (after the repayment in full of the Funded Indebtedness of Sullivan and its Subsidiaries and all related interest and other obligations and the release of all related Liens and the Mission Guarantees) be free and clear of all Liens other than Permitted Encumbrances. 4.H CALL LETTERS, TRADEMARKS, ETC. Taken together, Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three possess (and immediately after the Merger, will possess) adequate rights, licenses, or other authority to use the call letters presently used by the Stations and all trademarks and trade names relating to the Stations which are required for the operation of the Stations or which are material to the conduct of the business of the Stations, in each case as presently conducted by Sullivan and its Subsidiaries, and have good title to such call letters, trademarks and 29 trade names which they purport to own, and Sullivan's, its Subsidiaries', Sullivan Two's and Sullivan's Three's respective rights thereto are free and clear of all Liens other than Permitted Encumbrances. None of Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three has received any written notice with respect to any alleged infringement or unlawful or improper use of any copyright, trademark, trade name, or other intangible property right owned or alleged to be owned by others and used in connection with the Stations. 4.I INSURANCE. The attached Schedule 4I is, in all material respects, a correct and complete summary of the material terms of each material policy of insurance which is in effect on the date of this Agreement insuring Sullivan and its Subsidiaries against loss or damage to any Station Assets by fire, casualty and other hazards and risks relating to their tangible assets, and each such policy of insurance is in full force and effect in all material respects. 4.J CONTRACTS. The attached Schedule 4J contains a list of each of the following to which any of Sullivan or its Subsidiaries is a party on the date of this Agreement (other than any Contract (i) which does not require Sullivan and its Subsidiaries to furnish consideration in an aggregate amount for such Contract of more than $25,000, (ii) which is terminable by Sullivan or any of its Subsidiaries without penalty upon advance notice of thirty (30) days or less, (iii) which is a barter programming contract pursuant to which the remaining telecasting term as of December 31, 1997 was twelve months or less, or (iv) which is a Time Sale Contract): (1) television network affiliation agreements; (2) Trades which could require the furnishing of advertising time on any Station at any time after the Closing Date; (3) sales agency or advertising representation contracts; (4) employment contracts; (5) licenses or other contracts under which Sullivan or any of its Subsidiaries is authorized to broadcast on any Station filmed or taped programming supplied by others; (6) leases of personal property which have a term, including renewal options exercisable by any party thereto other than Sullivan or any of its Subsidiaries, ending more than one year after the date of this Agreement; and (7) any other contract which is material to the business and operation of the Stations. Neither Sullivan, any of its Subsidiaries, Sullivan Two nor Sullivan Three is in material breach of any contract or agreement described on the attached Schedule 4J, nor is there any fact or circumstance which, with the giving of notice or the passage of time, or both, would constitute such a breach. Each material Contract described on the attached Schedule 4J (other than any such Contract which expires or is terminated in the ordinary course of business after the date of this 30 Agreement) is in all material respects in full force and effect, valid and binding and enforceable as to Sullivan, its Subsidiaries, Sullivan Two and/or Sullivan Three, as applicable, and, to Sullivan's knowledge, each other party thereto (subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or similar laws affecting the rights of creditors generally and the availability of equitable remedies). 4.K EMPLOYEES. The attached Schedule 4K lists all employees of Sullivan or any of its Subsidiaries as of December 31, 1997 and their respective current budgeted annual base salary and bonus or annualized wages as of such date and their respective dates of hire. Except as described on the attached Schedule 4J or the attached Schedule 4K, on the date of this Agreement (a) Sullivan and its Subsidiaries have no written or oral contract of employment with any such employee (other than a Contract for employment at the will of the employer), and (b) Sullivan and its Subsidiaries are not a party to or subject to any collective bargaining agreement with respect to any such employee or any contract with any labor union or other labor organization with respect to the Stations. Sullivan and its Subsidiaries are not parties to any pending labor dispute affecting the Stations, nor, to the knowledge of Sullivan, is any such dispute threatened, on the date of this Agreement and, on the Closing Date, no such pending or threatened dispute will be material. With respect to employees of and service providers to Sullivan and its Subsidiaries, Sullivan and the Subsidiaries are and have been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice. The persons classified by Sullivan and the Subsidiaries as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and Sullivan and its Subsidiaries have in all material respects fully and accurately reported their compensation on IRS Forms 1099 when required to do so. 4.L LITIGATION. Except as set forth on the attached Schedule (1) on the date of this Agreement, Sullivan and its Subsidiaries are not operating under or subject to or in default with respect to any order, writ, injunction, or decree of any court or federal, state, municipal, or other governmental department, commission, board, agency, or instrumentality arising out of a proceeding to which it is or was a party, and on the Closing Date, no such item will have or reasonably be expected to result in a Material Adverse Change; and (2) on the date of this Agreement, there is no litigation pending by or against, or to the knowledge of Sullivan threatened against, Sullivan or any of its Subsidiaries which interferes with, or could reasonably be expected to interfere with, (a) the operations of the Stations as presently conducted or (b) the ability of Sullivan to carry out the transactions contemplated to be carried out by it pursuant to this Agreement, and on the Closing Date, no such pending or threatened litigation will have or will reasonably be expected to result in a Material Adverse Change. There are no attachments, executions, or assignments for the benefit of creditors or voluntary or 31 involuntary proceedings in bankruptcy initiated or contemplated by, or, to the knowledge of Sullivan, threatened or pending against, Sullivan or any of its Subsidiaries. 4.M COMPLIANCE WITH LAWS. Other than with respect to matters disclosed in the attached Schedule 4E or the attached Schedule 4L, subject to obtaining all applicable Consents: (a) Sullivan and its Subsidiaries, with respect to the Station Assets, are in compliance in all material respects with all applicable Legal Requirements, and (b) the present uses by Sullivan and its Subsidiaries of the Station Assets which they own do not in any material respect violate any such Legal Requirements. 4.N NO DEFAULTS. Except for (w) any item described on the attached Schedule 4N, (x) the requisite approval of the FCC, (y) compliance with the requirements of the Hart- Scott-Rodino Act, and (z) any Consent which may be required under any Contract, on the Closing Date (after giving effect to all Consents which have been obtained) neither the execution and delivery by Sullivan of this Agreement, nor the consummation by Sullivan of the Merger or the other transactions contemplated by this Agreement to be consummated by Sullivan, requires any Consent under, will constitute, or, with the giving of notice or the passage of time or both, would constitute, a material violation of or would conflict in any material respect with or result in any material breach of or any material default under, or will result in the creation of any Lien (other than any Permitted Encumbrance or any Lien in favor of one or more of the Acquiring Parties) under, any of the terms, conditions, or provisions of any Legal Requirement to which Sullivan or any of its Subsidiaries is subject, or of the certificate of incorporation or by-laws of Sullivan or any of its Subsidiaries. No Lease for the main studio site of any Station, no lease pursuant to which Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan Three leases (as lessee) space on a transmission tower for the location of any transmission equipment of any Station, and neither Existing LMA, contains any provision which expressly requires a Consent by reason of a merger or change of control or ownership of Sullivan. 4.O SUBSIDIARIES. (1) SUBSIDIARIES' STOCK. All of the issued and outstanding capital stock of each of the corporations named on the attached Schedule 4O (other than Sullivan, and other than Sullivan Two and Sullivan Three, as of the Closing Date) is owned of record (directly or indirectly through one or more of its Subsidiaries) by Sullivan free and clear of all Liens other than Permitted Encumbrances. All such capital stock has been validly issued and is fully paid and nonassessable, there is not outstanding any right to acquire any capital stock or other equity securities of any Subsidiary of Sullivan (by exercise of any right or by conversion, exchange or otherwise), and such capital stock is not subject to any option, warrant, voting trust, outstanding proxy, registration rights agreement or other agreement regarding voting rights, other than any Permitted Encumbrance. (2) SUBSIDIARIES' STATUS. Each of Sullivan's Subsidiaries named on the attached Schedule 4O is a corporation duly organized, validly existing and in good standing (or having comparable active status) under the laws of the jurisdiction indicated on such Schedule under the heading "Organization" and has the power and authority to carry on the business conducted by it and own the properties owned by it under the laws of such 32 jurisdiction and each other jurisdiction in which it is required to have such authority. A true and correct copy of the certificate or articles of incorporation and by-laws of each of such Subsidiary has been provided to the Merger Sub. On the Closing Date, neither Sullivan nor any other corporation named on the attached Schedule 4O will own any shares of stock or other equity or debt securities of or any interest in any Person other than another Person named on the attached Schedule 4O, Sullivan Two or Sullivan Three. 4.P TAX MATTERS. (1) TAX RETURNS. Except as set forth on the attached Schedule 4P or as has not caused and is not reasonably expected to cause a Material Adverse Change: (a) all federal, state, local and foreign tax returns and tax reports required to be filed by Sullivan or any of its Subsidiaries have been timely filed (taking into account any extensions of which Sullivan or any of its Subsidiaries may have availed itself) with the appropriate governmental agencies in all jurisdictions in which such returns and reports are required to be filed, and all of the foregoing (including any summary balance sheets included therein) are true, correct, and complete; (b) all federal, state, local and foreign income, profits, franchise, sales, use, occupation, property, excise, and other taxes (including interest and penalties) due and payable by Sullivan and its Subsidiaries have been fully paid; (c) no issues have been raised in writing (or, to Sullivan's knowledge, orally) and are currently pending by the Internal Revenue Service or any other taxing authority in connection with any of such returns and reports; (d) no waivers of statutes of limitations as to tax matters have been given or requested with respect to Sullivan and its Subsidiaries; (e) the federal, state, local, and foreign income tax and franchise tax returns of or with respect to Sullivan and its Subsidiaries have not been examined by the Internal Revenue Service or by appropriate state, provincial, or departmental tax authorities; (f) no issue has been raised in writing (or, to Sullivan's knowledge, orally) with Sullivan or any of its Subsidiaries by any taxing authority which can reasonably be expected to result in a deficiency for any fiscal year or all deficiencies asserted or assessments (including interest and penalties) made as a result of any examinations have been fully paid, and no proposed (but unassessed) additional taxes, interest, or penalties have been asserted; (g) neither Sullivan nor any of its Subsidiaries is (or has ever been) a party to any Tax sharing agreement with any Person who was not a member of an affiliated group of corporations (as that term is defined in Section 1504(a) of the Tax Code, or any analogous combined, consolidated or unitary group defined under state, local or foreign Tax law) consisting in whole or in part of the parties to such agreement, and neither Sullivan nor any of its Subsidiaries has any liability for the Taxes of any other Person (other than Sullivan and its Subsidiaries) pursuant to Reg. Section 1.1502-6 under the Tax Code (or any similar provision of state, local or foreign Tax law) or as a transferee or successor or by contract; and (h) Sullivan has provided Sinclair with copies of all federal and state income or franchise tax returns that have been filed with respect to Sullivan or any of its Subsidiaries since January 4, 1996. (2) TAX ELECTIONS AND SPECIAL TAX STATUS. Except as set forth on the attached Schedule 4P: (a) neither Sullivan nor any of its Subsidiaries is or has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Tax Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Tax Code, and 33 Sinclair is not required to withhold tax in respect of the Merger Consideration for the Sullivan Share Equivalents by reason of Section 1445 of the Tax Code; (b) neither Sullivan nor any of its Subsidiaries has made any election or filed any consent pursuant to Section 341(f) of the Tax Code relating to collapsible corporations; (c) neither Sullivan nor any of its Subsidiaries has entered into any compensatory agreements with respect to the performance of services which payment thereunder would result in a nondeductible expense to Sullivan or any of its Subsidiaries pursuant to Section 280G of the Tax Code or an excise tax to the recipient of such payment pursuant to Section 4999 of the Tax Code; and (d) Sullivan has not agreed to make, nor is it required to make, any adjustment under Section 481(a) of the Tax Code by reason of a change in accounting method or otherwise. 4.Q CAPITAL STOCK. As of the date of this Agreement, Sullivan has authorized capital stock consisting of 90,000,000 shares of capital stock, of which (a) 25,000,000 shares are designated Class A Common Stock, par value $0.001 per share, of which no shares are issued and outstanding, (b) 25,000,000 shares are designated Class B-1 Common Stock, par value $0.001 per share, of which 1,201,577 shares are issued and outstanding, (c) 25,000,000 shares are designated Class B-2 Common Stock, par value $0.001 per share, of which 6,158,211 shares are issued and outstanding, (d) 5,000,000 shares are designated Class C Common Stock, par value $0.001 per share, of which 1,021,872 shares are issued and outstanding, and (e) 10,000,000 shares are designated Preferred Stock, $0.001 par value per share, of which 1,150,000 shares are issued and outstanding. All of the issued and outstanding capital stock of Sullivan is duly authorized and validly issued, fully paid and nonassessable, and there are no preemptive rights in respect thereof in favor of any Person (other than any Person which holds Sullivan Share Equivalents). Except for warrants which are presently exercisable for 2,406,307 shares of Class B-1 Common Stock, there are no outstanding options, warrants or other rights to subscribe for or purchase from Sullivan, no contracts or commitments providing for the issuance of, or the granting of rights to acquire, and no securities convertible into or exchangeable for, any shares of capital stock or any other ownership interest of Sullivan. 4.R BOOKS AND RECORDS. The minute books of each of Sullivan and its Subsidiaries contain records which are complete and accurate in all material respects of all meetings and other corporate actions of its stockholders, its board of directors and all committees, if any, appointed by its board of directors. The books of accounts, ledgers, order books, records and documents of each of Sullivan and its Subsidiaries, in all material respects, accurately and completely reflect information relating to its business, the nature, acquisitions, maintenance and location of its assets and the transactions giving rise to its obligations and accounts receivable. 4.S ABSENCE OF SIGNIFICANT UNDISCLOSED LIABILITIES. Neither Sullivan nor its Subsidiaries has any debt, liability or obligation of any kind, whether accrued, absolute, contingent or otherwise, including any liability or obligation on account of Taxes or any governmental charges or penalty, interest or fines, which would be required to be reflected in Sullivan's consolidated balance sheet prepared in accordance with GAAP and which would have, or which in the case of contingent or inchoate liabilities, would have if accrued or absolute, a material adverse effect on the financial condition of Sullivan and its Subsidiaries, other than any liability or obligation (a) reflected in any Financial Statement, (b) identified with particularity in any attached Schedule or arising since September 30, 1997 under any Contract which is described, or which is not required to be described, 34 on any attached Schedule, (c) incurred in the ordinary course of business since September 30, 1997, or (d) incurred in connection with the transactions contemplated by this Agreement. Each of Sullivan and Sullivan Broadcasting has filed with the Securities and Exchange Commission all material documents required by the Securities Act or the Securities Exchange Act to be filed by it since January 4, 1996 (the "Sullivan SEC Reports"). Neither Sullivan nor Sullivan Broadcasting has any liability by reason of any Sullivan SEC Report not complying in all material respects at the time of the filing thereof with the requirements of the Securities Act, and the rules and regulations thereunder, or the Securities Exchange Act, and the rules and regulations thereunder, as the case may be, or containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.T EMPLOYEE BENEFIT PLANS. Except as set forth on the attached Schedule 4T, neither Sullivan nor its Subsidiaries maintains or is a party to or makes contributions to any of the following: (a) any "employee pension benefit plan," (as such term is defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA")); or (b) any "employee welfare benefit plan" (as such term is defined in Section 3(a) of ERISA), whether written or oral. All employee benefit plans and other Benefit Arrangements now or formerly maintained by Sullivan or its Subsidiaries or to which Sullivan or its Subsidiaries is obligated to contribute, are, and have in the past been, in all material respects maintained, funded and administered in compliance with ERISA, and other applicable law. No such employee benefit plan holds any securities issued by Sullivan. Neither Sullivan nor any of its ERISA Affiliates has ever sponsored or maintained, had any obligation to sponsor or maintain, or had any liability (whether actual or contingent, with respect to any of its assets or otherwise) with respect to any employee pension benefit plan subject to Section 302 of ERISA or Section 412 of the Tax Code or Title IV of ERISA (including any multiemployer plan). Excluding routine claims for benefits, there are no pending claims or lawsuits by, against, or relating to any employee benefit plans or other Benefit Arrangements that would, if successful, result in liability of Sullivan or any of its Subsidiaries. Neither Sullivan nor any Subsidiary has maintained or contributed to any plan intended to qualify under Section 401(a) of the Tax Code since January 4, 1996, other than the Sullivan Broadcasting Company 401(k) Plan (the "401(k) Plan"). The 401(k) Plan has always qualified in all material respects in form and operation under Section 401(a) of the Tax Code and has a currently applicable determination letter from the Internal Revenue Service, and its trust has always been exempt under Section 501 of the Tax Code, and nothing has occurred with respect to such plan and trust that could cause the loss of such qualification or exemption or the imposition of any liability, lien, penalty, or tax under ERISA or the Tax Code. The employee benefit plans and Benefit Arrangements maintained by Sullivan are not presently under audit or examination (and have not received notice of potential audit or examination) by any governmental authority, and no matters are pending with respect to the 401(k) Plan under any governmental compliance programs. No employee benefit plan or Benefit Arrangement contains any provision or is subject to any law that would give rise to any vesting of benefits, severance, termination, or other payments or liabilities as a result of the transactions this Agreement contemplates, and Sullivan has not declared or paid any bonus or other incentive compensation or established any severance plan, program, or arrangement in contemplation of the transactions contemplated by this Agreement, in each case other than those which have been paid or which will be included as part of the Current Liabilities. Sullivan has made or has recorded proper accruals for all required contributions to its employee benefit plans as of the last day of each 35 plan's most recent fiscal year, and all benefits accrued under any unfunded Sullivan employee benefit plan or Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with GAAP. All group health plans of Sullivan and its ERISA Affiliates have been operated in material compliance with the requirements of Section 4980B (and its predecessor) and 5000 of the Code. No employee or former employee of Sullivan or its Subsidiaries, and no beneficiary of any such employee or former employee, is, by reason of such employee's or former employee's employment by Sullivan or such ERISA Affiliate, entitled to receive any benefits, including death or medical benefits (whether or not insured) beyond retirement or other termination of employment as described in Statement of Financial Accounting Standards No. 106, other than continuation coverage mandated under Section 4980B of the Tax Code or comparable state law. 4.U BROKERS. There is no broker or finder or other Person who would have any valid claim against Sullivan, any Subsidiary thereof, or any Acquiring Party for a commission or brokerage fee in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or understanding of or action taken by Sullivan or any of its Affiliates. 4.V DISCLOSURE. To the knowledge of Sullivan, no statement of a material fact set forth in this Article IV contains any statement of any material fact which is untrue in any material respect or omits to state a material fact which is necessary in order to make the statements set forth in this Article IV not misleading in any material respect. 4.W ENVIRONMENTAL. All of the operations of Sullivan and its Subsidiaries at or from any Realty comply in all material respects with applicable Environmental Laws. Neither Sullivan nor its Subsidiaries has engaged in or permitted any operations or activities upon any of the Realty for the purpose of or involving the treatment, storage, use, generation, release, discharge, emission, or disposal of any Hazardous Materials at the Realty, except in substantial compliance with applicable Environmental Laws. To the knowledge of Sullivan, there are no conditions existing at the Realty that require, or which with the giving of notice or the passage of time or both would likely require remedial or corrective action, removal or closure pursuant to the Environmental Laws. To the knowledge of Sullivan, Sullivan and its Subsidiaries have all the material permits, authorizations, licenses, consents and approvals necessary for the current operation of the Stations and for the operations on, in or at the Realty which are required under applicable Environmental Laws and are in substantial compliance with the terms and conditions of all such permits, authorizations, licenses, consents and approvals. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SINCLAIR AND THE MERGER SUB Sinclair and the Merger Sub, jointly and severally, represent and warrant as follows: 5.A INCORPORATION. Sinclair is a corporation duly organized, validly existing, and in good standing (or has comparable active status) under the laws of the State of Maryland, and Sinclair has the corporate power and authority to enter into and consummate the transactions 36 contemplated to be consummated by it pursuant to this Agreement. From and after the time it is formed, the Merger Sub will be a corporation duly organized, validly existing, and in good standing (or has comparable active status) under the laws of the State of Delaware and will have the corporate power and authority to enter into and consummate the transactions contemplated to be consummated by it pursuant to this Agreement. 5.B CORPORATE ACTION. Each action necessary to be taken by or on the part of either Sinclair or the Merger Sub in connection with the execution and delivery of this Agreement and the consummation of transactions contemplated hereby to be consummated by it and necessary to make the same effective duly and validly taken by, and be effective at, the time by which such action is required to be taken. This Agreement has been duly and validly authorized, executed, and delivered by each of Sinclair and the Merger Sub and constitutes a valid and binding agreement, enforceable against each of them in accordance with and subject to its terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or similar laws affecting the rights of creditors generally and the availability of equitable remedies. 5.C NO DEFAULTS. Except as set forth on the attached Schedule 4H, the requisite approval of the FCC and compliance with the requirements of the Hart-Scott-Rodino Act, on the Closing Date (after giving effect to all approvals and consents which have been obtained), neither the execution and delivery by Sinclair or the Merger Sub of this Agreement, nor the consummation by Sinclair or the Merger Sub of the Merger and the other transactions contemplated by this Agreement to be consummated by it, will constitute, or, with the giving of notice or the passage of time or both, would constitute, a material violation of or would conflict in any material respect with or result in any material breach of or any material default under, any of the terms, conditions, or provisions of any Legal Requirement to which Sinclair or the Merger Sub is subject, or of Sinclair's or the Merger Sub's certificate of incorporation or by-laws or similar organizational documents, or of any material contract, agreement, or instrument to which Sinclair or the Merger Sub is a party or by which Sinclair or the Merger Sub is bound. 5.D BROKERS. There is no broker or finder or other Person who would have any valid claim against Sullivan (except after the Effective Time) or any Old Sullivan Stockholder for a commission or brokerage fee in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or understanding of or action taken by Sinclair, the Merger Sub or any Affiliate of any of them. 5.E LITIGATION. There is no litigation pending by or against, or to Sinclair's or the Merger Sub's knowledge (after due inquiry) threatened against, Sinclair or the Merger Sub related to or affecting Sinclair's or the Merger Sub's ability fully to carry out the transactions contemplated to be consummated by them pursuant to this Agreement. There are no attachments, executions, or assignments for the benefit of creditors or voluntary or involuntary proceedings in bankruptcy contemplated by, or, to Sinclair's or the Merger Sub's knowledge, threatened or pending against, Sinclair or the Merger Sub. 5.F SINCLAIR COMMON STOCK. The Sinclair Common Stock, if any, issued as part of the Merger Consideration will be duly authorized, validly issued, fully-paid and nonassessable 37 and will, upon issuance and registration under the Securities Act, be tradeable on the NASDAQ National Market without further registration under the Securities Act or any other federal or state securities law. Sinclair has filed with the Securities and Exchange Commission all material documents required by the Securities Act or the Securities Exchange Act to be filed by it since January 1, 1996 (the "Sinclair SEC Reports"). As of their respective filing dates, the Sinclair SEC Reports complied in all material respects with the requirements of the Securities Act, and the rules and regulations thereunder, or the Securities Exchange Act, and the rules and regulations thereunder, as the case may be, and at the time filed with the SEC none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Parties acknowledge that no representation or warranty will be deemed to be made pursuant to this Section 5.F if no Sinclair Common Stock is issued as part of the Merger Consideration. 5.G DISCLOSURE. To Sinclair's and the Merger Sub's knowledge, no statement of a material fact set forth in this Article V contains a statement of any material fact which is untrue in any material respect or omits to state a material fact which is necessary in order to make the statements set forth in this Article V not misleading in any material respect. ARTICLE VI APPLICATIONS FOR REQUIRED FCC CONSENT 6.A FOR SPIN-OFFS. On or prior to March 2, 1998, Sullivan will, and will cause its Subsidiaries to, complete the portions of the applications for the Required FCC Consents and will file such applications with the FCC. Sullivan will, and will cause its Subsidiaries to, diligently take or cooperate in the taking of all steps which are reasonably within its ability to take and which are necessary, proper, or desirable to expedite the prosecution of such applications and to cause the Required FCC Consents expeditiously to be Granted and expeditiously to become Final Orders, and will refrain from making any filing or announcement or taking (or causing or assisting any other Person to take) any other action which reasonably could be expected to delay in any respect such Required FCC Consents being Granted or becoming Final Orders without Sinclair's prior written consent. Sullivan will promptly provide Sinclair with a copy of any pleading, order, or other document served on Sullivan or any of its Subsidiaries relating to such applications (other than any of the same which is addressed to or states that it is to be served upon or delivered to Sinclair or its communications counsel). ARTICLE VII COVENANTS OF SULLIVAN 7.A MAINTENANCE OF BUSINESS UNTIL THE CLOSING. (1) OPERATION IN ORDINARY COURSE . Until the Closing, Sullivan will, 38 and will cause its Subsidiaries to, (a) with respect to the Station Assets, continue to carry on the business and operations of the Stations, keep the books of account, records, and files of Sullivan and its Subsidiaries, realize upon the accounts receivable of Sullivan and its Subsidiaries, and satisfy their accounts payable, all of which will be carried on by Sullivan and its Subsidiaries in the ordinary and usual course, in a manner which is consistent with their respective past practices, (b) without limiting the generality of the foregoing, not utilize Sullivan's and its Subsidiaries' rights under any Program Contract in a manner which will render exhibitions of programming thereunder unavailable to Post- Merger Sullivan and its Subsidiaries after the Adjustment Time, except in accordance with their past practices, (c) promptly execute and timely file any applications reasonably required for renewal of the FCC Authorizations, (d) timely file (taking into account any extensions of which Sullivan or any of its Subsidiaries may avail itself) true, correct and complete federal, state, local and foreign tax returns and tax reports required to be filed by Sullivan or any of its Subsidiaries, (e) fully pay all federal, state, local and foreign income, profits, franchise, sales, use, occupation, property, excise and other taxes (including interest and penalties) due and payable by Sullivan and its Subsidiaries, and (f) sell advertising time on the Stations only in the ordinary and usual course in a manner consistent with their respective past practices, and (g) to the extent necessary to the conduct of its business, use reasonable efforts to (i) perform its obligations under all Station Contracts to which it is a party, (ii) preserve the Station Assets held by it, and (iii) maintain in full force and effect the FCC Authorizations. (2) MAINTENANCE OF INSURANCE. Sullivan will, and will cause its Subsidiaries to, maintain in full force and effect through the Closing property damage insurance with respect to the Station Assets which is not materially less comprehensive, and in amounts which are not materially less than, the insurance coverage described on the attached Schedule 4I, including timely paying the premiums associated therewith. (3) ADDITIONAL PROGRAM CONTRACTS. Until the Closing, Sullivan may, and may cause or permit its Subsidiaries to, enter into any Program Contract, or effect any such amendment, termination or modification, which is material only with the prior consent of Sinclair, which consent may be withheld in Sinclair's sole discretion and will be deemed given if not denied by written notice by Sinclair to Sullivan within five (5) Business Days after it is requested in writing; provided that such notice and consent will not be required as to the entry into any such Program Contracts so long as (x) the aggregate amount of the cash payment obligations under such Program Contracts as to which such consent is not given and not deemed given does not exceed $50,000 for any Station, and (y) if Sullivan or any of its Subsidiaries is required to provide advertising time in consideration for the use of any programming covered by such Program Contract, then the term during which such advertising time may be required to be provided commences prior to May 31, 1999 and does not exceed one (1) year in duration. (4) OTHER CONTRACTS. From the date of this Agreement to and including the Closing, Sullivan will be entitled to, and will be entitled to cause or permit its Subsidiaries to, renew or extend the term of any Time Sale Contract or any other Contract which, by its terms, has expired at the time of such renewal or extension or which would expire prior to the sixtieth day after the effective date of such renewal or extension, and, in 39 connection therewith, to agree to increase the amounts payable or other obligations thereunder during any such renewal or extended term in accordance with Sullivan's and its Subsidiaries' past practice in the operation of the Stations, and to enter into any new Contract (other than a Program Contract or except as prohibited by Section 7.A(5)) in the ordinary course of its business or which is reasonably required in order to enable it to comply with its obligations under this Agreement (5) RESTRICTIONS. Prior to the Closing, except (i) as otherwise permitted by Section 7.A(3) or 7.A(4), (ii) as required as part of a Spin-Off, (iii) the transfer of the Headquarters Assets to ABRY Partners or an Affiliate thereof for value and/or to one or more of the Corporate Personnel as compensation, or (iv) as disclosed on the attached Schedule 4F, Sullivan will not, and will not cause or permit any of its Subsidiaries to, without the prior written consent of Sinclair (to the extent the following restrictions are permitted by the FCC and all other applicable Legal Requirements): (a) other than in the ordinary course of business, sell, lease (as lessor), transfer, or agree to sell, lease (as lessor), or transfer, or agree to sell, lease (as lessor) or transfer, any Station Assets (x) which are required for the operation of any Station, or (y) which have individually or in the aggregate (together with all other Station Assets transferred by Sullivan or any of its Subsidiaries since the date of this Agreement other than in the ordinary course of business and not replaced with functionally equivalent or superior assets of substantially equal or greater value) a replacement cost in excess of $130,000 (it being understood that sales, leases and/or transfers of Station Assets described in this clause (y) and having an aggregate replacement cost of $130,000 or less ("Designated Sales") will not be prohibited by this Agreement) without replacement thereof with a functionally equivalent or superior asset of substantially equal or greater value; (b) enter into any contract of employment (other than (x) any contract for employment at the will of the employer, (y) any contract for employment entered into in the ordinary course of business and providing for consideration payable upon or after termination which is consistent with that payable under employment contracts for present or former employees of Sullivan and its Subsidiaries having similar seniority or responsibilities, or (z) any contract or Benefit Arrangement not described in clause (y) with respect to the employment of any Person whose employment will be terminated at the time of the Closing, it being understood that the costs of severance and other payments to be made under any contract or Benefit Arrangement described in this clause (z) in connection with or after such termination will be reflected in the Current Liabilities) or collective bargaining agreement which will be binding on Post-Merger Sullivan after the 40 Merger, or permit any increases in the compensation of the employees of Sullivan or any of its Subsidiaries with respect to the Stations (but excluding the Corporate Personnel), in each case except to the extent consistent with Sullivan's and its Subsidiaries' past practices; provided that Sullivan and its Subsidiaries may pay bonuses to any of their employees, grant raises in salary and wages which do not represent, in the aggregate, an increase in the employees' aggregate annualized base compensation of more than 4% of the employees' present annualized base compensation, and enter into any employment agreement with on-air talent under which the annual salary payable does not exceed $50,000 during any twelve-month period; (c) enter into any new Trade arrangement which will involves the furnishing of advertising time in exchange for services or merchandise after the Adjustment Time on any Station, other than any Trade arrangement which (i) does not involve goods and services having an aggregate fair value in excess of $25,000, (ii) together with all other Trade arrangements for such Station entered into after the date of this Agreement by Sullivan and its Subsidiaries does not involve goods and services having an aggregate fair value in excess of $50,000, and (iii) does not have a duration in excess of twelve months (it being understood that Sullivan and its Subsidiaries may perform their obligations and exercise their rights under such Trade arrangements and all Trade arrangements in effect on the date of this Agreement); (d) apply to the FCC for any construction permit that would materially restrict any Station's present operations or make any material adverse change in the buildings or leasehold improvements which constitute Station Assets; (e) merge or consolidate, or agree to merge or consolidate, with or into any other Person, other than Sullivan or a Subsidiary of Sullivan; (f) enter into any Contract with any of its Affiliates (other than Sullivan or any of its Subsidiaries) which will not be performed in its entirety or by its terms terminate at or prior to the time of the Closing; (g) cause any of its assets or properties to become subject to any Lien, other than any Permitted Encumbrance; (h) commit any material breach of any Contract which is described on the attached Schedule 4J or any material Contract entered into by it after the date of this Agreement; or (i) change any material tax election, or make any material change in accounting practice or policy, if such change could reasonably be expected to have an adverse effect on Post-Merger Sullivan, except to the extent required by any Legal Requirement, any Contract or GAAP. (6) EFFORTS TO PURSUE CERTAIN REMEDIES. Without limiting the 41 foregoing, prior to the Closing, Sullivan will (and will cause its Subsidiaries to), use reasonable efforts to assert and prosecute any claims, and resolve any unresolved claims, for indemnity or other payment which they may have pursuant to the Act III Purchase Agreement and, upon request, will keep Sinclair reasonably informed of the status of any such claim. 7.B ORGANIZATION/GOODWILL. Prior to the Closing, Sullivan will, and will cause its Subsidiaries to, use reasonable efforts to preserve the business organization of the Stations and preserve the goodwill of the Stations' suppliers, customers, and others having business relations with Sullivan and its Subsidiaries. This Section 7.B will not apply to the Corporate Personnel or any Non-Continuing Station Manager, with respect to continued service by them after the Closing (it being understood that the Corporate Personnel intend to resign their respective positions with Sullivan and its Subsidiaries effective as of the Effective Time). 7.C REPORTS; ACCESS TO FACILITIES, FILES, AND RECORDS. (1) INTERIM REPORTS. On or prior to March 20, 1998, Sullivan will provide to Sinclair copies of the audited consolidated balance sheet of Sullivan and its Subsidiaries as of December 31, 1997 and the related audited statements of income and cash flows for the twelve-month period then ended (the "12/31/97 Financial Statements)". In addition, prior to the Closing, Sullivan will provide to Sinclair (x) within twenty (20) days after the end of each calendar month, (i) an income statement for such month, substantially in the form in which Sullivan and its Subsidiaries have prepared such statements for internal purposes prior to the date of this Agreement, and (ii) in the case of the months of March, April, May, June, July and August 1998, a report setting forth in reasonable detail Sullivan's good faith determination of the Trailing Cash Flow and the Gross Revenues, each determined as if the last day of the applicable month were the Measurement Date (the "Cash Flow Report" for such month), and (z) on or prior to the Wednesday of each week, a pacing report for the prior week, substantially in the form furnished to Sinclair by Sullivan prior to the date of this Agreement. The statements and reports described in the preceding sentence will be prepared in good faith consistent with past practices but will be furnished to the Acquiring Parties without representation or warranty as to their contents or otherwise. (2) ACCESS GENERALLY. From time to time at the request of any Acquiring Party, Sullivan will give or cause to be given to the officers, employees, accountants, counsel, and representatives of each Acquiring Party (a) access (in the presence of any representative designated by Sullivan, at Sullivan's option), upon reasonable prior notice, during normal business hours, to all facilities, property, accounts, books, deeds, title papers, insurance policies, licenses, agreements, contracts, commitments, records, equipment, machinery, fixtures, furniture, vehicles, accounts payable and receivable, and inventories of Sullivan and its Subsidiaries (but, in any event, not personnel, unless Sullivan otherwise consents) related to the Stations, including for purposes of permitting the Acquiring Parties to perform "Phase One" (and, after consulting with Sullivan as to the scope thereof, "Phase Two") environmental surveys with respect 42 to the Station Assets, (b) Sullivan will use its commercially reasonable efforts to obtain the consent of its auditors to permit inclusion of the Financial Statements in applicable securities filings of Sinclair and, if Sinclair requests, it shall have the right to have the access provided by Section 7.C(2)(a) to conduct an audit of each Station's financial information, and, subject to the foregoing, Sullivan shall cooperate with Sinclair's reasonable requests in connection with such audit, including giving all reasonable consents in connection therewith; and (c) all such other information in Sullivan's and its Subsidiaries' possession concerning the affairs of the Stations as such Acquiring Party may reasonably request, in each case at the Acquiring Parties' expense; provided that the foregoing does not disrupt or interfere with the business and operations of Sullivan, its Subsidiaries or any Station in any material respect ("materiality," for purposes of this proviso, being determined by reference to Sullivan, each of its Subsidiaries and each Station individually, and not taken as a whole). 7.D HART-SCOTT-RODINO MATTERS. As soon as practicable, but in any event not later than March 20, 1998, Sullivan will complete all documents required to be filed with the Federal Trade Commission (the "FTC") and the United States Department of Justice (the "DOJ") with respect to itself and/or its Affiliate(s) and concerning the Merger in order to comply with the Hart-Scott-Rodino Act and together with Sinclair and/or the appropriate Affiliate(s) of Sinclair who are required to join in such filings, will file the same with the FTC and the DOJ. Sullivan will reimburse Sinclair for one-half of the filing fees associated with all such filings. Sullivan will promptly furnish all materials thereafter required by the FTC, the DOJ or any other governmental entity having jurisdiction over such filings, and will take all reasonable actions and will file and use reasonable efforts to have declared effective or approved all documents and notifications with any such governmental entity, as may be required under the Hart-Scott-Rodino Act or other federal antitrust laws for the consummation of the Merger. 7.E CONSENTS. Except as provided in Sections 6.A and 7.D, it is agreed that (1) as between Sullivan and the Acquiring Parties, it will be the sole responsibility of the Acquiring Parties to timely obtain all Acquiring Party Consents, including with respect to the Stations' network affiliations and Program Contracts and with respect to the Sullivan Indentures, (2) so long as Sullivan complies with its obligations pursuant to the following sentence and Sections 6.A and 7.D, Sullivan, the Old Sullivan Stockholders and the Stockholder Representative will not be liable to any Person for any failure to obtain or other absence of any effective Acquiring Party Consent, and (3) except as provided in Sections 10.C and 10.D, the absence of any effective Consent will not excuse any Acquiring Party from consummating the Merger. Sullivan will send notices requesting all Consents required under Program Contracts, and will use reasonable efforts (without being required to make any payment not specifically required by the terms of any licenses, leases, and other contracts), including executing any related agreement or undertaking which does not take effect until the Effective Time, to obtain the Sullivan Consents and to assist the Acquiring Parties (at the 43 Acquiring Parties' request and expense) to (a) timely obtain prior all Acquiring Party Consents or, in the absence of any Acquiring Party Consent (where applicable), one or more replacement agreements, and (b) cause each Consent or replacement agreement to become effective as of the time of the Sullivan Two Spin-Off, the time of Sullivan Three Spin-Off or the Effective Time as applicable. 7.F NOTICE OF PROCEEDINGS. Prior to the Closing, Sullivan will promptly notify Sinclair in writing upon becoming aware of any order or decree or any complaint praying for an order or decree restraining or enjoining the consummation of either Spin-Off, the Merger or any other transaction contemplated by this Agreement, or upon receiving any notice from any governmental department, court, agency, or commission of its intention to institute an investigation into or institute a suit or proceeding to restrain or enjoin the consummation of either Spin-Off, the Merger or any such other transaction, or to nullify or render ineffective this Agreement, either Spin-Off, the Merger or any such other transaction if consummated. 7.G CONFIDENTIAL INFORMATION. If for any reason the transactions contemplated in this Agreement are not consummated, Sullivan will not use or disclose to any Person (except to its agents, representatives and advisors, to its lenders and security holders and their respective agents, representatives and advisors, or as may be required by any Legal Requirement) any confidential information received from any Acquiring Party or any of their respective agents, representatives and advisors (each a "disclosing party" for purposes of this Section 7.G) in the course of investigating, negotiating, and completing the transactions contemplated by this Agreement. Nothing will be deemed to be confidential information for purposes of this Section 7.G that: (a) is or was known to any Sullivan-Related Entity at the time of its initial disclosure by a disclosing party to any Sullivan-Related Entity; (b) has become or becomes publicly known or available other than through disclosure by any Sullivan-Related Entity; (c) is or was rightfully received by any Sullivan-Related Entity from any Person unrelated to any Sullivan-Related Entity (other than any Person engaged by any Sullivan-Related Entity in connection with the transactions contemplated by this Agreement); or (d) is or was independently developed by any Sullivan- Related Entity. 7.H EFFORTS TO CONSUMMATE. Subject to the provisions of Article IX and Section 12.A, Sullivan will use reasonable efforts to fulfill and perform all conditions and obligations on its part to be fulfilled and performed under this Agreement and to cause the conditions set forth in Articles IX and X to be fulfilled and cause the Spin-Offs, the Merger and the other transactions contemplated by this Agreement in connection with the Merger to be fully carried out. Without limiting the foregoing, Sullivan will use, and will cause its Subsidiaries to use, reasonable efforts to consummate the Merger in a manner to avoid the increase in the Cash Flow Multiplier caused by any delay in the Closing and the increase in the element of the Adjustment Amount described in Section 3.D(1)(b). In addition, promptly after Sullivan becomes aware prior to the Closing of a breach of any fact or circumstance which constitutes or would constitute a breach of any other Party's representation or warranty set forth in this Agreement, Sullivan will give such Party notice thereof so that such Party may attempt to cure the same. 7.I NOTICE OF CERTAIN DEVELOPMENTS. Sullivan will give prompt written notice to Sinclair if, prior to the Closing: (1) Sullivan or any of its Subsidiaries receives a National Labor Relations Board union election petition relating to employees of any Station, (2) Sullivan or any of 44 its Subsidiaries receives notice from any Market Cable System currently carrying a Station's signal of such Market Cable System's intention to delete such Station from carriage or change such Station's channel position on such Market Cable System, or (3) Sullivan becomes aware of any breach of any representation or warranty of Sullivan set forth in Article IV. 7.J UPDATED INFORMATION. Sullivan agrees to provide to Sinclair and the Merger Sub at or prior to the Closing, for informational purposes only, copies of all Contracts in existence at the time of the Closing which would have been required to be described on the attached Schedule 4J if such Contracts had existed on the date of this Agreement and which are not so disclosed. 7.K NON-SOLICITATION. From the date of this Agreement until the Closing or the earlier termination of this Agreement, each of ABRY Partners and Sullivan will not, and each of them will not cause (and will use reasonable efforts not to permit) any of its Subsidiaries, affiliates, directors, officers, employees, representatives or agents to, directly or indirectly solicit, or initiate, entertain or enter into any discussions or transactions with, or encourage or provide any information to, any Person (other than any Person described in Section 7.C(2)), concerning any sale of any of the assets of Sullivan or its Subsidiaries (other than any sale which is not prohibited by Section 7.A(5)) or any merger, stock acquisition or similar transaction involving Sullivan or its Subsidiaries (other than an issuance of capital stock or capital stock equivalents by Sullivan and the Spin-Offs); provided that nothing in this Section 7.K will prohibit ABRY Partners or Sullivan from furnishing, or causing or permitting any other Person to furnish, information concerning Sullivan or its Subsidiaries to any governmental authority or court of competent jurisdiction or any other Person as may be required by any Legal Requirement. 7.L INTERRUPTION OF BROADCAST TRANSMISSION. (1) NOTICE OF LOSS OR DAMAGE. In the event of any loss, damage, impairment, confiscation or condemnation of any of the Station Assets prior to the Approval Date that interferes with the normal operations of the Stations, Sullivan will notify Sinclair of the same in writing promptly after Sullivan becomes aware thereof, specifying with reasonable particularity the loss, damage or impairment, confiscation or condemnation incurred, the cause thereof, if known or reasonably ascertainable, and any applicable insurance coverage. To the extent thereof, Sullivan will apply the proceeds of any insurance policy, judgment or award with respect thereto as necessary to repair, replace or restore such Station Assets to their prior condition as soon as practicable after such loss, damage, impairment, confiscation or condemnation. (2) INTERRUPTION OF TRANSMISSION. If before the Approval Date, due to damage or destruction of the assets of any Station, the regular broadcast transmission of one (1) or more of the Stations in the normal and usual manner is interrupted for a period of twelve (12) continuous hours or more, Sullivan will give prompt written notice thereof to Sinclair. If prior to the Approval Date, due to damage or destruction of the assets of one (1) or more of the Stations, the regular broadcast transmission of one (1) or more Stations in the normal and usual manner is interrupted such that the regular broadcast signal of any such Station (including its effective radiated power) is diminished in any material respect, then 45 (i) Sullivan will give written notice to Sinclair promptly after Sullivan becomes aware thereof, and (ii) Sinclair shall have the right, by giving prompt written notice to Sullivan to postpone the Closing for a period up to sixty (60) days. (3) FAILURE TO RESUME TRANSMISSION. In the event any one (1) or more Stations' normal and usual transmission has not been substantially resumed by the date scheduled for the Closing, as postponed pursuant to Section 7.L(2) above, Sinclair may, pursuant to Section 12.A(2)(c), terminate this Agreement by written notice to Sullivan. Notwithstanding the foregoing, however, Sinclair may, at its option, proceed to complete the Merger and complete the restoration and replacement of any damaged assets of the Station in question after the Closing Date, in which event: (a) all insurance or other proceeds received in connection therewith, to the extent such proceeds are received by Sullivan and have not therefore been used in the restoration or replacement of such assets, will be excluded from the Current Assets, and (b) the lesser of $5,000,000 and the excess (if any) of the reasonable cost to complete such restoration or replacement over the amount of such proceeds will be included in the computation of the Current Liabilities (the exclusion of such proceeds and the inclusion of such cost being in lieu and to the exclusion of any remedy pursuant to the Indemnity Agreement in respect of the failure of such restoration or replacement to be completed). (4) INTERRUPTION NOTICE/TERMINATION. If before the Approval Date, due to damage or destruction of the Station Assets, the regular broadcast transmission of any Station in the normal and usual manner is interrupted for a period of seven (7) continuous days or more, Sullivan shall give prompt written notice thereof (the "Interruption Notice") to Sinclair. During the two (2) Business Days after the receipt of the Interruption Notice, Sinclair shall have the right, in its sole and absolute discretion, by giving written notice thereof to Sullivan to terminate this Agreement pursuant to Section 12.A(2)(c). 7.M NO PREMATURE ASSUMPTION OF CONTROL. Nothing contained in this Agreement will give any Acquiring Party any right to control the programming, operations, or any other matter relating to the Stations, and the respective licensees thereof, will have complete control of the programming, operations, and all other matters relating to the Stations (it being agreed that in any event Sinclair will have the right to withhold its Consent to any Program Contract to the extent provided in Section 7.A(3), if not deemed granted as provided therein). ARTICLE VIII COVENANTS OF SINCLAIR AND THE MERGER SUB 8.A HART-SCOTT-RODINO MATTERS. On or prior to March 20, 1998, Sinclair will complete all documents required to be filed with the FTC and the DOJ with respect to itself and/or its Affiliate(s) and concerning the Merger in order to comply with the Hart-Scott-Rodino Act and together with Sullivan and/or the appropriate Affiliate(s) of Sullivan who are required to join in such filings, will file the same with the FTC and the DOJ. Sinclair will pay the filing fees associated with all such filings (subject to partial reimbursement by Sullivan as provided in Section 7.D). Sinclair 46 and the Merger Sub will promptly furnish all materials thereafter required by the FTC, the DOJ or any other governmental entity having jurisdiction over such filings, and will take all reasonable actions and will file and use reasonable efforts to have declared effective or approved all documents and notifications with any such governmental entity, as may be required under the Hart-Scott-Rodino Act or other federal antitrust laws for the consummation of the Merger. 8.B CONFIDENTIAL INFORMATION. If for any reason the transactions contemplated in this Agreement are not consummated, each of Sinclair and the Merger Sub will not use or disclose to any Person (except to its agents, representatives and advisors, to its lenders and their respective agents, representatives and advisors, or as may be required by any Legal Requirement) any confidential information received from Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan Three or any of their respective agents, representatives and advisors (each a "disclosing party" for purposes of this Section 8.B) in the course of investigating, negotiating, and completing the transactions contemplated by this Agreement. Nothing will be deemed to be confidential information for purposes of this Section 8.B that: (a) is or was known to any Sinclair-Related Entity at the time of its initial disclosure by a disclosing party to any Sinclair-Related Entity; (b) has become or becomes publicly known or available other than through disclosure by any Sinclair-Related Entity; (c) is or was rightfully received by any Sinclair-Related Entity from any Person unrelated to any Sinclair-Related Entity (other than any Person engaged by any Sinclair- Related Entity in connection with the transactions contemplated by this Agreement); or (d) is or was independently developed by any Sinclair-Related Entity. In addition, the Merger Sub agrees to be bound by the same obligations as Sinclair is bound pursuant to the confidentiality agreement dated as of November 20, 1997 between Sinclair and Sullivan Broadcasting, which confidentiality agreement will survive the execution and delivery of this Agreement and will survive the execution and termination of this Agreement, and no provision of this Section 8.B will be deemed to supersede or in any way limit any obligation or right under such confidentiality agreement. 8.C EFFORTS TO CONSUMMATE. Subject to the provisions of Article X and Section 12.A, each of Sinclair and the Merger Sub will use reasonable efforts to fulfill and perform all conditions and obligations on its part to be fulfilled and performed under this Agreement and to cause the conditions set forth in Articles IX and X to be fulfilled and cause each Spin-Off, the Merger and the transactions contemplated by this Agreement in connection with the Merger to be fully carried out. In addition, promptly after Sinclair or the Merger Sub becomes aware prior to the Closing of a breach of any fact or circumstance which constitutes or would constitute a breach of any representation or warranty of Sullivan set forth in this Agreement, Sinclair will give Sullivan notice thereof so that Sullivan may attempt to cure the same. 8.D NOTICE OF PROCEEDINGS. Each of Sinclair and the Merger Sub will promptly notify Sullivan (prior to the Closing) or the Stockholder Representative (after the Closing) in writing upon becoming aware of any order or decree or any complaint praying for an order or decree restraining or enjoining the consummation of either Spin-Off, the Merger or any other transaction contemplated by this Agreement, or upon receiving any notice from any governmental department, court, agency, or commission of its intention to institute an investigation into or institute a suit or proceeding to restrain or enjoin the consummation of either Spin-Off, the Merger or any such other transaction, or to nullify or render ineffective this Agreement, either Spin-Off, the Merger or any such other transaction, if consummated. Sinclair will give the Stockholder Representative prompt 47 written notice if any Acquiring Party becomes aware of any breach of any representation or warranty of any Acquiring Party set forth in Article V. 8.E CONTINUED EMPLOYMENT. (1) GENERALLY. Except as provided in Section 8.E(2), the Merger Sub, in its capacity as Post-Merger Sullivan after the Effective Time, agrees to employ after the Closing, directly or indirectly through one or more of its Subsidiaries, all of those Persons who are common law employees of Sullivan and its Subsidiaries at the time of the Closing at the same rates of base pay and the other terms and conditions applicable to such employment at such time, and Sinclair and the Merger Sub agree to indemnify and hold harmless the Old Sullivan Stockholders, the Stockholder Representative and the present and former officers, directors, employees and agents of each of the Old Sullivan Stockholders, the Stockholder Representative, Sullivan and their respective Subsidiaries in respect of any loss, liability, cost, damage, claim or expense which may be incurred by or asserted against any of them arising out of or relating to any failure or refusal to so employ any such Person (including any change in any term or condition of such employment), or the termination of the employment of any such Person, at or after the Closing. Without limiting the foregoing indemnity, it is acknowledged that except as provided in any agreement referred to on the attached Schedule 4J, such employees will continue to be at-will employees, and the respective employers may terminate their employment or change their terms of employment at will, and/or Post-Merger Sullivan or its Subsidiaries may cover such employees under existing or new benefit plans, programs, and arrangements, and may amend or terminate the terms of any such plans, programs, or arrangements at any time (in each case, without reducing the indemnity obligation set forth in the preceding sentence). No employee or beneficiary of Post- Merger Sullivan or its Subsidiaries may sue to enforce the terms of this Agreement, including specifically this Section 8.E, and no such employee or beneficiary shall be treated as a third party beneficiary of this Agreement. (2) EXCLUDED EMPLOYEES. The provisions of Section 8.E(1) will not apply to the Corporate Personnel, the Non-Continuing Station Managers or any Person employed by Sullivan or any of its Subsidiaries pursuant to an agreement of a type described in clause (z) of Section 7.A(5)(b). Sullivan will cause the employment of each Non-Continuing Manager and the Corporate Personnel to be terminated, effective as of the time of the Closing. The liabilities of Sullivan and its Subsidiaries for amounts required to be paid in connection with or after the termination of any such excluded Person whose employment is terminated prior to or at the time of the Closing will be reflected in the computation of the Current Liabilities. 8.F SECTION 338 ELECTION. Without the Stockholder Representative's prior written consent, Sinclair will not, and will not cause or permit any of its Subsidiaries to, make an election under Section 338 of the Tax Code, or under any analogous provision of any other Legal Requirements relating to Taxes, with respect to the Merger. ARTICLE IX 48 CONDITIONS TO THE OBLIGATIONS OF SULLIVANAT THE CLOSING The obligation of Sullivan to consummate the Merger is, at Sullivan's option, subject to the fulfillment of the following conditions at the time of the Closing (Sullivan expressly acknowledging that the effectiveness of the Sullivan Consents is not a condition to such obligation): 9.A REPRESENTATIONS, WARRANTIES, COVENANTS. (1) Each of the representations and warranties of the Acquiring Parties set forth in Article V, considered without regard to any materiality qualifiers contained therein, will be deemed to be made again at and as of the time of the Closing (other than any such representation or warranty which is expressly made with reference to a time prior to the time of the Closing, which will be deemed remade as of such time only), and taken as a whole such representations and warranties, as so remade, will have been true and accurate in all material respects, except to the extent of deviations therefrom permitted or contemplated by this Agreement; and (2) each Acquiring Party will in all material respects have performed and complied with the covenants and agreements required by this Agreement to be performed or complied with by it prior to or at the time of the Closing, taken as a whole (other than the delivery of the Merger Consideration for the Sullivan Share Equivalents, which the Merger Sub will have established to Sullivan's reasonable satisfaction that it is prepared to deliver). 9.B PROCEEDINGS. (1) No action or proceeding will have been instituted and be pending before any court or governmental body to restrain or prohibit, or to obtain a material amount of damages in respect of, the consummation of the transactions contemplated by this Agreement that, in the reasonable opinion of Sullivan, may reasonably be expected to result in a preliminary or permanent injunction against such consummation or, if the transactions contemplated hereby were consummated, an order to nullify or render ineffective this Agreement or such transactions or for the recovery against any Sullivan- Related Entity or any officer, director or stockholder of any Sullivan-Related Entity of a material amount of damages; and (2) no Party will have received written notice from any governmental body of (a) such governmental body's intention to institute any action or proceeding to restrain or enjoin or nullify this Agreement or the transactions contemplated hereby, or to commence any investigation (other than a routine letter of inquiry, including, without limitation, a routine Civil Investigative Demand) into the consummation of the transactions contemplated by this Agreement, or (b) the actual commencement of such an investigation, in each case unless the same has been withdrawn, resolved, concluded or abandoned. 9.C HART-SCOTT-RODINO. The requisite waiting period under the Hart-Scott- Rodino Act for the consummation of the Merger will have expired or been terminated. 49 9.D SPIN-OFFS. The Required FCC Consent for each Spin-Off will have been Granted and be in full force and effect and all Acquiring Party Consents for the Spin-Offs will have been obtained and be in full force and effect; provided that the Grant and effectiveness of such Required FCC Consent and the effectiveness of such Acquiring Party Consents will not be conditions to Sullivan's obligation to consummate the Merger so long as any Sullivan Consent for the Spin-Offs is not in effect. 9.E SUFFICIENT FUNDS TO SATISFY OBLIGATIONS. Sullivan will have received evidence which is reasonably satisfactory to Sullivan to the effect that the Merger Sub and Post- Merger Sullivan and/or its Subsidiaries have or will have the funds described in Section 11.E. 9.F SINCLAIR COMMON STOCK. If the Merger Sub has elected to pay part of the Merger Consideration for the Sullivan Share Equivalents in the form of shares of Sinclair Common Stock as provided in Section 3.A(3), then Sinclair will have taken such actions as may be required, or are reasonably requested by the Stockholder Representative, in order that the Sinclair Common Stock be registered and tradeable as described in Section 3.C(3), including any registration, notice of issuance or other action or notice to or by NASDAQ, Nasdaq National Market or any relevant securities exchange in order that such shares of Sinclair Common Stock be tradeable thereon. 9.G OTHER. The Merger Sub will have delivered, or will stand ready to deliver, to Sullivan such instruments, documents, and certificates as are contemplated by Section 3.I(3). ARTICLE X CONDITIONS TO THE OBLIGATIONS OF THE MERGER SUB AT THE CLOSING The obligations of the Merger Sub to pay the Merger Consideration for the Sullivan Share Equivalents and consummate the Merger on the Closing Date are, at the Merger Sub's option, subject to the fulfillment of the following conditions at the time of the Closing (Sinclair and the Merger Sub expressly acknowledging that neither the availability to the Merger Sub of funds sufficient to pay such Merger Consideration and to fulfill the obligations under Section 11.E, nor the effectiveness of the Acquiring Party Consents, is a condition to such obligations): 10.A REPRESENTATIONS, WARRANTIES, COVENANTS. (1) Each of the representations and warranties of Sullivan and set forth in Article IV (other than any representation or warranty which speaks as of a time after the Closing), considered without regard to any materiality qualifiers contained therein, will be deemed to be made again at and as of the time of the Closing (other than any such representation or warranty which is expressly made with reference to a time prior to the time of the Closing, which will be deemed remade as of such time only), and taken as a whole such representations and warranties, as so remade, will have been true and accurate, except to the extent of deviations therefrom which are permitted or contemplated by this Agreement or which, in the aggregate, do not constitute and have not caused a Material Adverse Change; 50 and (2) Sullivan will in all material respects have performed and complied with the covenants and agreements required by this Agreement to be performed or complied with by it prior to or at the time of the Closing, taken as a whole. 10.B PROCEEDINGS. (1) No action or proceeding will have been instituted and be pending before any court or governmental body to restrain or prohibit, or to obtain a material amount of damages in respect of, the consummation of the transactions contemplated by this Agreement that, in the reasonable opinion of Sinclair, may reasonably be expected to result in a preliminary or permanent injunction against such consummation or, if the transactions contemplated hereby were consummated, an order to nullify or render ineffective this Agreement or such transactions or for the recovery against any Sinclair- Related Entity or any officer, director or stockholder of any Sinclair-Related Entity of a material amount of damages; and (2) no Party will have received written notice from any governmental body of (a) such governmental body's intention to institute any action or proceeding to restrain or enjoin or nullify this Agreement or the transactions contemplated hereby, or to commence any investigation (other than a routine letter of inquiry, including, without limitation, a routine Civil Investigative Demand) into the consummation of the transactions contemplated by this Agreement, or (b) the actual commencement of such an investigation, in each case unless the same has been withdrawn, resolved, concluded or abandoned. 10.C HART-SCOTT-RODINO AND OTHER CONSENTS. The requisite waiting period under the Hart-Scott-Rodino Act for the consummation of the Merger will have expired or been terminated and all Sullivan Consents will have been obtained and be effective. If the representation and warranty set forth in the final sentence of Section 4.N is untrue, then each Consent of a type described therein will have been obtained and be effective. 10.D SPIN-OFFS. The Required FCC Consents for the Spin-Offs will have been Granted and be in full force and effect and Sullivan will stand ready to effect, or will have effected, the Spin-Offs, and each of Sullivan Two and Sullivan Three will have entered into the New LMA applicable to it; provided that the foregoing will not be conditions to the Merger Sub's obligation to consummate the Merger so long as any Acquiring Party Consent to a Spin-Off or the Merger is not in effect. 10.E MINIMUM GROSS REVENUES. The amount of the Gross Revenues for the Measurement Period will have been determined in accordance with Section 3.J and will be not less than the amount set forth below: 51 Last Day of Measurement Period Gross Revenues ------------------ -------------- March 31, 1998 $32,042,000 April 30, 1998 $44,913,000 May 31, 1998 $58,693,000 June 30, 1998 $71,630,000 July 31, 1998 $82,729,000 August 31, 1998 $94,391,000 10.F LIMIT ON DISSENTERS. The holders of Sullivan Common Stock who have demanded appraisal pursuant to Section 262 of the Delaware General Corporation Act and who have not subsequently withdrawn or waived (or been deemed to have withdrawn or waived) or who are not otherwise barred from requiring any such appraisal, if there are any such holders at the time of the Closing, will not hold Sullivan Common Stock which (absent such right of appraisal) would be entitled to receive in excess of 6% of the aggregate Merger Consideration for the Sullivan Share Equivalents (determined based on the Estimated Annualized Trailing Cash Flow, or the Annualized Trailing Cash Flow, if it has been finally determined in accordance with Section 3.J, and the Estimated KOKH Amount and the Estimated Adjustment Amount determined pursuant to Section 3.E) if the Merger were consummated. 10.G OTHER INSTRUMENTS. Sullivan will have delivered, or will stand ready to deliver, to the Merger Sub such instruments, documents, and certificates as are contemplated by Section 3.I(2). ARTICLE XI POST-CLOSING MATTERS 11.A SURVIVAL. The representations, warranties and certifications of the Parties contained in or made pursuant to this Agreement (including any certification contained in any certificate to be delivered pursuant to Section 3.I) will survive the execution of this Agreement and the Closing only to the extent expressly provided in the Indemnity Agreement. The covenants and agreements of the Parties set forth in this Agreement will survive until performed and discharged in full. 11.B LIMITATION OF RECOURSE. Except as provided in the Indemnity Agreement, after the Closing, no claim may be brought or maintained against any Party or any Old Sullivan Stockholder or any of their respective present or former officers, directors, employees or other affiliates by any Party or Old Sullivan Stockholder or any of its successors or assigns, and no recourse may be sought or granted against any Person, by virtue of or based upon any alleged misstatement, omission, inaccuracy in, or breach of any representation, warranty or certification of any Party set forth in or made pursuant to this Agreement, and in no event will Sinclair or Post-Merger Sullivan be entitled to claim or seek any rescission of the Merger or any of the other 52 transactions consummated pursuant to the Transaction Documents, any such right of rescission or rights to damages which any such Party might otherwise have being hereby expressly waived and any claims or judgments being limited accordingly; provided that nothing in this Agreement will constitute a waiver of or limit any Old Sullivan Stockholder's recourse or remedy pursuant to any federal or state securities laws arising out of or relating to the offering or issuance of Sinclair Common Stock hereunder. 11.C ACKNOWLEDGMENT BY THE ACQUIRING PARTIES. Each of the Acquiring Parties has conducted, to its satisfaction, an independent investigation and verification of Sullivan, its Subsidiaries, the Stations and the Station Assets and the financial condition, results of operations, assets, liabilities, properties and projected operations of Sullivan, its Subsidiaries, the Stations and the Station Assets. In determining to enter into this Agreement and proceed with the transactions contemplated by this Agreement, each Acquiring Person has relied on the covenants of Sullivan, the results of such independent investigation and verification and the representations and warranties of Sullivan (in conjunction with the Schedules hereto) set forth in this Agreement (including the certifications to be made in any certificate to be delivered pursuant to Section 3.I), all of which each Acquiring Party acknowledges and agrees will survive for a limited duration. SUCH REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS WITH RESPECT TO SULLIVAN, ITS SUBSIDIARIES, THE STATIONS AND THE STATION ASSETS TO THE ACQUIRING PARTIES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND EACH ACQUIRING PARTY UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS OF ANY KIND OR NATURE AND WHETHER ORAL OR CONTAINED IN ANY WRITING OTHER THAN THIS AGREEMENT OR ANY SUCH CERTIFICATE (INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION, WARRANTY OR CERTIFICATION RELATING TO THE PROJECTED, FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OR OPERATIONS, ASSETS OR LIABILITIES RELATING TO THE STATIONS) ARE SPECIFICALLY DISCLAIMED BY SULLIVAN, THE STOCKHOLDER REPRESENTATIVE, THE OFFICERS OF SULLIVAN AND ITS SUBSIDIARIES AND THE OLD SULLIVAN STOCKHOLDERS. 11.D CORPORATE NAMES. After the Merger (but on the Closing Date), Post- Merger Sullivan will take and will cause its Subsidiaries to take such action as is necessary to change its corporate name in its certificate or articles of incorporation filed with the Secretary of State or similar official of the jurisdiction of its incorporation to a name which does not include, and is not confusingly similar to, the name "Sullivan" and will cease the use of all Sullivan Broadcasting logos or any similar mark. Notwithstanding anything in this Agreement to the contrary, Post-Merger Sullivan and its Subsidiaries will be entitled to continue to use its present corporate name until such time as such name change is effective and to the extent necessary to accomplish such name change, and may endorse checks and other instruments in such name. 11.E SATISFACTION OF CERTAIN OBLIGATIONS. On the Closing Date, immediately after the Effective Time, the Merger Sub will, and Sinclair will cause Post-Merger Sullivan and each of Post-Merger Sullivan's Subsidiaries to, pay in full all Funded Indebtedness of Sullivan and its Subsidiaries pursuant to, and otherwise satisfy all obligations of Sullivan and its 53 Subsidiaries under, the Sullivan Senior Debt Arrangements and the Mission Guarantees (other than Funded Indebtedness incurred pursuant to any Sullivan Indenture, to the extent any Consent necessary to permit the same to remain outstanding after the Closing) . Without limiting the foregoing, Sinclair will cause Post-Merger Sullivan and/or one or more of its Subsidiaries to have on the Closing Date funds which are sufficient to permit Post-Merger Sullivan and/or its Subsidiaries to take the actions contemplated by this Section 11.E and will cause the Merger Sub to have funds necessary to permit the Merger Sub to pay the Merger Consideration for the Sullivan Share Equivalents and make the deposit (if any) in the Estimate Fund pursuant to Section 3.A(3)(d). ARTICLE XII TERMINATION 12.A TERMINATION OF AGREEMENT PRIOR TO CLOSING. Subject to Section 12.A(3), this Agreement may be terminated at any time prior to the Closing as follows: (1) BY SULLIVAN. By Sullivan, by written notice (a "Sullivan Termination Notice") to Sinclair: (a) at any time when any material breach by any Acquiring Party of its obligations pursuant to this Agreement has occurred and is continuing, if both (i) such breach materially and adversely affects the likelihood that any of the conditions set forth in any of Article IX or Article X which has not been satisfied or waived will be satisfied or materially and adversely affects any Party's ability to comply with its obligations pursuant to this Agreement, and (ii) at least thirty days have elapsed since Sullivan gave Sinclair written notice requesting that such Acquiring Party cure such breach, unless prior to the giving of the Sullivan Termination Notice each such breaching Acquiring Party has cured such breach; (b) at any time after the Merger Sub has failed to make the Mandatory Payment when required by Section 3.K(1), if the Merger Sub has not made the Mandatory Payment prior to the giving of such Sullivan Termination Notice (in which event the termination of this Agreement pursuant to the delivery of such Sullivan Termination Notice will be effective at 5:00 p.m., Boston, Massachusetts, time, on the second Business Day after such Notice is given, unless the Mandatory Payment is made prior to such time); (c) at any time after the Expiration Date, if 54 (i) as of the Expiration Date, each of Sullivan's and the Merger Sub's conditions to closing set forth in Articles IX and X was satisfied or waived in writing, (ii) as of the Expiration Date, (x) each of Sullivan's and the Merger Sub's conditions to closing set forth in Articles IX and X (other than any set forth in Sections 9.D and 10.D) was satisfied or waived in writing, (y) the Required FCC Consent has been Granted and each Sullivan Consent for the Spin-Offs had been obtained, and (z) any Acquiring Party Consent for a Spin-Off was not obtained, (iii) the absence of satisfaction of each of Sullivan's and the Merger Sub's conditions to closing set forth in Articles IX and X which was not waived in writing or satisfied as of the Expiration Date was caused by a breach by one or more of the Acquiring Parties of any of its or their representations, warranties and/or obligations under this Agreement and/or the failure of any Acquiring Party Consent to have been obtained, (iv) the Approval Date had not occurred on or prior to the Expiration Date as a result of any breach by one or more of the Acquiring Parties of any provision of this Agreement, or (v) one or more of the Acquiring Parties and the Affiliates thereof refused, failed or declined to take any action (other than divesting itself of a broadcast television or radio station of which it or one of its Subsidiaries is the licensee or terminating any time brokerage or similar arrangement) which the FCC, the FTC, the DOJ or the staff of any of them indicates to any Acquiring Party or agent thereof is a condition to the grant of the Required FCC Consent or the expiration or termination of the requisite waiting period under the Hart-Scott- Rodino Act for the Merger; or (d) at any time after the Expiration Date, in any circumstance which is not described in Section 12.A(1)(c), unless the absence of satisfaction of each of Sullivan's and the Merger Sub's closing conditions set forth in Articles IX and X which has not been satisfied or waived in writing has been caused by a breach by Sullivan of its obligations under this Agreement. (2) BY SINCLAIR. By Sinclair, by written notice (a "Sinclair Termination Notice") to Sullivan: (a) at any time when any material breach by Sullivan of its obligations pursuant to this Agreement has occurred and is continuing, if both (i) such breach materially and adversely affects the likelihood that any of the conditions set forth in Article IX or Article X will be satisfied or materially and adversely affects any Party's ability to comply 55 with its obligations pursuant to this Agreement and (ii) at least thirty days have elapsed since Sinclair gave Sullivan written notice requesting that Sullivan cure such breach, unless prior to the giving of such Sinclair Termination Notice Sullivan has cured such breach; (b) at any time on or prior to the fifth (5th) Business Day after Sullivan delivers to Sinclair any amendment and restatement or modification of any attached Schedule pursuant to Section 13.P, if such amendment and restatement or modification reflects any fact or circumstance which (alone or in the aggregate with all other facts and circumstances reflected in the attached Schedules as so amended and restated or modified and not reflected in the attached Schedules as initially attached to this Agreement) represents or has caused a Material Adverse Change; (c) (i) at any time when there has occurred a Material Adverse Change and at least 30 days have elapsed since Sinclair gave Sullivan notice of the occurrence of such Material Adverse Change, unless the facts or circumstances causing or constituting such Material Adverse Change have been cured or otherwise no longer exist, or (ii) under the circumstances described in Section 7.L(3) or 7.L(4); (d) at any time during the five (5) Business Days after the amount of the Gross Revenues (as if the Measurement Date were June 30, 1998) is finally determined pursuant to Section 3.J, if such amount is less than $71,630,000; (e) at any time after the Expiration Date, under any circumstances described in Section 12.A(1)(c); or (f) at any time after the Expiration Date, in any case not described in Section 12.A(2)(e). (3) WHEN TERMINATION NOT PERMITTED. Sullivan may not terminate this Agreement pursuant to Section 12.A(1) at any time when Sullivan is in material breach of a material obligation under this Agreement. Sinclair may not terminate this Agreement pursuant to Section 12.A(2) (other than pursuant to Section 12.A(2)(e)) at any time when any Acquiring Party is in material breach of a material obligation under this Agreement. 12.B SURVIVAL OF CERTAIN PROVISIONS; REMEDIES. (1) GENERAL. No Party will have any liability to any other Party for costs, expenses, damages (consequential or otherwise), loss of anticipated profits, or otherwise as a result of a termination pursuant to Section 12.A, except as provided in Section 12.B(2), 12.B(3) or 12.B(4). The Parties agree that time is of the essence with respect to the provisions of Sections 3.H., 3.K and 12.A. Sections 7.G and 7.B, this Article XII and Article XIII will survive the termination of this Agreement pursuant to Section 12.A. 56 (2) DISPOSITION OF EARNEST MONEY FUND AND INCOME. If this Agreement is terminated pursuant to any of Sections 12.A(1)(a), 12.A(1)(b), 12.A(1)(c) or 12.A(2)(e), then the Earnest Money Fund will be paid to Sullivan (unless the Mandatory Payment has theretofore been made to Sullivan), and all Earnest Money Income will be paid to Sinclair. If this Agreement is terminated pursuant to any of Sections 12.A(1)(d), 12.A(2)(a), 12.A(2)(b), 12.A(2)(c), 12.A(2)(d) or 12.A(2)(f), then the Earnest Money Fund and all Earnest Money Income will be paid to Sinclair (unless the Mandatory Payment is due and payable and has not been paid, in which case the Mandatory Payment will be made from the Earnest Money Fund and the Earnest Money Income, and the remainder thereof will be paid to Sinclair). Any payment to be made pursuant to this Section 12.B(2) may be requested, and will be made, in accordance with the Earnest Money Escrow Agreement. (3) FOR SULLIVAN. Sullivan's sole and exclusive remedy for any termination of this Agreement or any failure of performance or compliance by any Acquiring Party with any covenant or agreement contained in this Agreement prior to the Closing will be Sullivan's right (if any) to receive the Earnest Money Fund as provided in the Earnest Money Escrow Agreement (or its right, if any, to receive or retain the Mandatory Payment, unless otherwise expressly provided in Section 12.B(4)(d), as liquidated damages and not as a penalty). (4) FOR THE ACQUIRING PARTIES. The Acquiring Parties' sole and exclusive remedies for the termination of this Agreement or any failure of performance or compliance by Sullivan with any covenant or agreement contained in this Agreement prior to the Closing will be (a) in the case of any such termination pursuant to Section 12.A, Sinclair's right (if any) to receive the Earnest Money Fund and the Earnest Money Income (including the right to any Earnest Money Income not yet received by the Earnest Money Escrow Agent) as provided in Section 12.B(2) and the Earnest Money Escrow Agreement; (b) in the case of any such failure, their respective rights (if any) under applicable law or equitable principles to seek damages in respect of their direct out-of-pocket losses or expenses (but not any damages in respect of lost profits or other similar or consequential or incidental damages) occasioned by and as a consequence of such breach; (c) their respective rights (if any) under applicable law or equitable principles to seek specific enforcement of this Agreement against Sullivan, including specific enforecement of Sullivan's obligation to consummate the Merger (subject to FCC approval and other required Consents being obtained), it being acknowledged by Sullivan that the Acquiring Parties would not have an adequate remedy at law in the event of any such failure, provided that no Acquiring Party will be entitled to such specific performance unless (i) each Acquiring Party has complied in all material respects with its material obligations under this Agreement and (ii) either (A) each condition to closing of Sullivan set forth in Article IX has been 57 satisfied or waived in writing or (B) the absence of satisfaction of each such condition to closing which has not been satisfied or waived in writing is caused solely by a breach by Sullivan of its obligations under this Agreement; (d) in the case of any such failure after the Approval Date, the release of the Merger Sub from the obligation to pay, or the return of, as the case may be, the Mandatory Payment, if (i) Sinclair has terminated this Agreement pursuant to Section 12.A(2)(a) or Section 12.A(2)(d), (ii) each Acquiring Party complied in all material respects with its material obligations under this Agreement prior to such termination, and (iii) if Sinclair terminated this Agreement pursuant to Section 12.A(2)(a), then either (A) each condition to closing set forth in Articles IX was satisfied or waived in writing as of the Expiration Date or (B) the absence of satisfaction of each such condition which was not satisfied or waived in writing as of the Expiration Date was caused solely by a breach by Sullivan of its obligations under this Agreement (it being agreed that, except as expressly provided in this Section 12.B(4)(d), if the Approval Date occurs and this Agreement is terminated prior to the Closing, then the Merger Sub will nonetheless be required to make the Mandatory Payment and, if the Mandatory Payment has been made prior to such termination, then Sullivan will be entitled to retain the Mandatory Payment); and (e) if (i) Sinclair has terminated this Agreement pursuant to Section 12.A(2)(a) based on a willful breach of this Agreement by Sullivan, (ii) the circumstances described in clauses (ii) and (iii) of Section 12.B(4)(d) apply, and (iii) Sinclair has disclaimed in writing its right to seek specific performance as described in Section 12.B(4)(c) or Sinclair has asserted such right and such remedy has been denied in a final, nonappealable judgment on the grounds that the obligation of Sullivan to consummate the Merger hereunder is not of a type for which specific enforcement is an available remedy, then in addition to Sinclair's right to receive the Earnest Money Fund as the Earnest Money Income as provided in Section 12.B(4)(a), upon the occurrence of the event described in clause (iii) above, Sullivan will pay to Sinclair the amount of Seventy Five Million Dollars ($75,000,000) in cash as liquidated damages. ARTICLE XIII MISCELLANEOUS 13.A EXPENSES. Except as otherwise expressly provided in this Agreement, Sullivan will bear all of the expenses incurred prior to the Closing by Sullivan and the Stockholder Representative in connection with the transactions contemplated by this Agreemen, and each of the Acquiring Parties will bear all of its expenses incurred in connection with the transactions contemplated by this Agreement, in each case including, without limitation, account ing and legal fees incurred in connection herewith. 13.B ASSIGNMENTS. 58 (1) BY SULLIVAN. This Agreement may not be assigned by Sullivan without the prior written consent of the Acquiring Parties. (2) BY SINCLAIR OR THE MERGER SUB. Prior to the Closing, this Agreement may be assigned by Sinclair or the Merger Sub (or the Merger Sub may cease to be a wholly-owned Subsidiary of Sinclair prior to the Closing) only with the prior written consent of Sullivan, except that at any time Sinclair or the Merger Sub may assign its rights and interests hereunder absolutely to one or more directly or indirectly wholly-owned Subsidiaries of Sinclair without obtaining such consent; provided in each case, that the assigning Person gives Sullivan, prior to the Closing, or the Stockholder Representative, after the Closing, prior written notice of such assignment and that such assignment will not delay the satisfaction of any condition to closing set forth in this Agreement, and provided further that any such assignment will not relieve the assigning Person of any of its obligations or liabilities hereunder. (3) EXCEPTIONS. Notwithstanding the foregoing, any Party may assign its rights under this Agreement for collateral purposes only to any lender to it, or any agent for any such lender(s), without the consent of any other Party, and any such lender or agent may transfer such rights pursuant to the exercise of remedies with respect to such collateral security to any other Person (it being understood that any such lender or agent will be a third-party beneficiary of the agreement constituted by this Section 13.B(3)). (4) GENERAL RULES. Any attempt to assign this Agreement or any rights or obligations hereunder without first obtaining any consent which is required by this Section 13.B will be void. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Each Old Sullivan Stockholder is an express third-party beneficiary of this Agreement. 13.C FURTHER ASSURANCES. From time to time prior to, at, and after the Closing, each Party will execute all such instruments and take all such actions as any other of them, being advised by counsel, may reasonably request in connection with carrying out and effectuating the intent and purpose hereof, and all transactions and things contemplated by this Agreement, including the execution and delivery of any and all consents, confirmatory and other instruments, in addition to those to be delivered at the Closing, and any and all actions which may reasonably be necessary to complete the transactions contemplated hereby. 13.D NOTICES. All notices, demands, and other communications which may or are required to be given under or with respect to this Agreement will be in writing, will be delivered personally or sent by nationally recognized overnight delivery service, charges prepaid, or by registered or certified mail, return-receipt requested, and will be deemed to have been given or made when personally delivered, or on the next Business Day after delivery to such overnight delivery service, or on the fifth day after it is deposited in the mail, registered or certified, first class postage prepaid, as the case may be, if addressed as follows: 59 (1) If to Sullivan (prior to the Closing) or the Stockholder Representative: c/o ABRY Partners, Inc. 18 Newbury Street Boston, Massachusetts 02116 Attn: Royce Yudkoff, President with a copy (which will not constitute notice to Sullivan or the Stockholder Representative) to: John L. Kuehn, Esq. Kirkland & Ellis 153 E. 53rd Street New York, New York 10022 or to such other address and/or with such other copies as the Person to whom such notice is to be given may from time to time designate by notice to the Acquiring Parties given in accordance with this Section 13.D. (2) If to Sinclair, the Merger Sub or Post-Merger Sullivan: Sinclair Broadcast Group, Inc. 2000 W. 41st Street Baltimore, Maryland 21211 Attn: David D. Smith, President with a copy (which will not constitute notice to Sinclair, the Merger Sub or Post-Merger Sullivan) to: Steven A. Thomas, Esq. Thomas & Libowitz, P.A. 100 Light Street, Suite 1100 Baltimore, Maryland 21202 and Sinclair Communications, Inc. 2000 W. 41st Street Baltimore, Maryland 21211 Attn: General Counsel and George Stamas, Esq. Wilmer, Cutler & Pickering 60 100 Light Street Baltimore, Maryland 21202 or to such other address and/or with such other copies as the Person to whom such notice is to be given may from time to time designate by notice to Sullivan (if prior to the Closing) and the Stockholder Representative given in accordance with this Section 13.D. 13.E CAPTIONS. The captions of Articles and Sections of this Agreement are for convenience only, and will not control or affect the meaning or construction of any of the provisions of this Agreement. 13.F LAW GOVERNING. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED, AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCES TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE FEDERAL LAW OF THE UNITED STATES GOVERNS THE TRANSACTIONS CONTEMPLATED HEREBY. 13.G WAIVER OF PROVISIONS. The terms, covenants, representations, warranties, and conditions of this Agreement may be waived as to any Party only by a written instrument executed by such Party. The terms, covenants, representations, warranties, and conditions of this Agreement may be waived as to any Old Sullivan Stockholder only by a written instrument executed by Sullivan, prior to the Closing, or the Stockholder Representative, after the Closing. The failure of any Party or any Old Sullivan Stockholder at any time or times to require performance of any provision of this Agreement will in no manner affect the right at a later date to enforce the same. No waiver by or on behalf of any Party to this Agreement or any Old Sullivan Stockholder of any condition or the breach of any provision, term, covenant, representation, or warranty contained in this Agreement, whether by conduct or otherwise, in any one or more instances, will be deemed to be or construed as a further or continuing waiver of any such condition or of the breach of any other provision, term, covenant, representation, or warranty of this Agreement. 13.H COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, and all counterparts so executed will constitute one (1) agreement binding on all of the parties hereto, notwithstanding that all the parties hereto are not signatory to the same counterpart. 13.I ENTIRE AGREEMENT. This Agreement (including the Schedules and Exhibits hereto) and the confidentiality agreement referred to in Section 8.C (including the Acquiring Parties' obligations with respect thereto, as provided in Section 8.C), constitute the entire agreement among the parties hereto pertaining to the subject matter hereof and supersede any and all prior agreements, understandings, negotiations, and discussions, whether oral or written, between them relating to the subject matter hereof. 13.J ACCESS TO BOOKS AND RECORDS. (1) Post-Merger Sullivan will, and will cause its Subsidiaries to, preserve for not less than five (5) years after the Closing Date all books and records included in the 61 Station Assets. After such five-year period, Post-Merger Sullivan will not, and will not cause or permit its Subsidiaries to, destroy any books or records relating to the conduct of business of the Stations prior to the Effective Time unless Post-Merger Sullivan first offers to transfer such books and records to the Stockholder Representative at no cost to the Stockholder Representative, and if Post-Merger Sullivan is requested to do so, Post-Merger Sullivan will transfer, or cause a Subsidiary of Post-Merger Sullivan to transfer, such books or records to the Stockholder Representative. (2) At the request of the Stockholder Representative, Post-Merger Sullivan will, and will cause each of its Subsidiaries to, permit the Stockholder Representative (including its officers, employees, accountants, and counsel) any access, upon reasonable prior written notice during normal business hours, to all of its property, accounts, books, contracts, records, accounts payable and receivable, records of employees, FCC logs and other information concerning the affairs or operation of the Stations as the Stockholder Representative may reasonably request for any reasonable purpose relating to the transactions contemplated by this Agreement or the ownership or operation of any Station prior to the Effective Time, and to make extracts or copies from the foregoing at the Stockholder Representative's expense. At Post-Merger Sullivan's request, prior to receiving any such requested information, the Stockholder Representative will execute a confidentiality agreement with respect thereto which is reasonably acceptable to Post-Merger Sullivan. 13.K PUBLIC ANNOUNCEMENTS. Prior to the Closing, no Party will, except by mutual agreement of Sullivan and Sinclair (including agreement as to content, text and method of distribution or release), make any press release or other public announcement or disclosure concerning the transactions contemplated by this Agreement, except as may be required by any Legal Requirement (including filings and reports required to be made with or pursuant to the rules of the Securities and Exchange Commission); provided that, prior to making any such announcement or disclosure required by any Legal Requirement, to the extent practicable, the disclosing Party gives each Person named above prior written notice of the context, text and content of, the method of distribution or release of, and all other material facts concerning, such disclosure. 13.L DISCLOSURE. If and to the extent that any information required to be furnished by Sullivan in any attached Schedule is contained in this Agreement or in any attached Schedule, such information will be deemed to have been included in each other attached Schedule in which such information is required to be included to the extent its relevance to such latter Schedule is reasonably apparent. By including any information in any attached Schedule, Sullivan will not be deemed to have admitted or acknowledged that such information is material to or outside the ordinary course of the business of Sullivan or any Station. 13.M DEFINITIONAL PROVISIONS. (1) TERMS DEFINED IN APPENDIX. Each capitalized term which is used and not otherwise defined in this Agreement or any attached Schedule has the meaning which is specified for such term in the Appendix which is attached to this Agreement. 62 (2) MATERIALITY. For purposes of Sections 9.A(2), and 10.A(2), materiality (as embodied in the phrase "in all material respects" will be measured by reference to the business or operations of the Stations, taken as a whole, the value of the Station Assets, taken as a whole, or the ability of Sullivan or Sinclair and the Merger Sub, taken as a whole, as the case may be, to perform or carry out the transactions contemplated by this Agreement, as the context requires. (3) KNOWLEDGE. As used in this Agreement, the term "knowledge" of Sullivan will refer only to the actual knowledge, without any particular inquiry (except as specified in this Agreement), of the Corporate Personnel, Andrew Banks and Royce Yudkoff, after inquiry of the general managers of the Stations; and the "knowledge" of Sinclair or the Merger Sub will refer only to the actual knowledge, without any particular inquiry (except as specified in this Agreement) of David Smith and David Amy. (4) INTERPRETATION. Words used in this Agreement, regardless of the gender and number specifically used, will be deemed and construed to include any other gender, masculine, feminine or neuter, and any other number, singular or plural, as the context requires. Whether or not used in conjunction with the words "without limitation" or words of similar import, the term "including" as used in this Agreement imports that the items referred to are illustrative only and do not purport to be a complete listing of the items of the type in question. The wording of the provisions of this Agreement is the result of arms-length negotiations among the parties to this Agreement and was selected by them to reflect their mutual intentions; therefore, no party will be deemed the "drafter" of this Agreement and no rule of strict construction will be applied against or in favor of any party to this Agreement. 13.N ARBITRATION. (1) GENERALLY. Except as expressly provided in the Estimate Escrow Agreement or the Indemnity Escrow Agreement or for purposes of pursuing any remedy pursuant to Section 12.B(3)(b), the arbitration procedures described in this Section 13.N will be the sole and exclusive method of resolving and remedying claims arising under this Agreement and the other Transaction Documents ("Disputes"); provided that nothing in this Section 13.N will prohibit a Party from instituting litigation to enforce any Final Arbitration Award. Except as otherwise provided in the Commercial Arbitration Rules of the American Arbitration Association as in effect from time to time (the "AAA Rules"), the arbitration procedures described in this Section 13.N and any Final Arbitration Award will be governed by, and will be enforceable pursuant to, the Uniform Arbitration Act as in effect in the State of New York from time to time. No Person will be entitled to claim or recover punitive damages in any such proceeding. (2) NOTICE OF ARBITRATION. If a Party asserts that there exists a Dispute, then such Person (the "Disputing Person") will give each other Person involved in such Dispute a written notice setting forth the nature of the asserted Dispute. If all such Persons do not resolve any such asserted Dispute prior to the tenth Business Day after such notice is given, then the Disputing Person may commence arbitration pursuant to this Section 13.N 63 by giving each other Person involved in such Dispute a written notice to that effect (an "Arbitration Notice"), setting forth any matters which are required to be set forth therein in accordance with the AAA Rules. Unless otherwise notified, the Acquiring Parties are entitled to assume that the Stockholder Representative is authorized to act on behalf of each Old Sullivan Stockholder with respect to any Dispute. (3) SELECTION OF ARBITRATOR. The Persons involved in such Dispute will attempt to select a single arbitrator by mutual agreement. If no such arbitrator is selected prior to the twentieth Business Day after the related Arbitration Notice is given, then an arbitrator which is experienced in matters of the type which are the subject matter of the Dispute will be selected in accordance with the AAA Rules. (4) CONDUCT OF ARBITRATION. The arbitration will be conducted under the AAA Rules, as modified by any written agreement among the Persons involved in such Dispute. The arbitrator will conduct the arbitration in a manner so that the final result, determination, finding, judgment or award determined by the arbitrator (the "Final Arbitration Award") is made or rendered as soon as practicable, and the Persons involved in such Dispute will use reasonable efforts to cause a Final Arbitration Award to occur not later than the sixtieth day after the arbitrator is selected. Any Final Arbitration Award will be final and binding upon the Persons involved in such Dispute, and there will be no appeal from or reexamination of any Final Arbitration Award, except as provided in the Uniform Arbitration Act, as in effect in the State of New York from time to time. (5) ENFORCEMENT. A Final Arbitration Award may be enforced in any state or federal court having jurisdiction over the subject matter of the related Dispute. (6) EXPENSES. The prevailing Person(s) in any arbitration proceeding in connection with this Agreement will be entitled to recover from the non-prevailing Person(s) their reasonable attorneys' fees and disbursements in addition to any damages or other remedies awarded to such prevailing Person(s), and the non-prevailing Person(s) will be required to pay all other costs and expenses associated with the arbitration; provided that (i) if an arbitrator is unable to determine that a Person is a prevailing Person in any such arbitration proceeding, then such costs and expenses will be equitably allocated by such arbitrator upon the basis of the outcome of such arbitration proceeding, and (ii) if such arbitrator is unable to allocate such costs and expenses in such a manner, then the costs and expenses of such arbitration will be paid one-half by Sullivan and one-half by Sinclair, and each Party will pay the out-of-pocket expenses incurred by it. As part of any Final Arbitration Award, the arbitrator may designate the prevailing Person(s) for purposes of this Section 13.N(6). Except as provided in the preceding sentences, each Person involved in a Dispute will bear its own costs and expenses (including legal fees and disbursements) in connection with any such proceeding or submission. 13.O STOCKHOLDER REPRESENTATIVE. (1) APPOINTMENT; AUTHORITY GENERALLY. On behalf of the Old Sullivan Stockholders, Sullivan hereby appoints ABRY Partners as the initial Stockholder 64 Representative under this Agreement, to serve in accordance with the terms, conditions and provisions of this Agreement, and ABRY Partners, by its execution of this Agreement, hereby agrees to act as such, upon the terms, conditions and provisions of this Agreement. From and after the Closing, the Stockholder Representative will be authorized to act on behalf of the Old Sullivan Stockholders in accordance with this Agreement. (2) AUTHORIZATION. The Stockholder Representative, in such capacity, will be entitled to take all actions on behalf of the holders of Sullivan Shares or the Old Sullivan Stockholders, as the case may be, with respect to this Agreement and the other agreements contemplated hereby, and omit to take any action, each as directed by (a) prior to the Effective Time, the holders of capital stock of Sullivan having a majority of the voting power represented by the outstanding capital stock of Sullivan at the time in question, and (b) after the Effective Time, Persons who immediately prior to the Effective Time held Sullivan Shares which represented a majority of the voting power of the Sullivan Shares, (in either case, the "Majority Sullivan Stockholders"). The Stockholder Representative may be removed and replaced from time to time as the representative of the holders of the Sullivan Shares or the Old Sullivan Stockholders by written notice given by the Majority Sullivan Stockholders to Sullivan (prior to the Effective Time) and the Acquiring Parties. (3) RESPONSIBILITY. The Stockholder Representative will have no duties or responsibilities except those expressly set forth in this Agreement or any other agreement which may be entered into by it hereunder. The Stockholder Representative will have no responsibility for the validity of this Agreement or any agreement referred to in this Agreement or for the performance of any such agreements by any party thereto or for the interpretation of any of the provisions of any such agreements. The Stockholder Representative's liability in fulfilling its duties will be limited to bad faith, willful misconduct or gross negligence on its part. The Stockholder Representative will be protected in acting upon any certificate, notice or other instrument whatsoever received by the Stockholder Representative as to its due execution, the validity and effectiveness of its provisions, and the truth and accuracy of any information therein contained that the Stockholder Representative in good faith believes to be genuine and to have been signed or presented by a proper Person or Persons. The Stockholder Representative may, in its sole discretion, consult with and obtain advice from legal counsel and any other Person in the event of any question as to any of the provisions of this Agreement, any other agreement entered into in connection herewith or its duties hereunder or thereunder. The reasonable cost of such services, to the extent not borne by Sullivan, will be borne among the Old Sullivan Stockholders who held Sullivan Shares immediately prior to the Merger Effective Time, pro rata in accordance with the respective amounts of the Merger Consideration to be received by them in respect of the Sullivan Shares. (4) RESIGNATION; REPLACEMENT. The Stockholder Representative will 65 have the right, in its sole discretion, to resign as the Stockholder Representative (in its capacity as the representative of the holders of Sullivan Shares or the Old Sullivan Stockholders) at any time by giving at least 30 days prior written notice to Sullivan (prior to the Effective Time) and the Acquiring Parties. In such event, Sullivan (prior to the Effective Time) or the Majority Sullivan Stockholders (after the Effective Time) will promptly appoint another Stockholder Representative to represent the holders of Sullivan Shares and the Old Sullivan Stockholders and give notice of such selection to the Acquiring Parties and the Old Sullivan Stockholders (after the Effective Time). Such resignation of the Stockholder Representative will be effective upon such notice being given and such new Stockholder Representative's acceptance of such appointment and will relieve the resigning Stockholder Representative of all duties and responsibilities of the Stockholder Representative in such capacity thereafter arising. 13.P COMPLETION OF SULLIVAN'S SCHEDULES. The Acquiring Parties acknowledge that Sullivan has executed this Agreement without having the opportunity to request of personnel of the Stations information which may be material to the preparation of the attached Schedules referred to in Article IV (and that, therefore, some or all of such attached Schedules may not be correct and complete and, as a result, some or all of the representations and warranties set forth in Article IV which refer to such attached Schedules may not be true and correct). On or prior to March 9, 1998, Sullivan may deliver to Sinclair an amendment and restatement of any such attached Schedule, or any portion thereof, or a supplement to any such attached Schedule or any portion thereof, which may be required in order to accurately depict facts and circumstances which exist on the date of this Agreement (or any other applicable date referred to in any such representation or warranty), and the attached Schedule or portion thereof in question will be deemed to have been so amended and restated or modified, as the case may be, as of the time of the execution and delivery of this Agreement. The Acquiring Parties' sole and exclusive remedy under this Agreement with respect to any matter which may be disclosed by any such amendment and restatement or supplement will be Sinclair's right (if any) to terminate this Agreement as described in Section 12.A(2)(b). 13.Q TREATMENT OF STATION KOKH. Each Acquiring Party acknowledges that, notwithstanding any language to the contrary in this Agreement, Sullivan has not made and will not make any representation, warranty or certification of any kind with respect to Station KOKH (including with respect to the assets, liabilities and operations related to Station KOKH), and no representation or warranty set forth in Article IV, and no certification relating thereto delivered pursuant to Sections 3.I, will be deemed to apply to Station KOKH (including to any related asset, liability or operations). The Annualized Trailing Cash Flow, the Gross Revenues, the Current Assets, the Current Liabilities and the Sullivan Receivables will be determined without regard to the results of operations and assets of Station KOKH. [SIGNATURE PAGES TO FOLLOW --REST OF PAGE LEFT INTENTIONALLY BLANK] 66 IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of Merger to be duly executed by their duly authorized officers, all as of the day and year first above written. SULLIVAN BROADCAST HOLDINGS, INC. By: ---------------------------------------------- Its: --------------------------------------------- SINCLAIR BROADCAST GROUP, INC., in its own right and on behalf of a Subsidiary to be formed by it By: ---------------------------------------------- Its: --------------------------------------------- ABRY PARTNERS, INC. By: ---------------------------------------------- Its: --------------------------------------------- 67 APPENDIX ADDITIONAL DEFINED TERMS. The following capitalized terms have the following meanings when used in this Agreement and the Schedules attached to this Agreement: "ABRY FUND" means ABRY Broadcast Partners II, L.P., a Delaware limited partnership and a stockholder of Sullivan. "ACQUIRING PARTIES" means Sinclair, the Merger Sub and Post-Merger Sullivan. "ACQUIRING PARTY CONSENTS" means all Consents other than the Required FCC Consent, any Consent required under the Hart-Scott-Rodino Act, or any Sullivan Consent. "ACT III" means Act III Broadcasting, Inc., a predecessor by merger to Sullivan Broadcasting. "ACT III PURCHASE AGREEMENT" means the Stock Purchase Agreement dated as of June 19, 1995, among A-3 Acquisition, Inc., Act III and certain of the stockholders of Act III, as amended and in effect from time to time. "ADJUSTMENT TIME" means, with respect to each Station, 12:01 a.m., local time, on the Closing Date. "AFFILIATE" of any Person means any other Person which is controlled by, controls, or is under common control with, such first Person. "AFFILIATED GROUP" means an affiliated group of corporations, as that term is defined in Section 1504(a) of the Tax Code (or in any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law). "APPROVAL DATE" means the first day upon which the Required FCC Consent has been Granted and the requisite waiting period under the Hart-Scott-Rodino Act for the consummation of such Merger has expired or been terminated. "AVERAGE TRADING PRICE" means the average of the Closing Trading Prices for the third Business Day prior to the Closing Date and the nine (9) preceding Business Days. The "CLOSING TRADING PRICE" for any day means the closing price of Sinclair Common Stock on the Nasdaq National Market as of 4:00 P.M., New York time, on such day. "BENEFIT ARRANGEMENT" means any benefit arrangement, obligation, custom, or practice to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors (other than any obligation, arrangement, custom or practice that is an employee benefit plan under ERISA), including employment agreements, severance agreements, executive compensation arrangements, stock options, restricted stock rights and performance unit awards, incentive 68 programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discounts, employee loans, employee banking privileges, any plans subject to Section 125 of the Tax Code, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. A "BUSINESS DAY" means any day other than a Saturday, a Sunday or another day upon which banks in New York, New York generally are not open for business. "CLOSING DATE" means the date upon which the Closing occurs. "COMMUNICATIONS ACT" means the Communications Act of 1934, as amended and as in effect from time to time. "CONSENT" means any consent, order, approval, authorization or other action of, or any filing with or notice to or other action by or with respect to, any Person which is required for any of the execution, delivery or performance of this Agreement, the consummation of either Spin-Off, the Merger, or the conduct of the business of Sullivan Two, Sullivan Three or Post-Merger Sullivan or any of its Subsidiaries or the holding or utilization of any Station Asset thereafter, whether such requirement arises pursuant to any Legal Requirement, Contract, a Person's organizational documents or otherwise, including any of the foregoing which is required in order to prevent a breach of or a default under or a termination or modification of any Contract. "CONTRACT" means any agreement, lease, arrangement, commitment, or understanding to which Sullivan or any of its Subsidiaries, with respect to the Stations, is a party. "CORPORATE PERSONNEL" means J. Daniel Sullivan, David Pulido, Patrick Bratton, Richard Montgomery, Barry Charbonneau and any successor to any of them in his capacity as an employee of Sullivan and its Subsidiaries, Sullivan Two or Sullivan Three. "EARNEST MONEY ESCROW AGENT" means the "Escrow Agent" to which the Earnest Money Escrow Agreement refers. "EARNEST MONEY ESCROW AGREEMENT" means the Escrow Agreement entered into among Sullivan, Sinclair (on behalf of the Merger Sub) and The Chase Manhattan Bank (as Escrow Agent) dated as of the date of this Agreement, as such agreement is in effect from time to time. "EARNEST MONEY FUND" means the "Escrow Fund" to which the Earnest Money Escrow Agreement refers. 69 "EARNEST MONEY INCOME" means the "Escrow Income" to which the Earnest Money Escrow Agreement refers. "EARNEST MONEY LETTER OF CREDIT" means a stand-by letter of credit delivered to the Earnest Money Escrow Agent on the date of this Agreement issued by The Chase Manhattan Bank in the face amount of $75,000,000 and otherwise substantially in the form of the attached Exhibit E, or any replacement stand-by letter of credit delivered to the Earnest Money Escrow Agent in accordance with the Earnest Money Escrow Agreement. "ENVIRONMENTAL LAWS" means the rules and regulations of the FCC, the United States Environmental Protection Agency and any other federal, state or local government authority pertaining to human exposure to RF radiation and all applicable rules and regulations of federal, state and local laws, including statutes, regulations, ordinances, codes, and rules, as amended, relating to the discharge of air pollutants, water pollutants or process waste water or hazardous or toxic substances, including the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Occupational Safety and Health Act of 1970, each as amended, regulations of the Occupational Safety and Health Administration and regulations of any state department of natural resources or state environmental protection agency now in effect. "EFFECTIVE TIME" means the time of the filing of the Certificate of Merger described in Article II. "ERISA AFFILIATE" means any Person that, together with Sullivan, would be or was at any time treated as a single employer under Section 414 of the Code or 4001 of ERISA and any general partnership of which Sullivan or any Subsidiary of Sullivan is or has been a general partner. "ESTIMATE ESCROW AGENT" means the "Escrow Agent" to which the Estimate Escrow Agreement refers. "ESTIMATE ESCROW AGREEMENT" means the Estimate Escrow Agreement entered into among the Stockholder Representative, Sinclair (on behalf of the Merger Sub) and The Chase Manhattan Bank (as Escrow Agent) dated as of the date of this Agreement, as such agreement is in effect from time to time. "ESTIMATE FUND" means the "Escrow Fund" to which the Estimate Escrow Agreement refers. "EXISTING LMAS" means the time brokerage and local marketing agreements pursuant to which Sullivan and its Subsidiaries conduct their operations with respect to the LMA Stations. 70 "EXPIRATION DATE" means May 16, 1999. "FCC" means the Federal Communications Commission or any successor thereto. "FCC AUTHORIZATIONS" means the authorizations issued by the FCC and described on the attached Schedule 4E. "FILM OBLIGATIONS" means all cash payment obligations of Sullivan or any of its Subsidiaries under any Program Contract. A "FINAL ORDER" means the Required FCC Consent if (a) the Required FCC Consent has been Granted and has not been reversed, stayed, set aside, enjoined, annulled or suspended (whether under Section 402 or 405 of the Communications Act or otherwise) and (b) (i) no request has been filed for administrative or judicial review, reconsideration, appeal, certiorari or stay and the time for filing any such request and for the FCC to review the Required FCC Consent on its own motion has expired, or (2) if such a review, reconsideration or appeal has occurred, such review, reconsideration or appeal has been denied and the time for further review, reconsideration or appeal has expired. "FUNDED INDEBTEDNESS" means the indebtedness for borrowed money of Sullivan and its Subsidiaries under the Sullivan Senior Debt Arrangements, the indebtedness for borrowed money of Sullivan and its Subsidiaries represented by the Sullivan Notes, and all other indebtedness of Sullivan and its Subsidiaries for money borrowed by them. As used herein, the term "money borrowed" does not refer to the receipt or benefit of trade credit for the purchase of goods or services. "GAAP" means United States generally accepted accounting principles, as in effect from time to time, as applied by Sullivan and its Subsidiaries from time to time. The Required FCC Consent is "GRANTED" on the effective date, as determined under the FCC's rules, regulations and policies, of the grant thereof by the FCC or its staff. "HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as in effect from time to time. "HAZARDOUS MATERIAL" means any substance or waste containing any hazardous substance, pollutant or contaminant, as those terms are defined, in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601 et seq., and any other substance similarly defined or identified in any applicable Environmental Laws, including toxic materials or harmful physical agents, as defined in the Occupational Safety and Health Act of 1979, as amended, 29 U.S.C. ss.651 et seq. "Hazardous Materials" includes asbestos, asbestos-containing materials, petroleum and petroleum-based products, polycholorinated biphenyls (PCBs), infectious wastes and radioactive materials and wastes. "HEADQUARTERS ASSETS" means the assets of Sullivan and its Subsidiaries located in the offices of Sullivan and its Subsidiaries located in Franklin, Tennessee, and Boston, Massachusetts, and any so-called "personal seat license" or other right of Sullivan or any of 71 its Subsidiaries to subscribe for tickets to events at the stadium presently being constructed or proposed to be constructed in the Nashville, Tennessee, metropolitan area. "INDEMNITY AGREEMENT" means the Indemnity Agreement entered into among Sullivan, Sinclair and certain other Persons dated as of the date of this Agreement, as such agreement is in effect from time to time. "INDEMNITY ESCROW AGENT" means the "Escrow Agent" to which the Indemnity Escrow Agreement refers. "INDEMNITY ESCROW AGREEMENT" means the Escrow Agreement entered into among the Stockholder Representative, Sinclair and certain other Persons and The Chase Manhattan Bank (as Escrow Agent) dated as of the date of this Agreement, as such agreement is in effect from time to time. "INDEMNITY FUND" means the "Escrow Fund" to which the Indemnity Escrow Agreement refers. "KOKH PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as of January 6, 1998 among Sinclair, SBOC and SBLH, as in effect from time to time. "LEGAL REQUIREMENTS" means the Communications Act, the rules, regulations and published policies of the FCC, and all other federal, state and local laws, rules, regulations, ordinances, judgments, orders and decrees. "LIEN" means any mortgage, pledge, hypothecation, encumbrance, lien (statutory or otherwise), preference, priority or other security agreement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any lease having substantially the same effect as any of the foregoing and any assignment or deposit arrangement in the nature of a security device). "LMA STATIONS" means broadcast television station WUXP, Nashville, Tennessee; and broadcast television station WUPN-TV, Greensboro, North Carolina; in each case together with all related translator stations (if any). "MARKET CABLE SYSTEM" means, with respect to any Station, any cable television system located within such Station's television market, as that term is defined in Section 76.55(e) of the rules of the FCC. "MATERIAL ADVERSE CHANGE" means a material adverse change after the date of this Agreement in the operations, business, financial condition or results of operations of the Stations, taken as a whole, or in the condition of the Station Assets, taken as a whole (as compared with the operations, business, financial condition and results of operations of the Stations, taken as a whole, and the condition of the Station Assets, taken as a whole, on the date of this Agreement) which occurs on or prior to the Approval Date; provided that none of the following (or any combination thereof) will be a Material Adverse Change: (i) a 72 change in the financial performance of the Stations; (ii) any change caused in whole or in part by (A) any change in employees, suppliers or customers of the Stations, (B) a change in general economic, financial or capital market conditions on a national, state, regional or local basis, (C) a change in conditions (including legislation, regulations or competitive activities) applicable to the broadcast television industry generally on a national, state, regional or local basis, (D) any matter disclosed on the attached Schedules to this Agreement, (E) the establishment of a union or collective bargaining arrangement, or actual or threatened union organizing activity, involving employees of Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan Three, (F) the departure of any employees of Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan Three after the date of this Agreement, whether or not in anticipation of the Merger, or (G) the loss of cable system carriage of any Station. "MISSION GUARANTEES" means the (i) Guaranty of Sullivan dated as of July 11, 1996 in favor of NationsBank of Texas, N.A., and any other lenders referred to therein relating to certain indebtedness of Mission Broadcasting I, Inc., a Delaware corporation, and (ii) the Guaranty of Sullivan dated as of July 29, 1996 in favor of NationsBank of Texas, N.A., and any other lenders referred to therein relating to certain indebtedness of Mission Broadcasting II, Inc., a Delaware corporation, in each case as in effect from time to time. "9-5/8% INDENTURE" means the Indenture dated as of December 15, 1993 among Sullivan Broadcasting (as the successor by merger to Act III), its Subsidiaries and The State Street Bank and Trust Company, as successor trustee, as in effect from time to time. "9-5/8% NOTES" means the 9-5/8% Notes due 2003 of Sullivan Broadcasting (as the successor by merger to Act III) issued pursuant to the 9-5/8% Indenture, as such Notes are in effect from time to time. "NEW LMAS" means the Sullivan Two LMA and the Sullivan Three LMA. "NON-CONTINUING STATION MANAGER" means any general manager or general sales manager of a Station, if Sinclair notifies Sullivan in writing not fewer than 10 days prior to the Closing Date that Sinclair desires that the employment of such general manager or general sales manager be terminated effective as of the Closing Date and Sinclair does not withdraw such notice by contrary written notice to Sullivan on or prior to the Closing Date. "OLD SULLIVAN STOCKHOLDER" means any holder of record of any Sullivan Share Equivalent immediately prior to the Effective Time. "ORDINARY COURSE OF BUSINESS" means the ordinary course of the conduct of business by Sullivan and is Subsidiaries, substantially consistent with their respective past practices. "OWNED STATIONS" means broadcast television station WZTV, Nashville, TN; broadcast television station WUTV, Buffalo, New York; broadcast television station WXLV-TV, Winston-Salem, North Carolina; broadcast television station WRGT-TV, Dayton, Ohio; broadcast television station WRLH-TV, Richmond, Virginia; broadcast television station 73 WVAH-TV, Charleston, West Virginia; broadcast television station WUHF, Rochester, New York; broadcast television station WTAT-TV, Charleston, South Carolina; broadcast television station WFXV, Utica, New York; low-power television station WPNY-LP, Rome, New York; broadcast television station WMSN-TV, Madison, Wisconsin; and Station KOKH; in each case together with all associated translator stations (if any) owned by Sullivan or any of its Subsidiaries immediately prior to the Spin-Offs. "PARTIES" means the parties to this Agreement. "PERMITTED ENCUMBRANCES" means (i) Liens arising by operation of law and securing the payment of Taxes which are not yet due and payable, (ii) with respect to any property leased by Sullivan, any of its Subsidiaries, Sullivan Two or Sullivan Three as lessee, the interest of the lessor in such property, (iii) easements, rights-of-way, reservations of rights, conditions or covenants, zoning, building or similar restrictions or other non-monetary Liens or defects that do not, individually or in the aggregate, materially interfere with the use of the affected property in the operation of the Stations as currently conducted or as presently proposed by Sullivan and its Subsidiaries to be conducted, (iv) restrictions on transfer imposed under state or federal securities laws or pursuant to the Communications Act or the FCC Regulations, (v) Liens disclosed on the attached Schedule 4G, including those described in the title policies which are a part of such Schedule, and (vi) Liens securing indebtedness under the Sullivan Senior Debt Arrangements, other Funded Indebtedness and the Mission Guarantees. A "PERSON" means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated association or government or department thereof. "PROGRAM CONTRACTS" means all program licenses and other Contracts which authorize the broadcast of film product or programs on any Station, including those described under the heading "Program Contracts" on the attached Schedule 4J and any of the same entered into after the date of this Agreement and prior to the Closing in accordance with this Agreement, and any of the same which are not required to be described on any Schedule to this Agreement by reason of the dollar-amount or term thresholds set forth in Section 4.J, in each case to the extent existing and as in effect from time to time. "REALTY" means all real property interests described on the attached Schedule 4G. "REQUIRED FCC CONSENT" means the action(s) or order(s) by the FCC granting its Consent to the transfer of the FCC Authorizations in the Spin-Offs, in each case without any condition which in the reasonable judgment of Sullivan and the Acquiring Parties is adverse to such Person (or, in Sullivan's or the Stockholder Representative's reasonable judgment, adverse to any of the Old Sullivan Stockholders or the stockholders of Sullivan Two or Sullivan Three), as the case may be, in any material respect. "SALE OF SULLIVAN" means any transfer, or transfer of control, of all or substantially all of the assets of Sullivan, its Subsidiaries, Sullivan Two and Sullivan Three, taken as a whole, whether by means of a sale of assets, merger, stock acquisition or similar transaction, 74 other than to the ABRY Fund or an Affiliate of the ABRY Fund. "SECURITIES ACT" means the Securities Act of 1933, as amended and in effect from time to time. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended and in effect from time to time. "SINCLAIR COMMON STOCK" means the Class A Common Stock of Sinclair, par value $0.01 per share. "SINCLAIR-RELATED ENTITY" means Sinclair, the Merger Sub, any direct or indirect assignee or proposed assignee (by operation of law or otherwise) of any of the rights of any of them pursuant to this Agreement or any other agreement contemplated hereby, any direct or indirect successor or proposed successor to Post-Merger Sullivan's and its Subsidiaries' or Sullivan Two's business or operation with respect to any Station, or any Affiliate or any of them. "STATION ASSETS" means all of Sullivan's and its Subsidiaries' rights in, to and under the assets and properties of the Stations, real and personal, tangible and intangible, of every kind and description which are owned and used by Sullivan or its Subsidiaries in connection with the business and operations of the Stations, including rights under con tracts and leases, real and personal property, plant and equipment, inventories, intangibles, licenses and goodwill, and all other assets and properties of Sullivan and its Subsidiaries used solely in connection with the operation of any Station; provided that the Station Assets will not include the Headquarters Assets. "STATION KOKH" means broadcast television station KOKH-TV, Oklahoma City, Oklahoma, together with all related translator stations (if any) owned by Sullivan and its Subsidiaries immediately prior to the Spin-Offs. "STATIONS" means the Owned Stations and the LMA Stations. "STOCKHOLDER REPRESENTATIVE" means ABRY Partners, Inc., a Delaware corporation, or any successor thereto as the Stockholder Representative designated pursuant to Section 13.O. "STRADDLE PERIOD" means any Taxable period beginning before and ending on or after the Closing Date. With respect to any Person, a "SUBSIDIARY" means any corporation, partnership, limited liability company, association or other business entity of which, at the time of such reference, (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof, or a majority economic interest, is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that 75 Person or a combination thereof, or (ii) if a partnership, limited liability company, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons will be deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons will be allocated a majority of partnership, company, association or other business entity gains or losses or will be or control the managing director or general partner of such partnership, company, association or other business entity. "SULLIVAN BROADCASTING" means Sullivan Broadcasting Company, Inc., a Delaware corporation. "SULLIVAN COMMON STOCK" means Sullivan Shares which are common stock. "SULLIVAN CONSENTS" means all Consents of the board of directors or stockholders of Sullivan or any of its Subsidiaries and all Consents (if any) for a Spin-Off required under any lease under which Sullivan or a Subsidiary (as lessee) leases space on a tower for the location of any assets described on the attached Exhibit A or the attached Exhibit B. "SULLIVAN INDENTURES" means the 9-5/8% Indenture, the 10-1/4% Indenture and the 13-1/4% Indenture. "SULLIVAN NOTES" means the 9-5/8% Notes, the 10-1/4% Notes and the 13-1/4% Notes. "SULLIVAN PREFERRED STOCK" means the Series A Preferred Stock of Sullivan, par value $0.001 per share. "SULLIVAN-RELATED ENTITY" means any Affiliate of ABRY Partners Inc. or ABRY Broadcast Partners II, L.P., including Sullivan and each of its Subsidiaries, prior to the Effective Time. "SULLIVAN RIGHT" means any security or right issued by Sullivan which is not a Sullivan Share, which is outstanding immediately prior to the Effective Time and which is directly or indirectly convertible into or exercisable or exchangeable for any capital stock of Sullivan at such time. "SULLIVAN SENIOR DEBT ARRANGEMENTS" means the Credit Agreement dated as of January 4, 1996 among Sullivan, Sullivan Broadcasting, the various Agents and co-Agents referred to therein, and the several Lenders from time to time parties thereto, together with all "Loan Documents" and other documents and instruments relating to the "Obligations" referred to therein, in each case as in effect from time to time. "SULLIVAN SHARE" means any share of capital stock of Sullivan which is outstanding immediately prior to the Effective Time. 76 "SULLIVAN SHARE EQUIVALENT" means any Sullivan Right or Sullivan Share. "SULLIVAN THREE" means Sullivan Broadcasting Company III, Inc., a Delaware corporation. "SULLIVAN THREE LMA" means a local marketing or time brokerage agreement to be entered into at the time of the Closing pursuant to which Sinclair or a Subsidiary of Sinclair will have the right to sell all or substantially all of the advertising time on the Sullivan Three Stations and having such other terms and conditions as Sinclair may propose and which are reasonably acceptable to Sullivan Three. "SULLIVAN THREE STATIONS" means broadcast television station WRGT-TV, Dayton, Ohio; broadcast television station WVAH-TV, Charleston, West Virginia; broadcast television station WTAT-TV, Charleston, South Carolina; broadcast television station WFXV-TV, Utica, New York; low-power television station WPNY-LP, Rome, New York; and Station KOKH; in each case together with all associated translator stations (if any) owned by Sullivan or any of its Subsidiaries immediately prior to the Spin-Offs. "SULLIVAN TWO" means Sullivan Broadcasting Company II, Inc., a Delaware corporation. "SULLIVAN TWO LMA" means a local marketing or time brokerage agreement to be entered into at the time of the Closing pursuant to which Sinclair or a Subsidiary of Sinclair will have the right to sell all or substantially all of the advertising time on the Sullivan Two Stations and having such other terms and conditions as Sinclair may propose and which are reasonably acceptable to Sullivan Two. "SULLIVAN TWO STATIONS" means the Stations which are not Sullivan Three Stations. "TAX" (and, with correlative meaning, "Taxes", "Taxable" and "Taxing") means any (A) federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profits, environmental (including under Section 59A of the Tax Code), customs, duties, real property, real property gains, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing; (B) liability of any corporation for the payment of any amounts of the type described in clause (A) arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included in any Tax Return relating thereto); and (C) liability for the payment of any amounts of the type described in clause (A) or (B) as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person. "TAX CODE" means the Internal Revenue Code of 1986, as amended (including, where applicable, the Internal Revenue Code of 1954, as amended). 77 "10-1/4% INDENTURE" means the Indenture dated as of December 21, 1995 among Sullivan Broadcasting, its Subsidiaries and The State Street Bank and Trust Company, as trustee, as in effect from time to time. "10-1/4% NOTES" means the 10-1/4% Senior Subordinated Notes due 2005 of Sullivan Broadcasting issued pursuant to the 10-1/4%Indenture, as such Notes are in effect from time to time. "13-1/4% INDENTURE" means the Indenture dated as of December 21, 1995 among Sullivan and the Bank of New York, as trustee, as in effect from time to time. "13-1/4% NOTES" means the 13-1/4% Senior Accrual Debentures due 2006 of Sullivan issued pursuant to the 13-1/4% Indenture, as such Debentures are in effect from time to time. "TIME SALE CONTRACTS" means all orders, agreements and other Contracts existing on the date of this Agreement, or entered into in the ordinary course of business of any Stations, or as otherwise permitted by this Agreement, between the date of this Agreement and the Closing, for the sale of advertising time (other than any Trades) on any Station; provided that any so-called barter Program Contract will be deemed to constitute a "Program Contract," and not a "Time Sale Contract," for purposes of this Agreement. "TRADE" means any trade, barter or similar arrangement for the sale of advertising time other than for cash (other than any film or program barter arrangements and radio barter arrangements) on any Station; provided that any so-called barter Program Contract will be deemed to constitute a "Program Contract," and not a "Trade," for purposes of this Agreement. "TRADE-OUT PAYABLES" means all obligations of Sullivan or any of its Subsidiaries to provide advertising time arising under any Trade arrangement, whenever made. "TRADE-OUT RECEIVABLES" means all current assets of Sullivan or any of its Subsidiaries which are goods or services receivable by Sullivan or any of its Subsidiaries arising under any Trade arrangement, whenever made, and all other accounts receivable of Sullivan or any of its Subsidiaries which at the option of the obligor thereof may be satisfied or discharged other than in money. "TRANSACTION DOCUMENTS" means this Agreement and all agreements between or among any or all of the Sullivan-Related Entities and the Sinclair-Related Entities relating thereto, in each case as in effect from time to time. 78 LIST OF SCHEDULES Schedule 4C Financial Statements Schedule 4D Certain Developments Schedule 4E FCC Matters Schedule 4F Certain Asset-Related Matters Schedule 4G Ownership and Other Matters Schedule 4I Insurance Schedule 4J Contracts Schedule 4K Employees Schedule 4L Litigation Schedule 4N Conflicts Schedule 4O Subsidiaries, Organization and Qualification Schedule 4P Tax Matters Schedule 4T Employee Benefit Matters Schedule 5E Sinclair's FCC-Related Disclosures LIST OF EXHIBITS Exhibit A Sullivan Two Spin-Off Assets Exhibit B Sullivan Three Spin-Off Assets Exhibit C Opinions of Sullivan's Counsel Exhibit D Opinions of Sinclair's and the Merger Sub's Counsel Exhibit E Form of Earnest Money Letter of Credit 79 EX-10.66 13 EXHIBIT 10.66 AGREEMENT AND PLAN OF MERGER AMONG SULLIVAN BROADCASTING COMPANY II, INC. SINCLAIR BROADCAST GROUP, INC., and ABRY PARTNERS, INC. (as Stockholder Representative) EFFECTIVE AS OF FEBRUARY 23, 1998 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER is entered into on March 16, 1998, but is effective as of March 16, 1998, among Sullivan Broadcasting Company II, Inc., a Delaware corporation ("Sullivan"), Sinclair Broadcast Group, Inc., a Maryland corporation ("Sinclair"), on behalf of itself and a subsidiary to be formed by it pursuant to Article I below, and ABRY Partners, Inc., a Delaware corporation ("ABRY Partners"), solely in its capacity as the Stockholder Representative referred to in this Agreement. WHEREAS, the parties to this Agreement are among the parties to an Agreement and Plan of Merger dated as of February 23, 1998 (the "Prior Agreement"), and the parties to the Prior Agreement have agreed to restate the Prior Agreement by entering into this Agreement and certain other agreements; NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows, effective as of the date of the Prior Agreement: ARTICLE I FORMATION OF SUBSIDIARY On or prior to March 20, 1998, Sinclair will form a wholly-owned Subsidiary which will be a Delaware corporation. Such Subsidiary will be the "Merger Sub" referred to in this Agreement. Sinclair will cause such Subsidiary to become a party to this Agreement and the Indemnity Escrow Agreement by executing and delivering to Sullivan a counterpart thereof. ARTICLE II MERGER 2.A GENERAL. Upon and subject to the terms and conditions stated in this Agreement, on the Closing Date, effective as of the Effective Time, the Merger Sub will merge with and into Sullivan in accordance with the terms and conditions of this Agreement. Sullivan will be the corporation which survives such merger (the "Merger") and in such capacity is sometimes referred to in this Agreement as "Post-Merger Sullivan." 2.B EFFECT ON SULLIVAN SHARES. Immediately after the Closing, effective at the Effective Time, subject to the terms and conditions of this Agreement (1) the Merger will be effected by the filing with the Secretary of the State of Delaware of a Certificate of Merger; (2) each Sullivan Share outstanding at the Effective Time, by said occurrence and with no further action on the part of the holder thereof, will be canceled without consideration; (3) each share of common stock of the Merger Sub outstanding immediately prior to the Effective Time will, by said occurrence and with no further action on the part of the holder thereof, be transformed and converted into one share of common stock of Post-Merger Sullivan, so that immediately thereafter Sinclair will be the sole and exclusive owner of all equity securities of Post-Merger Sullivan; and (4) Post-Merger Sullivan will be the owner of the business, assets, rights, privileges, immunities, powers, franchises and other attributes of Sullivan and the Merger Sub. 2.C CERTIFICATE OF INCORPORATION. Immediately after the Effective Time, the certificate of incorporation of Post-Merger Sullivan will be the certificate of incorporation of the Merger Sub as in effect immediately prior to the Effective Time. 2.D BYLAWS. Immediately after theEffective Time, the bylaws of Post-Merger Sullivan will be the bylaws of the Merger Sub as in effect immediately prior to the Effective Time. 2.E BOARD OF DIRECTORS AND OFFICERS. The board of directors and officers of the Merger Sub immediately prior to the Effective Time will be the board of directors and the officers, respectively, of Post-Merger Sullivan immediately after the Effective Time, and such individuals will serve in such positions for the respective terms provided by applicable Legal Requirements or in the bylaws of Post-Merger Sullivan until their respective successors are elected and qualified. 2.F NAME. The name of Post-Merger Sullivan will be designated by Sinclair. 2.G TRANSFER OF SULLIVAN STOCK. At the Effective Time, the stock transfer books of Sullivan will be closed and no transfer of Sullivan Shares will thereafter be made. ARTICLE III MERGER CONSIDERATION AND CLOSING 3.A MERGER CONSIDERATION. No consideration will be payable to the holders of Sullivan Shares by reason of or in connection with the Merger. 3.B CLOSING TIME AND PLACE. Subject to Section 12.A, the consummation of the Merger (the "Closing") will be held in the offices of Kirkland & Ellis, in New York, New York, at 10:00 a.m., local time, on the date determined pursuant to the following two sentences, or at such other place and/or at such other time and date as the Merger Sub and Sullivan may agree in writing. The Merger Closing will occur on a date designated by the Merger Sub by written notice to Sullivan not less than ten Business Days in advance of such date (which designated date will be not later than the Expiration Date). Notwithstanding the foregoing, but subject to Section 12.A, if on a date for the Closing described in the preceding sentence or specified pursuant to this sentence any condition of the Merger Sub or Sullivan specified in Article IX or X has not been satisfied (and will not be satisfied by the delivery of documents at the Closing) or waived in writing, then the date for the 2 Closing will be extended to any date specified by the Merger Sub to Sullivan with not less than 10 Business Days' notice to the other (subject to the Merger Sub's and Sullivan's respective conditions to the Closing set forth in Articles IX and X being satisfied or waived in writing on such specified date); provided that any such specified date will be on or prior to the Expiration Date. 3.C DELIVERIES AT THE CLOSING. All actions on the Closing Date (including those described in Section 11.D) will be deemed to occur simultaneously, and no document or payment to be delivered or made on the Closing Date will be deemed to be delivered or made until all such documents and payments are delivered or made to the reasonable satisfaction of Sullivan, the Merger Sub, the Stockholder Representative and their respective legal counsel. (1) DELIVERIES BY SULLIVAN. At the Closing, Sullivan will deliver to the Merger Sub the following: (a) the minute book, stock transfer book and other records relating to the internal corporate affairs of Sullivan which are in Sullivan's possession, and resignations of the officers and directors of Sullivan, which resignations will be effective as of the Effective Time; (b) all mortgage discharges or releases of Liens, if any, that will be sufficient to cause the Station Assets held by Sullivan to be as described in Section 4.E; (c) a certificate of the President or Chief Executive Officer of Sullivan dated the Closing Date to the effect that, except as specified in such certificate, to the best of such officer's knowledge, the conditions set forth in Sections 10.A(1) and 10.A(2) have been fulfilled; (d) a certificate of Sullivan dated the Closing Date to the effect that, except as specified in such certificate, the conditions set forth in Sections 10.A(1) and 10.A(2) have been fulfilled; (e) a certified copy of the resolutions or action by written consent of the board of directors and stockholders of Sullivan authorizing the Merger and Sullivan's execution, delivery and performance of this Agreement; (f) certificates as to the existence and/or good standing of Sullivan, in each case issued by the Secretary of State or a comparable official of Delaware and each other jurisdiction (if any) in which it is then required to be qualified to do business, certifying as to the existence and/or good standing of such corporation in such jurisdictions; (g) one or more opinions of counsel or special counsel to Sullivan, each dated the Closing Date, as to the matters set forth in the attached Exhibit A; and 3 (h) such other documents, instruments and receipts as the Merger Sub may reasonably request in order to effectuate the Merger and the other transactions contemplated by this Agreement to be consummated at the Closing. Each of the foregoing will be reasonably satisfactory in form to the Merger Sub and its legal counsel. (2) DELIVERIES BY THE MERGER SUB. At the Closing, the Merger Sub will deliver to the Stockholder Representative the following: (a) a certificate of an officer or similar official of the Merger Sub dated the Closing Date to the effect that, except as specified in such certificate, to the best of such officer's or official's knowledge, the conditions set forth in Sections 9.A(1) and 9.A(2) have been fulfilled; (b) a certificate of an officer or similar official of Sinclair dated the Closing Date to the effect that, except as specified in such certificate, to the best of such officer's or official's knowledge, the conditions set forth in Sections 9.A(1) and 9.A(2) have been fulfilled; (c) a certificate of the Merger Sub dated the Closing Date to the effect that, except as specified in such certificate, the conditions set forth in Sections 9.A(1) and 9.A(2) have been fulfilled; (d) a certificate of Sinclair dated the Closing Date to the effect that, except as specified in such certificate, the conditions set forth in Sections 9.A(1) and 9.A(2) have been fulfilled; (e) a certified copy of the resolutions or action by written consent of the board of directors and stockholders of the Merger Sub authorizing the Merger and the Merger Sub's execution, delivery and performance of this Agreement; (f) a certified copy of the resolutions or action by written consent of the board of directors of Sinclair authorizing Sinclair's execution, delivery and performance of this Agreement; (g) certificates as to the existence and/or good standing of Sinclair and the Merger Sub, in each case issued by the Secretary of State or a comparable official of such jurisdictions as Sullivan may reasonably request and dated on or after the fifth Business Day prior to the Closing Date, certifying as to the existence and/or good standing of such corporation in such jurisdictions; (h) one or more opinions of counsel or special counsel to Sinclair and the Merger Sub, each dated the Closing Date, as to the matters set forth in the 4 attached Exhibit B; and (i) such other documents, instruments and receipts as Sullivan may reasonably request in order to effectuate the Merger and the other transactions contemplated by this Agreement to be consummated at the Closing. Each of the foregoing will be reasonably satisfactory in form to Sullivan and its legal counsel. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SULLIVAN Subject to Section 13.Q, Sullivan makes the following representations and warranties: 4.A ORGANIZATION. Sullivan is a corporation which is duly organized, validly existing and in good standing under the laws of the State of Delaware. From and after the Spin- Off, Sullivan will be qualified to do business or have similar status under the laws of each jurisdiction in which such qualification is required by applicable Legal Requirements. Sullivan has the power and authority to carry on the business being conducted by it, to own and operate the Station Assets owned and operated by it, and to enter into and consummate the transactions contemplated to be consummated by it pursuant to this Agreement. 4.B ACTION. Each action necessary to be taken by or on the part of Sullivan in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated to be consummated by Sullivan pursuant to this Agreement and necessary to make the same effective will be duly and validly taken by, and be effective at, the time by which such action is required to be taken. This Agreement has been duly and validly authorized, executed, and delivered by Sullivan and constitutes its valid and binding agreement, enforceable against Sullivan in accordance with and subject to its terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or similar laws affecting the rights of creditors generally and the availability of equitable remedies. 4.C FCC AUTHORIZATIONS. As of the time of the Closing, Sullivan will be the holder of the FCC Authorizations. As of the time of the Closing, except as set forth on the attached Schedule 4C, (i) the Authorizations will constitute all of the licenses and authorizations required under the Communications Act, or the current rules, regulations, and policies of the FCC, for the operation of the Stations as now conducted; (ii) the FCC Authorizations will be in full force and effect and are subject to or scheduled for renewal on the respective dates specified 5 on the attached Schedule 4C (unless theretofore renewed after the date of this Agreement); (iii) the FCC Authorizations will be valid for the full respective terms thereof; (iv) Sullivan will have no reason to believe that the FCC Authorizations will not be renewed for a full and customary term in the ordinary course with no materially adverse conditions (except with respect to general rule-making and similar matters relating generally to television broadcast stations by reason of any action or omission of Sinclair or any of its Subsidiaries); (v) there will not be not pending, or, to the knowledge of Sullivan, threatened, any action by or before the FCC to revoke, cancel, rescind, modify, or refuse to renew in the ordinary course any of the FCC Authorizations, and there will not be pending, or, to the knowledge of any such Person, threatened, issued, or outstanding by or before the FCC, any investigation, order to show cause, notice of violation, notice of apparent liability, or notice of forfeiture or complaint against Sullivan with respect to any Station, in each case other than by reason of any actual or alleged action or omission of Sinclair or any of its Subsidiaries; (vi) Sullivan will have complied in all material respects with the FCC Authorizations, the Communications Act, and the current rules, regulations and policies of the FCC; and (vii) all documents required by 47 C.F.R. Section 73.3526 to be kept in each Station's public inspection file are in such file and such file will be maintained in proper order and complete up to and through the Closing Date. 4.D CONDITION OF ASSETS. Except as set forth on the attached Schedule 4D, the material tangible assets of Sullivan and the improvements on any real property which are used by it (a) at the time of the Spin-Off and on the Closing Date will in all material respects be in good and technically sound operating condition (ordinary wear and tear excepted) and are not in need of repair and in a condition which would be sufficient to permit the owner thereof to operate the Stations (in the manner in which the Stations are operated or programmed by Sullivan Holdings and its Subsidiaries as of the date of this Agreement) in compliance with the terms of the FCC Authorizations, the Communications Act and current FCC rules and regulations (if such owner had the right to use the Station Assets not owned by Sullivan and such Station Assets were in at least such condition), and (b) have in all material respects been maintained in a manner consistent with generally accepted standards of good engineering practice and to the knowledge of Sullivan, all applicable federal, state and local statutes, ordinances, rules and regulations, including, without limitation, all applicable tower painting and lighting requirements. 4.E TITLE, ETC. Immediately after the Spin-Off, Sullivan will have good title to, or a valid leasehold in, the tangible assets and personal property included in the Station Assets, and all such assets and personal property will on the Closing Date (after the repayment in full of the indebtedness of Sullivan and all related interest and other obligations and the release of all related Liens and the Mission Guarantees) be free and clear of all Liens other than Permitted Encumbrances. Sullivan possesses (and immediately after the Merger, will possess) adequate rights, licenses, or other authority to use the call letters presently used by the Stations, free and clear of all Liens other than Permitted Encumbrances. 4.F LITIGATION. Except as set forth on the attached Schedule 4F: (1) on the date of this Agreement, Sullivan is not operating under or subject to or in default with respect to any order, writ, injunction, or decree of any court or federal, state, municipal, or other governmental department, commission, board, agency, or instrumentality arising out of a proceeding to which it is or was a party, and on the Closing Date, no such item will have or reasonably be expected to result in a Material Adverse 6 Change; and (2) on the date of this Agreement, there is no litigation pending by or against, or to the knowledge of Sullivan threatened against, Sullivan which interferes with, or could reasonably be expected to interfere with, (a) the operations of the Stations as presently conducted or (b) the ability of Sullivan to carry out the transactions contemplated to be carried out by it pursuant to this Agreement, and on the Closing Date, no such pending or threatened litigation will have or will reasonably be expected to result in a Material Adverse Change. There are no attachments, executions, or assignments for the benefit of creditors or voluntary or involuntary proceedings in bankruptcy initiated or contemplated by, or, to the knowledge of Sullivan, threatened or pending against, Sullivan. 4.G COMPLIANCE WITH LAWS. Other than with respect to matters disclosed in the attached Schedule 4C or the attached Schedule 4F, subject to obtaining all applicable Consents: (a) Sullivan, with respect to the Station Assets, is in compliance in all material respects with all applicable Legal Requirements, and (b) the present uses by Sullivan of the Station Assets which it owns do not in any material respect violate any such Legal Requirements. 4.H NO DEFAULTS. Except for (w) any item on the attached Schedule 4H, (x) the requisite approval of the FCC, (y) compliance with the requirements of the Hart-Scott-Rodino Act, and (z) any Consent which may be required under any Contract, on the Closing Date (after giving effect to all Consents which have been obtained) neither the execution and delivery by Sullivan of this Agreement, nor the consummation by Sullivan of the Merger or the other transactions contemplated by this Agreement to be consummated by Sullivan, requires any Consent under, will constitute, or, with the giving of notice or the passage of time or both, would constitute, a material violation of or would conflict in any material respect with or result in any material breach of or any material default under, or will result in the creation of any Lien (other than any Permitted Encumbrance or any Lien in favor of one or more of the Acquiring Parties) under, any of the terms, conditions, or provisions of any Legal Requirement to which Sullivan is subject, or of the certificate of incorporation or by-laws of Sullivan. 4.I SUBSIDIARIES. Sullivan does not own any shares of stock or other equity or debt securities of or any interest in any Person. 7 4.J TAX MATTERS. (1) TAX RETURNS. Except as set forth on the attached Schedule 4J or as has not caused and is not reasonably expected to cause a Material Adverse Change: (a) all federal, state, local and foreign tax returns and tax reports required to be filed by Sullivan have been timely filed (taking into account any extensions of which Sullivan may have availed itself) with the appropriate governmental agencies in all jurisdictions in which such returns and reports are required to be filed, and all of the foregoing (including any summary balance sheets included therein) are true, correct, and complete; (b) all federal, state, local and foreign income, profits, franchise, sales, use, occupation, property, excise, and other taxes (including interest and penalties) due and payable by Sullivan have been fully paid; (c) no issues have been raised in writing (or, to Sullivan's knowledge, orally) and are currently pending by the Internal Revenue Service or any other taxing authority in connection with any of such returns and reports; (d) no waivers of statutes of limitations as to tax matters have been given or requested with respect to Sullivan; (e) the federal, state, local, and foreign income tax and franchise tax returns of or with respect to Sullivan have not been examined by the Internal Revenue Service or by appropriate state, provincial, or departmental tax authorities; (f) no issue has been raised in writing (or, to Sullivan's knowledge, orally) with Sullivan by any taxing authority which can reasonably be expected to result in a deficiency for any fiscal year or all deficiencies asserted or assessments (including interest and penalties) made as a result of any examinations have been fully paid, and no proposed (but unassessed) additional taxes, interest, or penalties have been asserted; (h) Sullivan is not (and has never been) a party to any Tax sharing agreement with any Person who was not a member of an Affiliated Group consisting in whole or in part of the parties to such agreement, and Sullivan has no liability for the Taxes of any other Person (other than Sullivan Holdings and its Subsidiaries) pursuant to Reg. Section 1.1502-6 under the Tax Code (or any similar provision of state, local or foreign Tax law) or as a transferee or successor or by contract. (2) TAX ELECTIONS AND SPECIAL TAX STATUS. Except as set forth on the attached Schedule 4J: (a) Sullivan is not and has never been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Tax Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Tax Code; (b) Sullivan has not made any election or filed any consent pursuant to Section 341(f) of the Tax Code relating to collapsible corporations; (c) Sullivan has not entered into any compensatory agreements with respect to the performance of services which payment thereunder would result in a nondeductible expense to Sullivan pursuant to Section 280G of the Tax Code or an excise tax to the recipient of such payment pursuant to Section 4999 of the Tax Code; and (d) Sullivan has not agreed to make, nor is it required to make, any adjustment under Section 481(a) of the Tax Code by reason of a change in accounting method or otherwise. 4.K CAPITAL STOCK. As of the date of this Agreement, Sullivan has authorized capital stock consisting of 80,000,000 shares of capital stock, of which (a) 25,000,000 shares will be designated Class A One Common Stock, par value $0.001 per share, (b) 25,000,000 shares will 8 be designated Class B-1 Common Stock, par value $0.001 per share, (c) 25,000,000 shares will be designated Class B-2 Common Stock, par value $0.001 per share, and (d) 5,000,000 shares will be designated Class C Common Stock, par value $0.001 per share. As of the Closing Date, all of the issued and outstanding capital stock of Sullivan will be duly authorized and validly issued, fully paid and nonassessable, and there will be no preemptive rights in respect thereof in favor of any Person (other than any Person which holds Sullivan Shares). There are no outstanding options, warrants or other rights to subscribe for or purchase from Sullivan, no contracts or commitments providing for the issuance of, or the granting of rights to acquire, and no securities convertible into or exchangeable for, any shares of capital stock or any other ownership interest of Sullivan. 4.L BOOKS AND RECORDS. The minute books of Sullivan contain records which are complete and accurate in all material respects of all meetings and other corporate actions of its stockholders, its board of directors and all committees, if any, appointed by its board of directors. The books of accounts, ledgers, order books, records and documents of Sullivan, in all material respects, accurately and completely reflect information relating to its business, the nature, acquisitions, maintenance and location of its assets and the transactions giving rise to its obligations and accounts receivable. 4.M ABSENCE OF SIGNIFICANT UNDISCLOSED LIABILITIES. Sullivan has no debt, liability or obligation of any kind, whether accrued, absolute, contingent or otherwise, including any liability or obligation on account of Taxes or any governmental charges or penalty, interest or fines, which would be required to be reflected in its balance sheet prepared in accordance with GAAP and which would have, or which in the case of contingent or inchoate liabilities, would have if accrued or absolute, a material adverse effect on the financial condition of Sullivan, viewed as a whole with Sullivan Holdings, its Subsidiaries and Sullivan Three as of the Closing Date, other than any liability or obligation (a) reflected in any Sullivan Holdings Financial Statement, (b) identified with particularity in any attached Schedule or arising under any Contract which is described, or which is not required to be described, on any attached Schedule or the Contracts Schedule, (c) incurred in the ordinary course of business since September 30, 1997, (d) incurred in connection with the transactions contemplated by this Agreement, or (e) pursuant to the promissory note issued to Sullivan Holdings and its Subsidiaries in connection with the Spin-Off. 4.N EMPLOYEE BENEFIT PLANS. Other than any plan described on the attached Schedule 4N, (a) Sullivan does not maintain, is not a party to and make no contributions to any of the following: (i) any "employee pension benefit plan," (as such term is defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA")); or (ii) any "employee welfare benefit plan" (as such term is defined in Section 3(a) of ERISA), whether written or oral; and (b) Sullivan has never sponsored or maintained, had any obligation to sponsor or maintain, or had any liability (whether actual or contingent, with respect to any of its assets or otherwise) with respect to any employee pension benefit plan subject to Section 302 of ERISA or Section 412 of the Tax Code or Title IV of ERISA (including any multiemployer plan). No employee or former employee of Sullivan, and no beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits, including death or medical benefits (whether or not insured) beyond retirement or other termination of employment as 9 described in Statement of Financial Accounting Standards No. 106, other than continuation coverage mandated under Section 4980B of the Tax Code or comparable state law. 4.O BROKERS. There is no broker or finder or other Person who would have any valid claim against Sullivan or any Acquiring Party for a commission or brokerage fee in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or understanding of or action taken by Sullivan or any of its Affiliates. 4.P DISCLOSURE. To the knowledge of Sullivan, no statement of a material fact set forth in this Article IV contains any statement of any material fact which is untrue in any material respect or omits to state a material fact which is necessary in order to make the statements set forth in this Article IV not misleading in any material respect. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SINCLAIR AND THE MERGER SUB Sinclair and the Merger Sub, jointly and severally, represent and warrant as follows: 5.A INCORPORATION. Sinclair is a corporation duly organized, validly existing, and in good standing (or has comparable active status) under the laws of the State of Maryland, and Sinclair has the corporate power and authority to enter into and consummate the transactions contemplated to be consummated by it pursuant to this Agreement. From and after the time it is formed, the Merger Sub will be a corporation duly organized, validly existing, and in good standing (or has comparable active status) under the laws of the State of Delaware and will have the corporate power and authority to enter into and consummate the transactions contemplated to be consummated by it pursuant to this Agreement. 5.B CORPORATE ACTION. Each action necessary to be taken by or on the part of either Sinclair or the Merger Sub in connection with the execution and delivery of this Agreement and the consummation of transactions contemplated hereby to be consummated by it and necessary to make the same effective duly and validly taken by, and be effective at, the time by which such action is required to be taken. This Agreement has been duly and validly authorized, executed, and delivered by each of Sinclair and the Merger Sub and constitutes a valid and binding agreement, enforceable against each of them in accordance with and subject to its terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or similar laws affecting the rights of creditors generally and the availability of equitable remedies. 5.C NO DEFAULTS. Except as set forth on the attached Schedule 4H, the requisite approval of the FCC and compliance with the requirements of the Hart-Scott-Rodino Act, on the Closing Date (after giving effect to all approvals and consents which have been obtained), neither 10 the execution and delivery by Sinclair or the Merger Sub of this Agreement, nor the consummation by Sinclair or the Merger Sub of the Merger and the other transactions contemplated by this Agreement to be consummated by it, will constitute, or, with the giving of notice or the passage of time or both, would constitute, a material violation of or would conflict in any material respect with or result in any material breach of or any material default under, any of the terms, conditions, or provisions of any Legal Requirement to which Sinclair or the Merger Sub is subject, or of Sinclair's or the Merger Sub's certificate of incorporation or by-laws or similar organizational documents, or of any material contract, agreement, or instrument to which Sinclair or the Merger Sub is a party or by which Sinclair or the Merger Sub is bound. 5.D BROKERS. There is no broker or finder or other Person who would have any valid claim against Sullivan (except after the Effective Time) or any Old Sullivan Stockholder for a commission or brokerage fee in connection with this Agreement or the transactions contemplated hereby as a result of any agreement or understanding of or action taken by Sinclair, the Merger Sub or any Affiliate of any of them. 5.E QUALIFICATION AS A BROADCAST LICENSEE. Sinclair and the Merger Sub will, at the time of the filing of the applications for the Required FCC Consent described in Section 6.A, be legally and financially qualified under the Communications Act, and the rules and regulations promulgated by the FCC thereunder, to control Sullivan (in the case of Sinclair) or be the successor by merger to Sullivan and the holder of the FCC Authorizations (in the case of the Merger Sub). To Sinclair's and the Merger Sub's knowledge, no fact exists as of the date of this Agreement that would, under the Communications Act, the existing rules, regulations, policies, and practices of the FCC or any other Legal Requirement, disqualify either Sinclair or the Merger Sub as the direct or indirect holder of any FCC Authorization or as owner and operator of the related Station Assets or any related Station. 5.F LITIGATION. There is no litigation pending by or against, or to Sinclair's or the Merger Sub's knowledge (after due inquiry) threatened against, Sinclair or the Merger Sub related to or affecting Sinclair's or the Merger Sub's ability fully to carry out the transactions contemplated to be consummated by them pursuant to this Agreement. There are no attachments, executions, or assignments for the benefit of creditors or voluntary or involuntary proceedings in bankruptcy contemplated by, or, to Sinclair's or the Merger Sub's knowledge, threatened or pending against, Sinclair or the Merger Sub. 5.G DISCLOSURE. To Sinclair's and the Merger Sub's knowledge, no statement of a material fact set forth in this Article V contains a statement of any material fact which is untrue in any material respect or omits to state a material fact which is necessary in order to make the statements set forth in this Article V not misleading in any material respect. 11 ARTICLE VI APPLICATIONS FOR REQUIRED FCC CONSENT 6.A PREPARATION AND FILING. Within 30 Business Days after Sinclair's or its own written request after the Spin-Off, each of Sullivan and Sinclair will, and will cause its Subsidiaries to, complete the portions of the applications for the Required FCC Consent which pertain to it and jointly file such applications with the FCC. Each of Sullivan and Sinclair will, and will cause its Subsidiaries to, diligently take or cooperate in the taking of all steps which are reasonably within its ability to take and which are necessary, proper, or desirable to expedite the prosecution of such applications and to cause the Required FCC Consent expeditiously to become Granted and expeditiously to become a Final Order. 6.B CERTAIN ACTIONS. Sullivan will refrain from making any filing or announcement or taking (or causing or assisting any other Person to take) any other action which reasonably could be expected to delay the Required FCC Consent being Granted or becoming a Final Order in any respect without Sinclair's prior written consent. Without limiting Section 6.D, Sinclair will, and will cause its Subsidiaries to, refrain from making any filing or announcement or taking (or causing or assisting any other Person to take) any other action which reasonably could be expected to delay the Required FCC Consent being Granted or becoming a Final Order in any respect without the prior written consent of Sullivan (or, after the Closing, the Stockholder Representative). 6.C NOTICE OF OBJECTIONS, ETC. Sullivan will promptly provide Sinclair (or, after the Closing, the Stockholder Representative) with a copy of any pleading, order, or other document served on Sullivan relating to such applications (other than any of the same which is addressed to or states that it is to be served upon or delivered to the Person to whom such copy is to be provided or such Person's communications counsel). Sinclair will promptly provide Sullivan (or, after the Closing, the Stockholder Representative) with a copy of any pleading, order, or other document served on Sinclair or any of its Subsidiaries relating to such applications (other than any of the same which is addressed to or states that it is to be served upon or delivered to the Person to whom such copy is to be provided or such Person's communications counsel). 6.D PROHIBITED ACTIONS. Sinclair will not, and will not cause or permit any of its Subsidiaries to, make any "major amendment" (as that term is used in Section 73.3578(b) of the rules of the FCC (Ch. 47 C.F.R.)) in respect of any such application other than (i) with prior written consent of Sullivan (prior to the Closing) or the Stockholder Representative (after the Closing), (ii) in order to reflect any change in the proposed operating or ownership structure of the Merger Sub or any Station which the FCC or its staff has indicated to Sinclair or any Affiliate or agent of Sinclair is a condition to the Required FCC Consent to be Granted, or (iii) if required by a change in the rules, regulations or policies of the FCC to disclose any attributable interest which Sinclair or any of its Subsidiaries may be deemed to have by virtue of any local marketing, time brokerage or similar arrangement in effect on the date of this Agreement. 12 ARTICLE VII COVENANTS OF SULLIVAN 7.A ACTIONS AFTER SPIN-OFF AND PRIOR TO MERGER. (1) OPERATION GENERALLY. After the Spin-Off and until the Closing, Sullivan will (a) with respect to Station Assets, keep books of account, records, and files substantially in accordance with the practices of Sullivan Holdings and its Subsidiaries with respect to such assets of such type prior to the Spin-Off, (b) promptly execute and timely file any applications reasonably required for renewal of the FCC Authorizations, (c) timely file (taking into account any extensions of which Sullivan may avail itself) true, correct and complete federal, state, local and foreign tax returns and tax reports required to be filed by Sullivan, (d) fully pay all federal, state, local and foreign income, profits, franchise, sales, use, occupation, property, excise and other taxes (including interest and penalties) due and payable by Sullivan, (e) to the extent necessary to the conduct of its business: use reasonable efforts to (i) perform its obligations under all Station Contracts to which it is a party, (ii) preserve the Station Assets held by it, and (iii) maintain in full force and effect the FCC Authorizations, and (f) maintain property damage insurance in such amounts, and insuring against such risks, as Sinclair may reasonably request. (2) CONTRACTS. After the Spin-Off and until to the Closing, Sullivan will be entitled to renew or extend the term of any Contract which, by its terms, has expired at the time of such renewal or extension or which would expire prior to the sixtieth day after the effective date of such renewal or extension, and, in connection therewith, to agree to increase the amounts payable thereunder during any such renewal or extended term in accordance with Sullivan Holdings' and its Subsidiaries' past practice in the operation of the Stations, or enter into any other Contract which is reasonably required in order to enable it to comply with its obligations under this Agreement. (3) RESTRICTIONS. After the Spin-Off and until to the Merger Closing, Sullivan will not without the prior written consent of Sinclair (to the extent the following restrictions are permitted by the FCC and all other applicable Legal Requirements): (a) other than in the ordinary course of business, sell, lease (as lessor), transfer, or agree to sell, lease (as lessor), or transfer any Station Assets which are required for the operation of any Station without replacement thereof with a functionally equivalent or superior asset of substantially equal or greater value; (b) apply to the FCC for any construction permit that would materially restrict any Station's present operations or make any material adverse change in the buildings or leasehold improvements which constitute Station Assets; (c) merge or consolidate, or agree to merge or consolidate, with 13 or into any Person; (d) enter into any Contract with any of its Affiliates which will not be performed in its entirety or by its terms terminate at or prior to the time of the Closing; (e) cause any of its assets or properties to become subject to any Lien, other than any Permitted Encumbrance; (f) commit any material breach of any material Contract to which it is a party; or (g) change any material tax election if such change could reasonably be expected to adversely affect Post-Merger Sullivan, except to the extent required by any Legal Requirement, any Contract or GAAP. (4) NO PREMATURE ASSUMPTION OF CONTROL. Nothing contained in this Agreement will give any Acquiring Party any right to control the programming, operations, or any other matter relating to the Stations prior to the Closing, and Sullivan will have complete control of the programming, operations, and all other matters relating to the Stations up to the time of the Closing. 7.B ORGANIZATION/GOODWILL. After the Spin-Off and until to the Closing, Sullivan will use reasonable efforts to preserve the business organization of Sullivan with respect to the Stations and preserve the goodwill of the Stations' suppliers, customers, and others, to the extent such Persons have business relations with Sullivan. This Section 7.B will not apply to the Corporate Personnel, with respect to continued service by them after the Closing (it being understood that the Corporate Personnel intend to resign their respective positions with Sullivan effective as of the Effective Time). 7.C ACCESS TO FACILITIES, FILES, AND RECORDS. From time to time at the request of Sinclair after the Spin-Off and prior to the Closing, Sullivan will give or cause to be given to the officers, employees, accountants, counsel, and representatives of Sinclair and the Merger Sub (a) access (in the presence of any representative designated by Sullivan, at Sullivan's option), upon reasonable prior notice, during normal business hours, to all facilities, property, accounts, books, deeds, title papers, insurance policies, licenses, agreements, contracts, commitments, records, equipment, machinery, fixtures, furniture, vehicles, accounts payable and receivable, and inventories of Sullivan (but, in any event, not personnel, unless Sullivan otherwise consents) related to the Stations, including for purposes of permitting Sinclair to perform "Phase One" (and, after consulting with Sullivan as to the scope thereof, "Phase Two") environmental surveys with respect to the Station Assets, and 14 (b) all such other information in Sullivan's possession con cerning the affairs of the Stations as Sinclair may reasonably request, in each case at Sinclair's expense; provided that the foregoing does not disrupt or interfere with the business and operations of Sullivan or any Station in any material respect ("materiality," for purposes of this proviso, being determined by reference to each Station individually, and not taken as a whole). 7.D HART-SCOTT-RODINO MATTERS. Within thirty (30) days after Sinclair's or its own request after the Spin-Off, Sullivan will complete all documents (if any) required to be filed with the Federal Trade Commission (the "FTC") and the United States Department of Justice (the "DOJ") with respect to itself and/or its Affiliate(s) and concerning the Merger in order to comply with the Hart-Scott-Rodino Act and together with Sinclair and/or the appropriate Affiliate(s) of Sinclair who are required to join in such filings, will file the same with the FTC and the DOJ. Sullivan will promptly furnish all materials thereafter required by the FTC, the DOJ or any other governmental entity having jurisdiction over such filings, and will take all reasonable actions and will file and use reasonable efforts to have declared effective or approved all documents and notifications with any such governmental entity, as may be required under the Hart-Scott-Rodino Act or other federal antitrust laws for the consummation of the Merger. 7.E CONSENTS. Except as provided in Article VI and Section 7.D, it is agreed that (1) as among Sullivan and the Acquiring Parties, it will be the sole responsibility of the Acquiring Parties to timely obtain all Acquiring Party Consents, (2) so long as Sullivan complies with its obligations pursuant to the following sentence and Article VI and Section 7.D, Sullivan, the Old Sullivan Stockholders and the Stockholder Representative will not be liable to any Person for any failure to obtain or other absence of any effective Acquiring Party Consent, and (3) except as provided in Sections 10.C and 10.D, the absence of any effective Consent will not excuse any Acquiring Party from consummating the Merger. Sullivan will use reasonable efforts (without being required to make any payment not specifically required by the terms of any licenses, leases, and other contracts), including executing any related agreement or undertaking which does not take effect until the Effective Time, to obtain the Sullivan Consents and to assist the Acquiring Parties (at the Acquiring Parties' request and expense) to (a) timely obtain all Acquiring Party Consents or, in the absence of any Acquiring Party Consent (where applicable), one or more replacement agreements, and (b) cause each Consent or replacement agreement to become effective as of the time of the Spin-Off or the Effective Time, as applicable. 7.F NOTICE OF PROCEEDINGS. After the Spin-Off and prior to the Closing, Sullivan will promptly notify Sinclair in writing upon becoming aware of any order or decree or any complaint praying for an order or decree restraining or enjoining the consummation of the Merger or any other transaction contemplated by this Agreement to be consummated by Sullivan, or upon receiving any notice from any governmental department, court, agency, or commission of its intention to institute an investigation into or institute a suit or proceeding to restrain or enjoin the consummation of the Merger or any such other transaction, or to nullify or render ineffective this Agreement, the Merger or any such other transaction if consummated. 15 7.G CONFIDENTIAL INFORMATION. If for any reason the transactions contemplated in this Agreement are not consummated, Sullivan will not use or disclose to any Person (except to its agents, representatives and advisors, to its lenders and securityholders and their respective agents, representatives and advisors, or as may be required by any Legal Requirement) any confidential information received from any Acquiring Party or any of their respective agents, representatives and advisors (each a "disclosing party" for purposes of this Section 7.G) in the course of investigating, negotiating, and completing the transactions contemplated by this Agreement. Nothing will be deemed to be confidential information for purposes of this Section 7.G that: (a) is or was known to any Sullivan-Related Entity at the time of its initial disclosure by a disclosing party to any Sullivan-Related Entity; (b) has become or becomes publicly known or available other than through disclosure by any Sullivan-Related Entity; (c) is or was rightfully received by any Sullivan-Related Entity from any Person unrelated to any Sullivan-Related Entity (other than any Person engaged by any Sullivan-Related Entity in connection with the transactions contemplated by this Agreement); or (d) is or was independently developed by any Sullivan- Related Entity. 7.H EFFORTS TO CONSUMMATE. Subject to the provisions of Article IX and Section 12.A, Sullivan will use reasonable efforts to fulfill and perform all conditions and obligations on its part to be fulfilled and performed under this Agreement and to cause the conditions set forth in Articles IX and X to be fulfilled and cause the Merger and the other transactions contemplated by this Agreement in connection with the Closing to be fully carried out. In addition, promptly after Sullivan becomes aware prior to the Closing of a breach of any fact or circumstance which constitutes or would constitute a breach of any other Party's representation or warranty set forth in this Agreement, Sullivan will give such Party notice thereof so that such Party may attempt to cure the same. 7.I NOTICE OF CERTAIN DEVELOPMENTS. Sullivan will give prompt written notice to Sinclair if, after the Spin-Off and prior to the Closing: (1) Sullivan receives notice from any Market Cable System currently carrying a Station's signal of such Market Cable System's intention to delete such Station from carriage or change such Station's channel position on such Market Cable System, or (2) Sullivan becomes aware of any breach of any representation or warranty of Sullivan set forth in Article IV. 7.J UPDATED INFORMATION. Sullivan agrees to provide to Sinclair and the Merger Sub at or prior to the Closing, for informational purposes only, copies of all material Contracts in existence at the time of the Closing and which are entered into after the Spin-Off and prior to the Closing. 7.K NON-SOLICITATION. After the Spin-Off and prior to the Closing or the earlier termination of this Agreement, each of ABRY Partners and Sullivan will not, and each of them will not cause (and will use reasonable efforts not to permit) any of its Subsidiaries, affiliates, directors, officers, employees, representatives or agents to, directly or indirectly solicit, or initiate, entertain or enter into any discussions or transactions with, or encourage or provide any information to, any Person (other than any Person described in Section 7.C), concerning any sale of any of the assets of Sullivan (other than any sale which is not prohibited by Section 7.A(3)) or any merger, stock 16 acquisition or similar transaction involving Sullivan (other than an issuance of capital stock or capital stock equivalents by Sullivan); provided that nothing in this Section 7.K will prohibit ABRY Partners or Sullivan from furnishing, or causing or permitting any other Person to furnish, information concerning Sullivan to any governmental authority or court of competent jurisdiction or any other Person as may be required by any Legal Requirement. ARTICLE VIII COVENANTS OF SINCLAIR AND THE MERGER SUB 8.A HART-SCOTT-RODINO MATTERS. Within 30 days after Sullivan's or its own request after the Spin-Off, Sinclair will complete all documents (if any) required to be filed with the FTC and the DOJ with respect to itself and/or its Affiliate(s) and concerning Merger in order to comply with the Hart-Scott-Rodino Act and together with Sullivan and/or the appropriate Affiliate(s) of Sullivan who are required to join in such filings, will file the same with the FTC and the DOJ. Sinclair will pay the filing fees associated with all such filings and the filings described in Section 6.A. Sinclair and the Merger Sub will promptly furnish all materials thereafter required by the FTC, the DOJ or any other governmental entity having jurisdiction over such filings, and will take all reasonable actions and will file and use reasonable efforts to have declared effective or approved all documents and notifications with any such governmental entity, as may be required under the Hart-Scott-Rodino Act or other federal antitrust laws for the consummation of the Merger. 8.B CONFIDENTIAL INFORMATION. If for any reason the transactions contemplated in this Agreement are not consummated, each of Sinclair and the Merger Sub will not use or disclose to any Person (except to its agents, representatives and advisors, to its lenders and their respective agents, representatives and advisors, or as may be required by any Legal Requirement) any confidential information received from Sullivan Holdings, any of its Subsidiaries, Sullivan or any of their respective agents, representatives and advisors (each a "disclosing party" for purposes of this Section 8.B) in the course of investigating, negotiating, and completing the transactions contemplated by this Agreement. Nothing will be deemed to be confidential information for purposes of this Section 8.B that: (a) is or was known to any Sinclair-Related Entity at the time of its initial disclosure by a disclosing party to any Sinclair-Related Entity; (b) has become or becomes publicly known or available other than through disclosure by any Sinclair-Related Entity; (c) is or was rightfully received by any Sinclair-Related Entity from any Person unrelated to any Sinclair-Related Entity (other than any Person engaged by any Sinclair- Related Entity in connection with the transactions contemplated by this Agreement); or (d) is or was independently developed by any Sinclair-Related Entity. In addition, the Merger Sub agrees to be bound by the same obligations as Sinclair is bound pursuant to the confidentiality agreement dated as of November 20, 1997 between Sinclair and Sullivan Broadcasting, which confidentiality agreement will survive the execution and delivery of this Agreement and will survive the execution and termination of this Agreement, and no provision of this Section 8.B will be deemed to supersede or in any way limit any obligation or right under such confidentiality agreement. 17 8.C EFFORTS TO CONSUMMATE. Subject to the provisions of Article X and Section 12.A, each of Sinclair and the Merger Sub will use reasonable efforts to fulfill and perform all conditions and obligations on its part to be fulfilled and performed under this Agreement and to cause the conditions set forth in Articles IX and X to be fulfilled and cause the Merger and the transactions contemplated by this Agreement in connection with the Merger to be fully carried out. In addition, promptly after Sinclair or the Merger Sub becomes aware prior to the Closing of a breach of any fact or circumstance which constitutes or would constitute a breach of any representation or warranty of Sullivan set forth in this Agreement, Sinclair will give Sullivan notice thereof so that Sullivan may attempt to cure the same. 8.D NOTICE OF PROCEEDINGS. Each of Sinclair and the Merger Sub will promptly notify Sullivan (prior to the Closing) or the Stockholder Representative (after the Closing) in writing upon becoming aware of any order or decree or any complaint praying for an order or decree restraining or enjoining the consummation of the Merger or any other transaction contemplated by this Agreement, or upon receiving any notice from any governmental department, court, agency, or commission of its intention to institute an investigation into or institute a suit or proceeding to restrain or enjoin the consummation of the Merger or any such other transaction, or to nullify or render ineffective this Agreement, the Merger or any such other transaction, if consummated. Sinclair will give the Stockholder Representative prompt written notice if any Acquiring Party becomes aware of any breach of any representation or warranty of any Acquiring Party set forth in Article V. 8.E SECTION 338 ELECTION. Without the Stockholder Representative's prior written consent, Sinclair will not, and will not cause or permit any of its Subsidiaries to, make an election under Section 338 of the Tax Code, or under any analogous provision of any other Legal Requirements relating to Taxes, with respect to the Merger. ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF SULLIVAN AT THE CLOSING The obligation of Sullivan to consummate the Merger is, at Sullivan's option, subject to the fulfillment of the following conditions at the time of the Closing (Sullivan expressly acknowledging that the effectiveness of the Sullivan Consents is not a condition to such obligation): 9.A REPRESENTATIONS, WARRANTIES, COVENANTS. (1) Each of the representations and warranties of Sinclair and the Merger Sub set forth in Article V, considered without regard to any materiality qualifiers contained therein, will be deemed to be made again at and as of the time of the Closing (other than any such representation or warranty which is expressly made with reference to a time prior to the time of the Closing, which will be deemed remade as of such time only), and taken as a whole such representations and warranties, as so remade, will have been true and accurate 18 in all material respects, except to the extent of deviations therefrom permitted or contemplated by this Agreement; and (2) each of Sinclair and the Merger Sub will in all material respects have performed and complied with the covenants and agreements required by this Agreement to be performed or complied with by it prior to or at the time of the Closing, taken as a whole. 9.B PROCEEDINGS. (1) No action or proceeding will have been instituted and be pending before any court or governmental body to restrain or prohibit, or to obtain a material amount of damages in respect of, the consummation of the transactions contemplated by this Agreement that, in the reasonable opinion of Sullivan, may reasonably be expected to result in a preliminary or permanent injunction against such consummation or, if the transactions contemplated hereby were consummated, an order to nullify or render ineffective this Agreement or such transactions or for the recovery against any Sullivan- Related Entity or any officer, director or stockholder of any Sullivan-Related Entity of a material amount of damages; and (2) no Party will have received written notice from any governmental body of (a) such governmental body's intention to institute any action or proceeding to restrain or enjoin or nullify this Agreement or the transactions contemplated hereby, or to commence any investigation (other than a routine letter of inquiry, including, without limitation, a routine Civil Investigative Demand) into the consummation of the transactions contemplated by this Agreement, or (b) the actual commencement of such an investigation, in each case unless the same has been withdrawn, resolved, concluded or abandoned. 9.C HART-SCOTT-RODINO AND FCC MATTERS. The Approval Date will have occurred and the Required FCC Consent will be in full force and effect. 9.D SPIN-OFF. The Spin-Off will have been consummated. 9.E OTHER DELIVERIES. The Merger Sub will have delivered, or will stand ready to deliver, to Sullivan such instruments, documents, and certificates as are contemplated by Section 3.B(1). ARTICLE X CONDITIONS TO THE OBLIGATIONS OF THE MERGER SUB AT THE CLOSING The obligations of the Merger Sub to consummate the Merger on the Closing Date are, at the Merger Sub's option, subject to the fulfillment of the following conditions at the time of the Closing (Sinclair and the Merger Sub expressly acknowledging that the effectiveness of the 19 Acquiring Party Consents is not a condition to such obligations): 10.A REPRESENTATIONS, WARRANTIES, COVENANTS. (1) Each of the representations and warranties of Sullivan set forth in Article IV, considered without regard to any materiality qualifiers contained therein, will be deemed to be made again at and as of the time of the Closing (other than any such representation or warranty which is expressly made with reference to a time prior to the time of the Closing, which will be deemed remade as of such time only), and taken as a whole such representations and warranties, as so remade, will have been true and accurate, except to the extent of deviations therefrom which are permitted or contemplated by this Agreement or which, in the aggregate, do not constitute and have not caused a Material Adverse Change; and (2) Sullivan will in all material respects have performed and complied with the covenants agreements required by this Agreement to be performed or complied with by it prior to or at the time of the Closing, taken as a whole, and Sullivan will in all material respects have performed and complied with the covenants and agreements required by this Agreement to be performed or complied with by it prior to or at the time of the Closing, taken as a whole. 10.B PROCEEDINGS. (1) No action or proceeding will have been instituted and be pending before any court or governmental body to restrain or prohibit, or to obtain a material amount of damages in respect of, the consummation of the transactions contemplated by this Agreement that, in the reasonable opinion of Sinclair, may reasonably be expected to result in a preliminary or permanent injunction against such consummation or, if the transactions contemplated hereby were consummated, an order to nullify or render ineffective this Agreement or such transactions or for the recovery against any Sinclair- Related Entity or any officer, director or stockholder of any Sinclair-Related Entity of a material amount of damages; and (2) no Party will have received written notice from any governmental body of (a) such governmental body's intention to institute any action or proceeding to restrain or enjoin or nullify this Agreement or the transactions contemplated hereby, or to commence any investigation (other than a routine letter of inquiry, including, without limitation, a routine Civil Investigative Demand) into the consummation of the transactions contemplated by this Agreement, or (b) the actual commencement of such an investigation, in each case unless the same has been withdrawn, resolved, concluded or abandoned. 10.C HART-SCOTT-RODINO AND FCC MATTERS. The Approval Date will have occurred and the Required FCC Consent will be in full force and effect. 20 10.D OTHER INSTRUMENTS. Sullivan will have delivered, or will stand ready to deliver, to the Merger Sub such instruments, documents, and certificates as are contemplated by Section 3.C(1). ARTICLE XI POST-CLOSING MATTERS 11.A SURVIVAL. The representations, warranties and certifications of the Parties contained in or made pursuant to this Agreement (including any certification contained in any certificate to be delivered pursuant to Section 3.C) will survive the execution of this Agreement and the Closing only to the extent expressly provided in the Indemnity Agreement. The covenants and agreements of the Parties set forth in this Agreement will survive until performed and discharged in full. 11.I LIMITATION OF RECOURSE. Except as provided in the Indemnity Agreement, after the Closing, no claim may be brought or maintained against any Party or any Old Sullivan Stockholder or any of their respective present or former officers, directors, employees or other affiliates by any Party or Old Sullivan Stockholder or any of its successors or assigns, and no recourse may be sought or granted against any Person, by virtue of or based upon any alleged misstatement, omission, inaccuracy in, or breach of any representation, warranty or certification of any Party set forth in or made pursuant to this Agreement, and in no event will Sinclair or Post-Merger Sullivan be entitled to claim or seek any rescission of the Merger or any of the other transactions consummated pursuant to the Transaction Documents, any such right of rescission or rights to damages which any such Party might otherwise have being hereby expressly waived and any claims or judgments being limited accordingly. 11.C ACKNOWLEDGMENT BY THE ACQUIRING PARTIES. Each of the Acquiring Parties has conducted, to its satisfaction, an independent investigation and verification of Sullivan, its Subsidiaries, the Stations and the Station Assets and the financial condition, results of operations, assets, liabilities, properties and projected operations of Sullivan, its Subsidiaries, the Stations and the Station Assets. In determining to enter into this Agreement and proceed with the transactions contemplated by this Agreement, each Acquiring Person has relied on the covenants of Sullivan, the results of such independent investigation and verification and the representations and warranties of Sullivan (in conjunction with the Schedules hereto) set forth in this Agreement (including the certifications to be made in any certificate to be delivered pursuant to Section 3.C), all of which each Acquiring Party acknowledges and agrees will survive for a limited duration. SUCH REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS WITH RESPECT TO SULLIVAN, ITS SUBSIDIARIES, THE STATIONS AND THE STATION ASSETS TO THE ACQUIRING PARTIES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND EACH ACQUIRING PARTY UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER 21 REPRESENTATIONS, WARRANTIES AND CERTIFICATIONS OF ANY KIND OR NATURE AND WHETHER ORAL OR CONTAINED IN ANY WRITING OTHER THAN THIS AGREEMENT OR ANY SUCH CERTIFICATE (INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION, WARRANTY OR CERTIFICATION RELATING TO THE PROJECTED, FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OR OPERATIONS, ASSETS OR LIABILITIES RELATING TO THE STATIONS) ARE SPECIFICALLY DISCLAIMED BY SULLIVAN, THE STOCKHOLDER REPRESENTATIVE, THE OFFICERS OF SULLIVAN AND ITS SUBSIDIARIES AND THE OLD SULLIVAN STOCKHOLDERS. 11.D CORPORATE NAME. After the Merger (but on the Closing Date), Post- Merger Sullivan will take and will cause its Subsidiaries to take such action as is necessary to change its corporate name in its certificate or articles of incorporation filed with the Secretary of State or similar official of the jurisdiction of its incorporation to a name which does not include, and is not confusingly similar to, the name "Sullivan" and will cease the use of all Sullivan Broadcasting logos or any similar mark. Notwithstanding anything in this Agreement to the contrary, Post-Merger Sullivan will be entitled to continue to use its present corporate name until such time as such name change is effective and to the extent necessary to accomplish such name change, and may endorse checks and other instruments in such name. ARTICLE XII TERMINATION 12.A TERMINATION OF AGREEMENT PRIOR TO CLOSING. Subject to Section 12.A(3), this Agreement may be terminated at any time prior to the Closing as follows: (1) BY SULLIVAN. By Sullivan, by written notice (a "Sullivan Termination Notice") to Sinclair: (a) at any time when any material breach by any Acquiring Party of its obligations pursuant to this Agreement has occurred and is continuing, if both (i) such breach materially and adversely affects the likelihood that any of the conditions set forth in Article IX or X which has not been satisfied or waived will be satisfied or materially and adversely affects any Party's ability to comply with its obligations pursuant to this Agreement, and (ii) at least thirty days have elapsed since Sullivan gave Sinclair written notice requesting that such Person cure such breach, unless prior to the giving of the Sullivan gave each such breaching Acquiring Party 22 has cured such breach; (b) at any time after the Expiration Date, if (i) as of the Expiration Date, each of Sullivan's and the Merger Sub's conditions to closing set forth in Articles IX and X was satisfied or waived in writing, (ii) the absence of satisfaction of each of Sullivan's and the Merger Sub's conditions to closing set forth in Articles IX and X which was not waived in writing or satisfied as of the Expiration Date was caused by a breach by one or more of the Acquiring Parties of any of its or their representations, warranties and/or obligations under this Agreement and/or the failure of any Acquiring Party Consent to have been obtained, (iii) the Approval Date had not occurred on or prior to the Expiration Date as a result of any breach by one or more of the Acquiring Parties of any provision of this Agreement, or (iv) one or more of the Acquiring Parties and the Affiliates thereof refused, failed or declined to take any action (other than divesting itself of an broadcast television or radio station of which it or one of its Subsidiaries is the licensee or terminating any time brokerage or similar arrangement) which the FCC, the FTC, the DOJ or the staff of any of them indicates to any Acquiring Party or agent thereof is a condition to the grant of the Required FCC Consent or the expiration or termination of the requisite waiting period under the Hart-Scott-Rodino Act for the Merger; or (c) at any time after the Expiration Date, in any circumstance which is not described in Section 12.A(1)(b), unless the absence of satisfaction of each of Sullivan's and the Merger Sub's closing conditions set forth in Articles IX and X which has not been satisfied or waived in writing has been caused by a breach by Sullivan of its obligations under this Agreement. (2) BY SINCLAIR. By Sinclair, by written notice (a "Sinclair Termination Notice") to Sullivan: (a) at any time when any material breach by Sullivan of its obligations pursuant to this Agreement has occurred and is continuing, if both (i) such breach materially and adversely affects the likelihood that any of the conditions set forth in Article IX or X will be satisfied or materially and adversely affects any Party's ability to comply with its obligations pursuant to this Agreement and 23 (ii) at least thirty days have elapsed since Sinclair gave Sullivan written notice requesting that Sullivan cure such breach, unless prior to the giving of such Sinclair Termination Notice Sullivan has cured such breach; or (b) at any time after the Expiration Date, under any circumstances described in Section 12.A(1)(b) or Section 12.A(1)(c). (3) WHEN TERMINATION NOT PERMITTED. Sullivan may not terminate this Agreement pursuant to Section 12.A(1) at any time when Sullivan is in material breach of a material obligation under this Agreement. Sinclair may not terminate this Agreement pursuant to Section 12.A(2) at any time when any Acquiring Party is in material breach of a material obligation under this Agreement. 12.B SURVIVAL OF CERTAIN PROVISIONS; REMEDIES. (1) GENERAL. No Party will have any liability to any other Party for costs, expenses, damages (consequential or otherwise), loss of anticipated profits, or otherwise as a result of a termination pursuant to Section 12.A except as provided in Section 12.B(2) or 12.B(3). The Parties agree that time is of the essence with respect to the provisions of Sections 3.B and 12.A. Sections 7.G and 8.G, this Article XII and Article XIII will survive the termination of this Agreement pursuant to Section 12.A. (2) FOR SULLIVAN. Sullivan will have such remedies as it may have at law or in equity in the event of a termination of this Agreement pursuant to Section 12.A. (3) FOR THE ACQUIRING PARTIES. The Acquiring Parties' sole and exclusive remedies for the termination of this Agreement or any failure of performance or compliance by Sullivan with any covenant or agreement contained in this Agreement prior to the Closing, or by Sullivan with any covenant or agreement contained in this Agreement prior to the Closing, will be (a) their respective rights (if any) under applicable law or equitable principles to seek damages in respect of their direct out-of-pocket losses or expenses (but not any damages in respect of lost profits or other similar or consequential or incidental damages) occasioned by and as a consequence of such breach; (b) their respective rights (if any) under applicable law or equitable principles to seek specific enforcement of this Agreement against Sullivan, including specific enforcement of Sullivan's obligation to consummate the Merger (subject to FCC approval and other required Consents being obtained), it being acknowledged by Sullivan that the Acquiring Parties would not have an adequate 24 remedy at law in the event of any such failure, provided that no Acquiring Party will be entitled to such specific performance unless (i) each Acquiring Party has complied in all material respects with its material obligations under this Agreement and (ii) either (A) each condition to closing of Sullivan set forth in Article IX has been satisfied or waived in writing or (B) the absence of satisfaction of each such condition to closing which has not been satisfied or waived in writing is caused solely by a breach by Sullivan of its obligations under this Agreement. ARTICLE XIII MISCELLANEOUS 13.A EXPENSES. Except as otherwise expressly provided in this Agreement, Sullivan will bear all of the expenses incurred prior to the Closing by Sullivan and the Stockholder Representative in connection with the transactions contemplated by this Agreement, and each of the Acquiring Parties will bear all of its expenses incurred in connection with the transactions contemplated by this Agreement, in each case including, without limitation, account ing and legal fees incurred in connection herewith. 13.B ASSIGNMENTS. (1) BY SULLIVAN. This Agreement may not be assigned by Sullivan without the prior written consent of the Acquiring Parties. Notwithstanding the foregoing, Sullivan may assign its rights under this Agreement for collateral purposes only to any lender to it, or any agent for any such lender(s), without the consent of any other Party, and any such lender or agent may transfer such rights pursuant to the exercise of remedies with respect to such collateral security to any other Person (it being understood that any such lender or agent will be a third-party beneficiary of the agreement constituted by this Section 13.B(1)). (2) BY SINCLAIR. Sinclair or the Merger Sub may assign its rights under this Agreement without the consent of Sullivan or the Stockholder Representative. (3) GENERAL RULES. Any attempt to assign this Agreement or any rights or obligations hereunder without first obtaining any consent which is required by this Section 13.B will be void. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Each Old Sullivan Stockholder is an express third-party beneficiary of this Agreement. 13.C FURTHER ASSURANCES. From time to time prior to, at, and after the Closing, each Party will execute all such instruments and take all such actions as any other of them, being advised by counsel, may reasonably request in connection with carrying out and effectuating the intent and purpose hereof, and all transactions and things contemplated by this Agreement, including the execution and delivery of any and all consents, confirmatory and other instruments, in addition 25 to those to be delivered at the Closing, and any and all actions which may reasonablybe necessary to complete the transactions contemplated hereby. 13.D NOTICES. All notices, demands, and other communications which may or are required to be given under or with respect to this Agreement will be in writing, will be delivered personally or sent by nationally recognized overnight delivery service, charges prepaid, or by registered or certified mail, return-receipt requested, and will be deemed to have been given or made when personally delivered, or on the next Business Day after delivery to such overnight delivery service, or on the fifth day after it is deposited in the mail, registered or certified, first class postage prepaid, as the case may be, if addressed as follows: (1) If to Sullivan (prior to the Closing) or the Stockholder Representative: c/o ABRY Partners, Inc. 18 Newbury Street Boston, Massachusetts 02116 Attn: Royce Yudkoff, President with a copy (which will not constitute notice to Sullivan or the Stockholder Representative) to: John L. Kuehn, Esq. Kirkland & Ellis 153 E. 53rd Street New York, New York 10022 or to such other address and/or with such other copies as the Person to whom such notice is to be given may from time to time designate by notice to the Acquiring Parties given in accordance with this Section 13.D. (2) If to Sinclair, the Merger Sub or Post-Merger Sullivan: Sinclair Broadcast Group, Inc. 2000 W. 41st Street Baltimore, Maryland 21211 Attn: David D. Smith, President with a copy (which will not constitute notice to Sinclair, the Merger Sub or Post-Merger Sullivan) to: Steven A. Thomas, Esq. Thomas & Libowitz, P.A. 100 Light Street, Suite 1100 Baltimore, Maryland 21202 26 and Sinclair Communications, Inc. 2000 W. 41st Street Baltimore, Maryland 21211 Attn: General Counsel or to such other address and/or with such other copies as the Person to whom such notice is to be given may from time to time designate by notice to Sullivan (if prior to the Closing) and the Stockholder Representative given in accordance with this Section 13.D. 13.E CAPTIONS. The captions of Articles and Sections of this Agreement are for convenience only, and will not control or affect the meaning or construction of any of the provisions of this Agreement. 13.F LAW GOVERNING. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED, AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCES TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE FEDERAL LAW OF THE UNITED STATES GOVERNS THE TRANSACTIONS CONTEMPLATED HEREBY. 13.G WAIVER OF PROVISIONS. The terms, covenants, representations, warranties, and conditions of this Agreement may be waived as to any Party only by a written instrument executed by such Party. The terms, covenants, representations, warranties, and conditions of this Agreement may be waived as to any Old Sullivan Stockholder only by a written instrument executed by Sullivan, prior to the Closing, or the Stockholder Representative, after the Closing. The failure of any Party or any Old Sullivan Stockholder at any time or times to require performance of any provision of this Agreement will in no manner affect the right at a later date to enforce the same. No waiver by or on behalf of any Party to this Agreement or any Old Sullivan Stockholder of any condition or the breach of any provision, term, covenant, representation, or warranty contained in this Agreement, whether by conduct or otherwise, in any one or more instances, will be deemed to be or construed as a further or continuing waiver of any such condition or of the breach of any other provision, term, covenant, representation, or warranty of this Agreement. 13.H COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, and all counterparts so executed will constitute one (1) agreement binding on all of the parties hereto, notwithstanding that all the parties hereto are not signatory to the same counterpart. 13.I ENTIRE AGREEMENT. This Agreement (including the Schedules and Exhibits hereto) and the confidentiality agreement referred to in Section 8.C (including the Acquiring Parties' obligations with respect thereto, as provided in Section 8.C), constitute the entire agreement among 27 the parties hereto pertaining to the subject matter hereof and supersede any and all prior agreements, understandings, negotiations, and discussions, whether oral or written, between them relating to the subject matter hereof. 13.J ACCESS TO BOOKS AND RECORDS. (1) Post-Merger Sullivan will, and will cause its Subsidiaries to, preserve for not less than five (5) years after the Closing Date all books and records included in the Station Assets. After such five-year period, Post-Merger Sullivan will not, and will not cause or permit its Subsidiaries to, destroy any books or records relating to the conduct of business of the Stations prior to the Effective Time unless Post-Merger Sullivan first offers to transfer such books and records to the Stockholder Representative at no cost to the Stockholder Representative, and if Post-Merger Sullivan is requested to do so, Post-Merger Sullivan will transfer, or cause a Subsidiary of Post-Merger Sullivan to transfer, such books or records to the Stockholder Representative. (2) At the request of the Stockholder Representative, Post-Merger Sullivan will, and will cause each of its Subsidiaries to, permit the Stockholder Representative (including its officers, employees, accountants, and counsel) any access, upon reasonable prior written notice during normal business hours, to all of its property, accounts, books, contracts, records, accounts payable and receivable, records of employees, FCC logs and other information concerning the affairs or operation of the Stations as the Stockholder Representative may reasonably request for any reasonable purpose relating to the transactions contemplated by this Agreement or the ownership or operation of any Station prior to the Effective Time, and to make extracts or copies from the foregoing at the Stockholder Representative's expense. At Post-Merger Sullivan's request, prior to receiving any such requested information, the Stockholder Representative will execute a confidentiality agreement with respect thereto which is reasonably acceptable to Post-Merger Sullivan. 13.K PUBLIC ANNOUNCEMENTS. Prior to the Closing, no Party will, except by mutual agreement of Sullivan and Sinclair (including agreement as to content, text and method of distribution or release), make any press release or other public announcement or disclosure concerning the transactions contemplated by this Agreement, except as may be required by any Legal Requirement (including filings and reports required to be made with or pursuant to the rules of the Securities and Exchange Commission); provided that, prior to making any such announcement or disclosure required by any Legal Requirement, to the extent practicable, the disclosing Party gives each Person named above prior written notice of the context, text and content of, the method of distribution or release of, and all other material facts concerning, such disclosure. 13.L DISCLOSURE. If and to the extent that any information required to be furnished by Sullivan in any attached Schedule is contained in this Agreement or in any attached Schedule, such information will be deemed to have been included in each other attached Schedule in which such information is required to be included to the extent its relevance to such latter Schedule is 28 reasonably apparent. By including any information in any attached Schedule, Sullivan will not be deemed to have admitted or acknowledged that such information is material to or outside the ordinary course of the business of Sullivan or any Station. 13.M DEFINITIONAL PROVISIONS. (1) TERMS DEFINED IN APPENDIX. Each capitalized term which is used and not otherwise defined in this Agreement or any attached Schedule has the meaning which is specified for such term in the Appendix which is attached to this Agreement. (2) KNOWLEDGE. As used in this Agreement, the term "knowledge" of Sullivan will refer only to the actual knowledge, without any particular inquiry (except as specified in this Agreement), of the Corporate Personnel, Andrew Banks and Royce Yudkoff, after inquiry of the general managers of the Stations; and the "knowledge" of Sinclair or the Merger Sub will refer only to the actual knowledge, without any particular inquiry (except as specified in this Agreement) of David Smith and David Amy. (3) INTERPRETATION. Words used in this Agreement, regardless of the gender and number specifically used, will be deemed and construed to include any other gender, masculine, feminine or neuter, and any other number, singular or plural, as the context requires. Whether or not used in conjunction with the words "without limitation" or words of similar import, the term "including" as used in this Agreement imports that the items referred to are illustrative only and do not purport to be a complete listing of the items of the type in question. The wording of the provisions of this Agreement is the result of arms-length negotiations among the parties to this Agreement and was selected by them to reflect their mutual intentions; therefore, no party will be deemed the "drafter" of this Agreement and no rule of strict construction will be applied against or in favor of any party to this Agreement. 13.N ARBITRATION. (1) GENERALLY. Except as expressly provided in the Indemnity Escrow Agreement or for purposes of pursuing any remedy pursuant to Section 12.B(3)(b), the arbitration procedures described in this Section 13.N will be the sole and exclusive method of resolving and remedying claims arising under this Agreement and the other Transaction Documents ("Disputes"); provided that nothing in this Section 13.N will prohibit a Party from instituting litigation to enforce any Final Arbitration Award. Except as otherwise provided in the Commercial Arbitration Rules of the American Arbitration Association as in effect from time to time (the "AAA Rules"), the arbitration procedures described in this Section 13.N and any Final Arbitration Award will be governed by, and will be enforceable pursuant to, the Uniform Arbitration Act as in effect in the State of New York from time to time. No Person will be entitled to claim or recover punitive damages in any such proceeding. 29 (2) NOTICE OF ARBITRATION. If a Party asserts that there exists a Dispute, then such Person (the "Disputing Person") will give each other Person involved in such Dispute a written notice setting forth the nature of the asserted Dispute. If all such Persons do not resolve any such asserted Dispute prior to the tenth Business Day after such notice is given, then the Disputing Person may commence arbitration pursuant to this Section 13.N by giving each other Person involved in such Dispute a written notice to that effect (an "Arbitration Notice"), setting forth any matters which are required to be set forth therein in accordance with the AAA Rules. Unless otherwise notified, the Acquiring Parties are entitled to assume that the Stockholder Representative is authorized to act on behalf of each Old Sullivan Stockholder with respect to any Dispute. (3) SELECTION OF ARBITRATOR. The Persons involved in such Dispute will attempt to select a single arbitrator by mutual agreement. If no such arbitrator is selected prior to the twentieth Business Day after the related Arbitration Notice is given, then an arbitrator which is experienced in matters of the type which are the subject matter of the Dispute will be selected in accordance with the AAA Rules. (4) CONDUCT OF ARBITRATION. The arbitration will be conducted under the AAA Rules, as modified by any written agreement among the Persons involved in such Dispute. The arbitrator will conduct the arbitration in a manner so that the final result, determination, finding, judgment or award determined by the arbitrator (the "Final Arbitration Award") is made or rendered as soon as practicable, and the Persons involved in such Dispute will use reasonable efforts to cause a Final Arbitration Award to occur not later than the sixtieth day after the arbitrator is selected. Any Final Arbitration Award will be final and binding upon the Persons involved in such Dispute, and there will be no appeal from or reexamination of any Final Arbitration Award, except as provided in the Uniform Arbitration Act, as in effect in the State of New York from time to time. (5) ENFORCEMENT. A Final Arbitration Award may be enforced in any state or federal court having jurisdiction over the subject matter of the related Dispute. (6) EXPENSES. The prevailing Person(s) in any arbitration proceeding in connection with this Agreement will be entitled to recover from the non-prevailing Person(s) their reasonable attorneys' fees and disbursements in addition to any damages or other remedies awarded to such prevailing Person(s), and the non-prevailing Person(s) will be required to pay all other costs and expenses associated with the arbitration; provided that (i) if an arbitrator is unable to determine that a Person is a prevailing Person in any such arbitration proceeding, then such costs and expenses will be equitably allocated by such arbitrator upon the basis of the outcome of such arbitration proceeding, and (ii) if such arbitrator is unable to allocate such costs and expenses in such a manner, then the costs and expenses of such arbitration will be paid one-half by Sullivan and one-half by Sinclair, and each Party will pay the out-of-pocket expenses incurred by it. As part of any Final Arbitration Award, the arbitrator may designate the prevailing Person(s) for purposes of this Section 13.N(6). Except as provided in the preceding sentences, each Person involved in a 30 Dispute will bear its own costs and expenses (including legal feesand disbursements) in connection with any such proceeding or submission. 13.O STOCKHOLDER REPRESENTATIVE. (1) APPOINTMENT; AUTHORITY GENERALLY. On behalf of the Old Sullivan Stockholders, Sullivan hereby appoints ABRY Partners as the initial Stockholder Representative under this Agreement, to serve in accordance with the terms, conditions and provisions of this Agreement, and ABRY Partners, by its execution of this Agreement, hereby agrees to act as such, upon the terms, conditions and provisions of this Agreement. From and after the Closing, the Stockholder Representative will be authorized to act on behalf of the Old Sullivan Stockholders in accordance with this Agreement. (2) AUTHORIZATION. The Stockholder Representative, in such capacity, will be entitled to take all actions on behalf of the holders of Sullivan Shares or the Old Sullivan Stockholders, as the case may be, with respect to this Agreement and the other agreements contemplated hereby, and omit to take any action, each as directed by (a) prior to the Effective Time, the holders of capital stock of Sullivan having a majority of the voting power represented by the outstanding capital stock of Sullivan at the time in question, and (b) after the Effective Time, Persons who immediately prior to the Effective Time held Sullivan Shares which represented a majority of the voting power of the Sullivan Shares, (in either case, the "Majority Sullivan Stockholders"). The Stockholder Representative may be removed and replaced from time to time as the representative of the holders of the Sullivan Shares or the Old Sullivan Stockholders by written notice given by the Majority Sullivan Stockholders to Sullivan (prior to the Effective Time) and the Acquiring Parties. (3) RESPONSIBILITY. The Stockholder Representative will have no duties or responsibilities except those expressly set forth in this Agreement or any other agreement which may be entered into by it hereunder. The Stockholder Representative will have no responsibility for the validity of this Agreement or any agreement referred to in this Agreement or for the performance of any such agreements by any party thereto or for the interpretation of any of the provisions of any such agreements. The Stockholder Representative's liability in fulfilling its duties will be limited to bad faith, willful misconduct or gross negligence on its part. The Stockholder Representative will be protected in acting upon any certificate, notice or other instrument whatsoever received by the Stockholder Representative as to its due execution, the validity and effectiveness of its provisions, and the truth and accuracy of any information therein contained that the Stockholder Representative in good faith believes to be genuine and to have been signed or presented by a proper Person or Persons. The Stockholder Representative may, in its sole 31 discretion, consult with and obtain advice from legal counsel and any other Person in the event of any question as to any of the provisions of this Agreement, any other agreement entered into in connection herewith or its duties hereunder or thereunder. The reasonable cost of such services, to the extent not borne by Sullivan, will be borne among the Old Sullivan Stockholders who held Sullivan Shares immediately prior to the Effective Time, pro rata in accordance with the respective amounts of the Merger Consideration to be received by them in respect of the Sullivan Shares. (4) RESIGNATION; REPLACEMENT. The Stockholder Representative will have the right, in its sole discretion, to resign as the Stockholder Representative (in its capacity as the representative of the holders of Sullivan Shares or the Old Sullivan Stockholders) at any time by giving at least 30 days prior written notice to Sullivan (prior to the Effective Time) and the Acquiring Parties. In such event, Sullivan (prior to the Effective Time) or the Majority Sullivan Stockholders (after the Effective Time) will promptly appoint another Stockholder Representative to represent the holders of Sullivan Shares and the Old Sullivan Stockholders and give notice of such selection to the Acquiring Parties and the Old Sullivan Stockholders (after the Effective Time). Such resignation of the Stockholder Representative will be effective upon such notice being given and such new Stockholder Representative's acceptance of such appointment and will relieve the resigning Stockholder Representative of all duties and responsibilities of the Stockholder Representative in such capacity thereafter arising. 13.P COMPLETION OF SULLIVAN'S SCHEDULES. The Acquiring Parties acknowledge that Sullivan has executed this Agreement without having the opportunity to request of personnel of the Stations information which may be material to the preparation of the attached Schedules referred to in Article IV (and that, therefore, some or all of such attached Schedules may not be correct and complete and, as a result, some or all of the representations and warranties set forth in Article IV which refer to such attached Schedules may not be true and correct). On or prior to March 9, 1998, Sullivan may deliver to Sinclair an amendment and restatement of any such attached Schedule, or any portion thereof, or a supplement to any such attached Schedule or any portion thereof, which may be required in order to accurately depict facts and circumstances which exist on the date of this Agreement (or any other applicable date referred to in any such representation or warranty), and the attached Schedule or portion thereof in question will be deemed to have been so amended and restated or modified, as the case may be, as of the time of the execution and delivery of this Agreement. 32 13.Q TREATMENT OF STATION KOKH. Each Acquiring Party acknowledges that, notwithstanding any language to the contrary in this Agreement, Sullivan has made and will make no representation, warranty or certification of any kind with respect to Station KOKH (including with respect to the assets, liabilities and operations related to Station KOKH), and no representation or warranty set forth in Article IV, and no certification relating thereto delivered pursuant to Section 3.C, will be deemed to apply to Station KOKH (including to any related asset, liability or operations). [SIGNATURE PAGES TO FOLLOW --REST OF PAGE LEFT INTENTIONALLY BLANK] 33 IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of Merger to be duly executed by their duly authorized officers, all as of the day and year first above written. SULLIVAN BROADCASTING COMPANY II, INC. By: ----------------------------------------------- Its: ---------------------------------------------- SINCLAIR BROADCAST GROUP, INC., in its own right and on behalf of a Subsidiary to be formed by it By: ----------------------------------------------- Its: ---------------------------------------------- ABRY PARTNERS, INC. By: ----------------------------------------------- Its: ---------------------------------------------- 34 APPENDIX ADDITIONAL DEFINED TERMS. The following capitalized terms have the following meanings when used in this Agreement and the Schedules attached to this Agreement: "ABRY FUND" means ABRY Broadcast Partners II, L.P., a Delaware limited partnership. "ACQUIRING PARTIES" means Sinclair, the Merger Sub and Post-Merger Sullivan. "ACQUIRING PARTY CONSENTS" means all Consents other than the Required FCC Consent, any Consent required under the Hart-Scott-Rodino Act, or any Sullivan Consent. "AFFILIATE" of any Person means any other Person which is controlled by, controls, or is under common control with, such first Person. "AFFILIATED GROUP" means an affiliated group of corporations, as that term is defined in Section 1504(a) of the Tax Code (or in any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law). "APPROVAL DATE" means the first day upon which the Required FCC Consent has been Granted and the requisite waiting period under the Hart-Scott-Rodino Act for the consummation of the Merger has expired or been terminated. A "BUSINESS DAY" means any day other than a Saturday, a Sunday or another day upon which banks in New York, New York generally are not open for business. "CLOSING DATE" means the date upon which the Closing occurs. "COMMUNICATIONS ACT" means the Communications Act of 1934, as amended and as in effect from time to time. "CONSENT" means any consent, order, approval, authorization or other action of, or any filing with or notice to or other action by or with respect to, any Person which is required for any of the execution, delivery or performance of this Agreement, the consummation of the Spin-Off, the Merger, or the conduct of the business of Sullivan or Post-Merger Sullivan or the holding or utilization of any Station Asset thereafter, whether such requirement arises pursuant to any Legal Requirement, Contract, a Person's organizational documents or otherwise, including any of the foregoing which is required in order to prevent a breach of or a default under or a termination or modification of any Contract. "CONTRACT" means any agreement, lease, arrangement, commitment, or understanding to which Sullivan, with respect to the Stations, is a party. 35 "CONTRACTS SCHEDULE" means the attached Exhibit C. "CORPORATE PERSONNEL" means J. Daniel Sullivan, David Pulido, Patrick Bratton, Richard Montgomery, Barry Charbonneau and any successor to any of them in his capacity as an employee and/or officer of Sullivan. "EFFECTIVE TIME" means the time of the filing of the Certificate of Merger described in Article II. "EXPIRATION DATE" means the earlier of (a) the last to occur of the 15th day after the date upon which the Required FCC Consent is Granted and the last day of the calendar month during which the Required FCC Consent is Granted, and (b) December 31, 2008. "FCC" means the Federal Communications Commission or any successor thereto. "FCC AUTHORIZATIONS" means the authorizations issued by the FCC and described on the attached Schedule 4C. A "FINAL ORDER" means the Required FCC Consent if (a) the Required FCC Consent has been Granted and has not been reversed, stayed, set aside, enjoined, annulled or suspended (whether under Section 402 or 405 of the Communications Act or otherwise) and (b) (i) no request has been filed for administrative or judicial review, reconsideration, appeal, certiorari or stay and the time for filing any such request and for the FCC to review the Required FCC Consent on its own motion has expired, or (2) if such a review, reconsideration or appeal has occurred, such review, reconsideration or appeal has been denied and the time for further review, reconsideration or appeal has expired. "GAAP" means United States generally accepted accounting principles, as in effect from time to time, as applied by Sullivan and its Subsidiaries from time to time. The Required FCC Consent is "GRANTED" on the effective date, as determined under the FCC's rules, regulations and policies, of the grant thereof by the FCC or its staff. "HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as in effect from time to time. "HEADQUARTERS ASSETS" means the assets of Sullivan Holdings and its Subsidiaries located in the offices of Sullivan Holdings and its Subsidiaries located in Franklin, Tennessee, and Boston, Massachusetts, and any so-called "personal seat license" or other right of Sullivan Holdings or any of its Subsidiaries to subscribe for tickets to events at the stadium presently being constructed or proposed to be constructed in the Nashville, Tennessee, metropolitan area. "INDEMNITY AGREEMENT" means the Indemnity Agreement entered into among 36 Sullivan, Sinclair and certain other Persons dated as of the date of this Agreement, as such agreement is in effect from time to time. "INDEMNITY ESCROW AGREEMENT" means the Indemnity Escrow Agreement entered into among the Stockholder Representative, Sinclair and certain other Persons dated as of the date of this Agreement, as such agreement is in effect from time to time. "LEGAL REQUIREMENTS" means the Communications Act, the rules, regulations and published policies of the FCC, and all other federal, state and local laws, rules, regulations, ordinances, judgments, orders and decrees. "LIEN" means any mortgage, pledge, hypothecation, encumbrance, lien (statutory or otherwise), preference, priority or other security agreement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any lease having substantially the same effect as any of the foregoing and any assignment or deposit arrangement in the nature of a security device). "MARKET CABLE SYSTEM" means, with respect to any Station, any cable television system located within such Station's television market, as that term is defined in Section 76.55(e) of the rules of the FCC. "MISSION GUARANTEES" means the (i) Guaranty of Sullivan Broadcasting dated as of July 11, 1996 in favor of NationsBank of Texas, N.A., and any other lenders referred to therein relating to certain indebtedness of Mission Broadcasting I, Inc., a Delaware corporation, and (ii) the Guaranty of Sullivan Broadcasting dated as of July 29, 1996 in favor of NationsBank of Texas, N.A., and any other lenders referred to therein relating to certain indebtedness of Mission Broadcasting II, Inc., a Delaware corporation, in each case as in effect from time to time. "OLD SULLIVAN STOCKHOLDER" means any holder of record of any Sullivan Share immediately prior to the Effective Time. "ORDINARY COURSE OF BUSINESS" means the ordinary course of the conduct of business by Sullivan Holdings and is Subsidiaries, substantially consistent with their respective past practices. "PARTIES" means the parties to this Agreement. "PERMITTED ENCUMBRANCES" means (i) Liens arising by operation of law and securing the payment of Taxes which are not yet due and payable, (ii) with respect to any property leased by Sullivan as lessee, the interest of the lessor in such property, (iii) easements, rights-of-way, reservations of rights, conditions or covenants, zoning, building or similar restrictions or other non-monetary Liens or defects that do not, individually or in the aggregate, materially interfere with the use of the affected property in the operation of 37 the Stations as currently conducted or as presently proposed by Sullivan Holdings and its Subsidiaries to be conducted, (iv) restrictions on transfer imposed under state or federal securities laws or pursuant to the Communications Act or the FCC Regulations, and (v) Liens securing indebtedness under the Sullivan Senior Debt Arrangements, other indebtedness and the Mission Guarantees. A "PERSON" means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated association or government or department thereof. "REQUIRED FCC CONSENT" means the action(s) or order(s) by the FCC granting its Consent to the transfer of control of Sullivan by reason of the Merger, without any condition which in the reasonable judgment of the Sullivan and the Acquiring Parties is adverse to such Person (or, in Sullivan's or the Stockholder Representative's reasonable judgment, adverse to any of the Old Sullivan Stockholders), as the case may be, in any material respect. "SINCLAIR-RELATED ENTITY" means Sinclair, the Merger Sub, any direct or indirect assignee or proposed assignee (by operation of law or otherwise) of any of the rights of any of them pursuant to this Agreement or any other agreement contemplated hereby, any direct or indirect successor or proposed successor to Post-Merger Sullivan's business or operation with respect to any Station, or any Affiliate or any of them. "SPIN-OFF" means the transfer of the assets described on the attached Exhibit D to Sullivan by Sullivan Holdings and its Subsidiaries. "STATION ASSETS" means all of Sullivan's rights in, to and under the assets and properties of the Stations, real and personal, tangible and intangible, of every kind and description which are owned and used by Sullivan in connection with the business and operations of the Stations, including rights under contracts and leases, real and personal property, plant and equipment, inventories, intangibles, licenses and goodwill, and all other assets and properties of Sullivan used solely in connection with the operation of any Station; provided that the Station Assets will not include the Headquarters Assets. "STATION KOKH" means broadcast television station KOKH-TV, Oklahoma City, Oklahoma, together with all related translator stations (if any) owned by Sullivan. "STATIONS" means broadcast television station WZTV, Nashville, TN; broadcast television station WUTV, Buffalo, New York; broadcast television station WXLV-TV, Winston-Salem, North Carolina; broadcast television station WRLH-TV, Richmond, Virginia; broadcast television station WUHF, Rochester, New York; and broadcast television station WMSN-TV, Madison, Wisconsin; in each case together with all associated translator stations (if any) owned by Sullivan Holdings or any of its Subsidiaries immediately prior to the Spin-Off. "STOCKHOLDER REPRESENTATIVE" means ABRY Partners, Inc., a Delaware corporation, 38 or any successor thereto as the Stockholder Representative designated pursuant to Section 13.O. With respect to any Person, a "SUBSIDIARY" means any corporation, partnership, limited liability company, association or other business entity of which, at the time of such reference, (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof, or a majority economic interest, is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons will be deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons will be allocated a majority of partnership, company, association or other business entity gains or losses or will be or control the managing director or general partner of such partnership, company, association or other business entity. "SULLIVAN BROADCASTING" means Sullivan Broadcasting Company, Inc., a Delaware corporation. "SULLIVAN COMMON STOCK" means Sullivan Shares which are common stock. "SULLIVAN CONSENTS" means all Consents of the board of directors or stockholders of Sullivan. "SULLIVAN HOLDINGS" means Sullivan Broadcast Holdings, Inc., a Delaware corporation. "SULLIVAN HOLDINGS FINANCIAL STATEMENTS" means the Financial Statements attached to this Agreement as Exhibit E. "SULLIVAN-RELATED ENTITY" means any Affiliate of ABRY Partners Inc. or ABRY Broadcast Partners II, L.P., including Sullivan, prior to the Effective Time. "SULLIVAN SENIOR DEBT ARRANGEMENTS" means the Credit Agreement dated as of January 4, 1996 among Sullivan Holdings, Sullivan Broadcasting, the various Agents and co-Agents referred to therein, and the several Lenders from time to time parties thereto, together with all "Loan Documents" and other documents and instruments relating to the "Obligations" referred to therein, in each case as in effect from time to time. "SULLIVAN SHARE" means any share of capital stock of Sullivan which is outstanding immediately prior to the Effective Time. 39 "SULLIVAN STATION ASSETS" means all of Sullivan Holdings', its Subsidiaries, Sullivan's and Sullivan Three's rights in, to and under the assets and properties of the Sullivan Stations, real and personal, tangible and intangible, of every kind and description which are owned and used by Sullivan Holdings, its Subsidiaries, Sullivan or Sullivan Three in connection with the business and operations of the Sullivan Stations, including rights under contracts and leases, real and personal property, plant and equipment, inventories, intangibles, licenses and goodwill, and all other assets and properties of Sullivan, its Subsidiaries, Sullivan and Sullivan Three used solely in connection with the operation of any Sullivan Station; provided that the Sullivan Station Assets will not include the Headquarters Assets. "SULLIVAN STATIONS" means broadcast television station WZTV, Nashville, TN; broadcast television station WUTV, Buffalo, New York; broadcast television station WXLV-TV, Winston-Salem, North Carolina; broadcast television station WRGT-TV, Dayton, Ohio; broadcast television station WRLH-TV, Richmond, Virginia; broadcast television station WVAH-TV, Charleston, West Virginia; broadcast television station WUHF, Rochester, New York; broadcast television station WTAT-TV, Charleston, South Carolina; broadcast television station WFXV, Utica, New York; low-power television station WPNY-LP, Rome, New York; broadcast television station WMSN-TV, Madison, Wisconsin; Station KOKH; broadcast television station WUXP, Nashville, Tennessee; and broadcast television station WUPN-TV, Greensboro, North Carolina; in each case together with all associated translator stations (if any). "SULLIVAN THREE" means Sullivan Broadcasting Company III, Inc., a Delaware corporation. "TAX" (and, with correlative meaning, "Taxes", "Taxable" and "Taxing") means any (A) federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profits, environmental (including under Section 59A of the Tax Code), customs, duties, real property, real property gains, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing; (B) liability of any corporation for the payment of any amounts of the type described in clause (A) arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included in any Tax Return relating thereto); and (C) liability for the payment of any amounts of the type described in clause (A) or (B) as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person. "TAX CODE" means the Internal Revenue Code of 1986, as amended (including, where applicable, the Internal Revenue Code of 1954, as amended). "TRANSACTION DOCUMENTS" means this Agreement and all agreements between or 40 among any or all of the Sullivan-Related Entities and the Sinclair-Related Entities relating thereto, in each case as in effect from time to time. 41 LIST OF SCHEDULES Schedule 4C FCC Matters Schedule 4D Certain Asset-Related Matters Schedule 4F Litigation Schedule 4H Conflicts Schedule 4J Tax Matters Schedule 4N Employee Benefit Matters LIST OF EXHIBITS Exhibit A Opinions of Sullivan's Counsel Exhibit B Opinions of Sinclair's and the Merger Sub's Counsel Exhibit C Contracts Schedule Exhibit D Spin-Off Assets Exhibit E Sullivan Holdings Financial Statements 42 EX-12 14 EXHIBIT 12 EXHIBIT 12 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES COMPUTTATION OF RATIO FO EARNINGS TO FIXED CHARGES FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, 1995, 1996, AND 1997 (DOLLARS IN THOUSANDS)
1993 1994 1995 1996 1997 ----------- ------------ ------------ ----------- ------------ Income (loss) before provision (benefit) for income taxes and extraordinary items ....................................... $ 922 $ (3,387) $ 10,188 $ 8,067 11,488 Fixed charges(a) ............................. 12,852 25,418 39,253 84,314 98,393 -------- -------- -------- -------- ------ Earnings available for fixed charges ......... 13,774 22,031 49,441 92,381 109,881 Fixed charges ................................ 12,852 25,418 39,253 84,314 98,393 -------- -------- -------- -------- ------- Ratio of earnings to fixed charges ........... 1.1 x -- 1.3 x 1.1 x 1.1 x
- ---------- (a) Fixed charges consist of interest expense, which includes interest on all debt and amortization of debt discount, and deferred financing costs. EX-23.1 15 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference into Prospectus Supplement File Nos. 333-12255, 333-12257, 333-31569, 333-31571 and 333-43047 of our report dated February 9, 1998, except for Note 24, as to which the date is February 23, 1998, of Sinclair Broadcast Group, Inc. It should be noted that we have not audited any financial statements of the Company subsequent to December 31, 1997, or performed any audit procedures subsequent to the date of our report. Baltimore, Maryland Arthur Andersen LLP March 17, 1998 EX-27 16 FDS --
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS OF SINCLAIR BROADCAST GROUP, INC. FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000912752 SINCLAIR BROADCAST GROUP, INC. 1,000 US DOLLARS YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 1 139,327 0 123,018 2,920 0 330,752 161,714 18,040 2,034,234 154,704 751,899 200,000 45 392 542,851 2,034,234 0 516,435 0 390,182 0 0 116,993 11,488 15,984 (4,496) 0 (6,070) 0 (10,566) (.37) (.37)
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