AGREEMENT AND PLAN OF MERGER

Exhibit 10.21

 

 

AGREEMENT AND PLAN OF MERGER

 

between

 

SUMMIT AMERICA TELEVISION, INC.

 

and

 

THE E.W. SCRIPPS COMPANY

 

 

December 18, 2003

 

TABLE OF CONTENTS

 

 

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AGREEMENT AND PLAN OF MERGER

 

This Agreement is made as of December 18, 2003, between The E.W. Scripps Company, an Ohio corporation (“ Parent ”), and Summit America Television, Inc., a Tennessee corporation (“ Company ”).

 

RECITALS

 

1. Parent desires to acquire the business and properties of Company by means of a taxable merger of a Tennessee corporation to be formed and to be wholly owned by Parent (“ Merger Sub ”) with and into Company on the terms and conditions set forth herein and in the Articles of Merger substantially in the form attached hereto as Exhibit 1A (the “ Articles of Merger ”).

 

2. The separate existence of Merger Sub shall cease at the Effective Time (as hereinafter defined) and Company shall thereafter survive as a wholly owned subsidiary of Parent.

 

3. Concurrent with the execution and delivery of this Agreement, certain shareholders of Company have executed and delivered to Parent a Voting Agreement dated as of the date hereof, in substantially the form of Exhibit 1B (the “ Voting Agreement ”) under which such shareholders, among other things, have agreed to vote in favor of the Merger.

 

AGREEMENTS

 

The parties, intending to be legally bound, agree as follows:

 

ARTICLE I. DEFINITIONS

 

Section 1.1 Definitions . For purposes of this Agreement, the following terms have the meanings specified in this Section:

 

“ 1934 Act ” means the Securities Exchange Act of 1934, as amended, or any successor law, and rules and regulations issued pursuant thereto.

 

“ Acquisition Proposal ” is defined in Section 5.6(a) .

 

“ Affiliate ” means, with respect to any Person, any other Person (a) that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person, (b) that is a general partner, director, manager, trustee or principal officer of, or a limited partner owning more than 10% of, or that serves in a similar capacity with respect to, such Person, or (c) of which such Person is a general partner, director, manager, trustee or principal officer or a limited partner owning more than 10% of, or with respect to which such Person serves in a similar capacity. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or to cause the direction of the

management or policies of the Person in question through the ownership of voting securities or by contract or otherwise.

 

“ Articles of Merger ” is defined in the Recitals.

 

“ Break-Up Fee ” is defined in Section 5.6(b) .

 

“ Closing ” is defined in Section 2.2 .

 

“ Closing Date ” means the date and time as of which the Closing actually takes place.

 

“ Communications Act ” means the Communications Act of 1934, as amended and the rules and regulations promulgated thereunder.

 

“ Company ” is defined in the first paragraph of this Agreement.

 

“ Company Stock Option ” is defined in Section 2.5(h) .

 

“ Confidentiality Agreement ” means the Confidentiality Agreement between Parent and Company dated September 26, 2003.

 

“ Consent ” means any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization).

 

“ Contemplated Transactions ” means all of the transactions contemplated by this Agreement, including: (a) the merger of Merger Sub into Company, (b) the execution, delivery, and performance of this Agreement and the Articles of Merger; and (c) the performance by Parent and Company of their respective covenants and obligations under this Agreement.

 

“ Contract ” means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied).

 

“ Damages ” is defined in Section 12.2 .

 

“ Effective Time ” means Section 2.3 .

 

“ Encumbrance ” means any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

 

“ Environment ” means soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwater, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource.

 

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“ Environmental, Health, and Safety Liabilities ” means any cost, damages, liability or other obligation arising under Environmental Law or Occupational Safety and Health Law and consisting of or relating to: (a) environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products); (b) any fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law; (c) any financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions (“ Cleanup ”) required by applicable Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or other Person) and for any natural resource damages; or (d) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms “ removal ,” “ remedial ,” and “ response action ” include the types of activities covered by the U.S. Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601 et seq., as amended.

 

“ Environmental Law ” means any Legal Requirement that requires or relates to: (a) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities that could have significant impact on the Environment; (b) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment; (c) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated; (d) assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of; (e) protecting resources, species, or ecological amenities; (f) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances; (g) cleaning up pollutants that have been released, preventing the threat of release, or paying the costs of such clean up or prevention; or (h) making responsible parties pay private parties for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974 or any successor law, and rules and regulations issued pursuant to thereto.

 

“ Facilities ” means any real property and any buildings, plants, structures, towers, studios, transmitters or other equipment affixed to real property currently (or at any time formerly) owned, occupied, leased, licensed, used or operated by Company or any Subsidiary.

 

“ FCC ” means the Federal Communications Commission.

 

“ GAAP ” means generally accepted United States accounting principles, applied on a consistent basis.

 

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“ Governmental Authorization ” means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

 

“ Governmental Body ” means any: (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

 

“ HSR Act ” is defined in Section 7.2 .

 

“ Hazardous Activity ” means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about, or from the Facilities or any part thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the value of the Facilities or Company or any Subsidiary.

 

“ Hazardous Materials ” means any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under any Environmental Law, including any admixture or solution thereof.

 

“ IRC ” means the Internal Revenue Code of 1986, as amended and in effect from time to time, or any successor law, and all rules and regulations promulgated by the IRS pursuant thereto.

 

“ IRS ” means the U.S. Internal Revenue Service or any successor agency, and, to the extent relevant, the U.S. Department of the Treasury.

 

“ Indemnitees ” is defined in Section 7.3 .

 

“ Intellectual Property Assets ” is defined in Section 3.21 .

 

An individual will be deemed to have “ Knowledge ” of a particular fact or matter if he or she is actually aware of such fact or matter or if a prudent individual could be expected to discover or otherwise become aware of such fact or matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or matter. A Person other than an individual will be deemed to have “ Knowledge ” of a particular fact or matter if any individual who is serving as a director, executive officer, member, governor, manager (with respect to a partnership or limited liability company), partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or matter in accordance with the preceding sentence.

 

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“ Legal Requirement ” means any Order, constitution, law, ordinance, principle of common law, rule, regulation, statute, or treaty of any Governmental Body.

 

“ Merger ” is defined in Section 2.1 .

 

“ Merger Consideration ” means the consideration to be provided in exchange for common stock, Series A Preferred Stock, or Series D Preferred Stock of the Company in accordance with Section 2.5 .

 

“ Merger Sub ” is defined in the Recitals.

 

“ Occupational Safety and Health Law ” means any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.

 

“ Order ” means any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made, or rendered by any court, administrative agency or other Governmental Body or by any arbitrator.

 

“ Ordinary Course of Business ” means an action taken by a Person only if: (a) such action is consistent with the past practices of such Person and is taken in the ordinary course of such Person’s normal day-to-day operations; (b) such action is not required to be authorized by such Person’s board of directors or managers (or by any Person or group of Persons exercising similar authority) and is not required to be specifically authorized by such Person’s parent company (if any) or other equity holders; and (c) such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors or managers (or by any Person or group of Persons exercising similar authority) in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person.

 

“ Organizational Documents ” means (a) the articles or certificate of incorporation and bylaws or code of regulations of a corporation; or (b) the articles of organization or certificate of formation or similar document and the limited liability company agreement or operating agreement or similar document of a limited liability company; (c) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (d) any amendment to any of the foregoing.

 

“ Parent ” is defined in the first paragraph of this Agreement.

 

“ Paying Agent ” is defined in Section 2.7(a) .

 

“ Payment Fund ” is defined in Section 2.7(b) .

 

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“ Person ” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.

 

“ Plan ” is defined in Section 3.13 .

 

“ Proceeding ” means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

 

“ Proxy Statement ” is defined in Section 5.8 .

 

“ Release ” means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, or other releasing into the Environment, whether intentional or unintentional.

 

“ Representative ” means with respect to a particular Person, any director, officer, member, manager, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.

 

“ Scripps SAH Companies ” means The Scripps Shop At Home Holding Company and Shop At Home Network, LLC.

 

“ SEC ” means the U.S. Securities and Exchange Commission or any successor Governmental Body.

 

“ Securities Act ” means the Securities Act of 1933, as amended, or any successor law, and rules and regulations issued pursuant thereto.

 

“ Shareholder Approval ” is defined in Section 5.7 .

 

“ Shareholders Meeting ” is defined in Section 5.8 .

 

“ Shareholders Vote ” is defined in Section 5.8 .

 

“ Subsidiary ” means any corporation, more than 20% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is or was since 1986 owned by Company and/or one or more Subsidiaries of Company and (b) any limited liability company, partnership, association, joint venture, or other entity in which Company and/or one or more Subsidiaries has or had since 1986 greater than a 20% equity interest, but excluding the Scripps SAH Companies.

 

“ Superior Proposal ” is defined in Section 5.6(a) .

 

“ Surviving Corporation ” is defined is Section 2.1 .

 

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“ Tax ” means (a) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, franchise, profits, license or withholding on amounts paid to or by Company or any Subsidiary, payroll, employment, excise, severance, stamp occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Body responsible for the imposition of any such tax (domestic or foreign), (b) any liability of Company or any Subsidiary for the payment of any amounts of the type described in clause (a) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period prior to the Closing Date, and (c) any liability of Company or any Subsidiary for the payment of any amounts of the type described in clause (a) as a result of any express or implied obligation to indemnify any other Person.

 

“ Tax Return ” means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.

 

“ TBCA ” means the Tennessee Business Corporation Act.

 

A claim, Proceeding, dispute, action, or other matter will be deemed to have been “ Threatened ” if any demand or statement has been made (in writing) or any notice has been given (in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.

 

“ Voting Agreement ” is defined in the Recitals.

 

ARTICLE II. MERGER; CLOSING

 

Section 2.1 Merger . On and subject to the terms and conditions of this Agreement, at the Effective Time, Merger Sub will merge with and into Company, the separate corporate existence of Merger Sub will cease and Company will thereafter continue as the surviving corporation (the “ Surviving Corporation ”) in the merger (the “ Merger ”).

 

Section 2.2 Closing . The closing of the Contemplated Transactions (the “ Closing ”) will take place at the offices of Bone McAllester Norton PLLC at 511 Union Street, Suite 1600, Nashville, Tennessee, 37219, at 10:00 a.m. (local time) five days after satisfaction of the conditions set forth in Sections 8.1 , 8.2 , 8.3 , and 8.4 , or at such other time and place as the parties may agree.

 

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Section 2.3 Effectiveness of Merger . On the Closing Date, subject to the satisfaction or waiver of all conditions to the obligations of the parties to consummate the Merger, (a) Merger Sub and Company shall execute and deliver the Articles of Merger and file such Articles of Merger and, if required by law, this Agreement, with the Secretary of State of the State of Tennessee pursuant to TBCA §48-21-107. The Merger will become effective as of the filing of the Articles of Merger with the Secretary of State of the State of Tennessee or at such later date and time as may be specified in the Articles of Merger (the “ Effective Time ”).

 

Section 2.4 Effect of the Merger .

 

(a) The Merger will have the effect set forth in the TBCA. The Surviving Corporation shall, after the Effective Time, take all action (including executing and delivering any document) in its name and on its behalf in order to carry out and effectuate the Contemplated Transactions.

 

(b) The charter of Merger Sub shall be the charter of the Surviving Corporation until thereafter amended as provided therein and in accordance with the TBCA. The by-laws of Merger Sub in effect immediately prior to the Effective Time shall become the by-laws of the Surviving Corporation until thereafter amended as provided therein and in accordance with the TBCA. The officers and directors of Merger Sub immediately prior to the Effective Time will be the officers and directors of the Surviving Corporation and shall serve until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s charter and by-laws and the TBCA.

 

Section 2.5 Conversion and Exchange of Stock . At the Effective Time, by virtue of the Merger, and without any action on the part of Merger Sub, Company or Parent, or any holder of Company common stock or preferred stock:

 

(a) Each share of common stock of Merger Sub outstanding immediately prior to the Effective Time, by virtue of the Merger and without any action on the part of Parent, shall be converted into and exchanged for one validly issued, fully paid, and nonassessable share of common stock of the Surviving Corporation.

 

(b) Each share of common stock, $.0025 par value per share, of Company issued and outstanding immediately prior to the Effective Time (other than any share of common stock of the Company subject to Section 2.5(e) ) will be exchanged for the right to receive cash in the amount of $4.05.

 

(c) Each share of Series A Preferred Stock, $10.00 par value per share, of Company issued and outstanding immediately prior to the Effective Time (other than any share of Series A Preferred Stock of the Company subject to Section 2.5(e) ) will be exchanged for the right to receive cash in an amount equal to the Liquidation Preference (as defined in Company’s Charter) of such share in accordance with Company’s Charter.

 

(d) Each share of Series D Preferred Stock, $10.00 par value per share, of Company issued and outstanding immediately prior to the Effective Time will be converted into one share of Preferred Stock, $10 par value per share, of the Surviving Corporation.

 

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(e) Each share of common stock, Series A Preferred Stock and Series D Preferred Stock of Company owned by Company immediately prior to the Effective Time shall be cancelled and retired without any conversion thereof and no payment or distribution shall be made with respect thereto.

 

(f) As a result of the Merger and without any action on the part of the holder thereof, at the Effective Time, all shares of common stock, Series A Preferred Stock and Series D Preferred Stock of Company shall cease to be outstanding and shall be cancelled and retired and each holder thereof shall thereafter cease to have any rights with respect to such shares of stock of Company except the right to receive, without interest, the Merger Consideration in accordance with this Section 2.5 upon the surrender of a certificate representing such shares.

 

(g) At the Effective Time, all outstanding options to purchase shares of common stock of Company (each, a “ Company Stock Option ”) then outstanding and unexercised shall be converted into and represent a right to acquire shares of common stock of Surviving Corporation on identical terms, except that the number of shares underlying each such Company Stock Option shall be an amount representing a percentage of common stock of the Surviving Corporation substantially equal to the percentage of Company common stock underlying such Company Stock Option on a fully diluted basis.

 

Section 2.6 Closing of Transfer Books . At the Effective Time, the stock transfer books of Company will be closed with respect to all shares of common stock and preferred stock of Company outstanding immediately prior to the Effective Time. No further transfer of any such shares of common stock or preferred stock shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a valid Company stock certificate is presented to the Paying Agent or to Parent, such stock certificate shall be cancelled and surrendered for cash as provided in Section 2.7 .

 

Section 2.7 Surrender of Certificates .

 

(a) Promptly after the Effective Time, Parent shall deposit, or shall cause to be deposited, with Parent’s Corporate Secretary or a third party selected by Parent (the “ Paying Agent ”), cash sufficient to pay the cash consideration under Section 2.5(b) and (c) . The cash amounts so deposited with the Paying Agent are referred to collectively as the “ Payment Fund .”

 

(b) As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to the record holders of common stock and Series A Preferred Stock of Company (i) a letter of transmittal in customary form and containing such provisions as Parent may reasonably specify (including a provision confirming that delivery of stock certificates shall be effected, and risk of loss and title to stock certificates shall pass, only upon delivery of such stock certificates to the Paying Agent), and (ii) instructions for use in effecting the surrender of stock certificates in exchange for cash. Upon surrender to the Paying Agent of a stock certificate for common stock or Series A Preferred Stock of Company, together with a duly executed letter of transmittal, and such other documents as may be reasonably required by the Paying Agent or Parent, (i) the holder of such stock certificate shall be entitled to receive in exchange therefor the cash consideration that such holder has the right to receive pursuant to the provisions of Section 2.5(b) or (c) , and (ii) the stock certificate so surrendered shall be cancelled. Until surrendered as contemplated by

 

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this Section 2.7 , each stock certificate shall be deemed, from and after the Effective Time, to represent only the right to receive the Merger Consideration as contemplated by Section 2.5 . If any stock certificate shall have been lost, stolen or destroyed, Parent may, in its discretion and as a condition precedent to the issuance of any Merger Consideration, require the owner of such lost, stolen or destroyed stock certificate to provide an appropriate affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as indemnity against any claim that may be made against the Paying Agent or Parent with respect to such stock certificate. In the event that any shares of common stock or preferred stock of Company to be exchanged hereunder secure any indebtedness owing to Company, the cash consideration which the holder of such shares is entitled to receive shall be reduced by the amount of such indebtedness. In addition, at the request of an option holder electing to exercise options contemporaneously with the Effective Time, the cash consideration which such holder is entitled to receive for the shares of common stock underlying such options shall be reduced by the amount of the exercise price of such options.

 

(c) Any portion of the Payment Fund that remains undistributed to holders of stock certificates of Company as of the date 180 days after the Effective Time shall become the general funds of Parent.

 

(d) The Paying Agent shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any holder or former holder of common stock or preferred stock of Company such amounts as may be required to be deducted or withheld therefrom under the IRC or any provision of state, local or foreign tax law or under any other applicable Legal Requirement. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

 

(e) Neither Parent nor the Surviving Corporation shall be liable to any holder or former holder of common stock or preferred stock of Company or to any other Person for any cash amounts delivered to any public official pursuant to any applicable abandoned property law, escheat law or similar Legal Requirement.

 

Section 2.8 Further Action . If, at any time after the Effective Time, any further action is determined by Parent to be necessary or desirable to carry out the purposes of this Agreement or to vest Parent with full right, title and possession of and to all rights and property of Company, the officers and directors of Parent shall be fully authorized (in the name of Parent, in the name of Company or otherwise) to take such action.

 

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF COMPANY

 

Company represents and warrants to Parent as follows:

 

Section 3.1 Organization and Good Standing .

 

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(a) Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Tennessee, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under this Agreement. Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so qualified would not have a material adverse effect on Company.

 

(b) Each Subsidiary and its jurisdiction of organization is listed on Schedule 3.1(b) . Each Subsidiary is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, with full power and authority to conduct its business as it is now being conductions and to own or use the properties and assets that it purports to own. Each Subsidiary is duly qualified to do business as a foreign entity and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so qualified would not have a material adverse effect on such Subsidiary.

 

(c) Company has delivered to Parent copies of its and each Subsidiary’s Organizational Documents, as currently in effect.

 

Section 3.2 Authority; No Conflict .

 

(a) This Agreement constitutes the legal, valid, and binding obligation of Company, enforceable against Company in accordance with its terms. Company’s Board of Directors has approved the Contemplated Transactions and has resolved to recommend the Contemplated Transactions for Shareholder Approval.

 

(b) Except as set forth in Schedule 3.2 , neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time):

 

(i) contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of Company, or (B) any resolution adopted by the board of directors or the shareholders of Company;

 

(ii) contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions, or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Company or a Subsidiary, or any of the assets owned or used by Company or a Subsidiary, may be subject;

 

(iii) contravene, conflict with, or result in a violation of any of the terms of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by

 

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Company or a Subsidiary or that otherwise relates to the business of, or any of the assets owned or used by, Company or a Subsidiary;

 

(iv) cause Parent or Company or any Subsidiary to become subject to, or to become liable for the payment of, any Tax;

 

(v) cause any of the assets owned or used by Company or a Subsidiary to be reassessed or revalued by any taxing authority or other Governmental Body;

 

(vi) contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Contract to which Company or a Subsidiary is bound;

 

(vii) result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by Company or a Subsidiary; or

 

(viii) contravene, conflict with, or result in a violation, breach, or acceleration of any provision of any employment agreement between Company or any Subsidiary and any employee of Company or such Subsidiary.

 

Except as set forth in Schedule 3.2 , neither Company nor a Subsidiary is or will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

 

(c) No provision of any Tennessee anti-takeover law applies to the Contemplated Transactions.

 

Section 3.3 Capitalization .

 

(a) Company . The classes and number of authorized shares of each class of capital stock of Company, the number of issued and outstanding shares of such capital stock of Company, and the number of options, offers, warrants, conversion rights, agreements, or other rights to subscribe for or to purchase from Company shares of its capital stock are set forth on Schedule 3.3(a) . Except as set forth on Schedule 3.3(a) , Company has no other equity securities of any class issued, reserved for issuance, or outstanding. Except as set forth on Schedule 3.3(a) , there are no outstanding options, offers, warrants, conversion rights, agreements, or other rights to subscribe for or to purchase from Company shares of its capital stock. No shares of Company carry, and no shareholder of Company has been granted, any preemptive rights. Except as set forth on Schedule 3.3(a) , Company is not obligated under any provision of its Organizational Documents, or under any arrangement, Contract, plan, or understanding, to liquidate, redeem, or otherwise repurchase any equity or other securities of Company. Other than this Agreement, except as set forth on Schedule 3.3(a) , no arrangement, Contract, plan, or understanding exists pursuant to which Company has any obligation or any Person has any right relating to the issuance, sale, or transfer of any equity or other securities of Company. Except with respect to the Scripps SAH Companies and the Subsidiaries, Company does not own, nor does it possess

 

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any right under a Contract or otherwise to acquire, any equity or other securities of any Person or any direct or indirect equity or ownership interest in any other business.

 

(b) Subsidiaries . The classes and number of authorized shares of each class of capital stock of each Subsidiary, the number of issued and outstanding shares of such capital stock of each Subsidiary, and the number of options, offers, warrants, conversion rights, agreements, or other rights to subscribe for or to purchase from each Subsidiary shares of its capital stock are set forth on Schedule 3.3(b) . Schedule 3.3(b) sets forth the record and beneficial owner and holder of all issued and outstanding shares of capital stock of each Subsidiary (the “ Subsidiary Shares ”). Except as set forth on Schedule 3.3(b) , all of the Subsidiary Shares are held free and clear of all Encumbrances. All of the issued and outstanding Subsidiary Shares are duly authorized, validly issued, fully paid, and non-assessable, and were issued in conformity with all applicable state and federal securities laws. No Subsidiary has any equity securities of any class issued, reserved for issuance, or outstanding, other than its Subsidiary Shares. There are no outstanding options, offers, warrants, conversion rights, agreements, or other rights to subscribe for or to purchase from any Subsidiary shares of its capital stock. No Subsidiary Shares carry, and no holder of any Subsidiary Shares has been granted, any preemptive rights. No Subsidiary is obligated under any provision of its Organizational Documents, or under any arrangement, Contract, plan, or understanding, to liquidate, redeem, or otherwise repurchase any equity or other securities of such Subsidiary. No arrangement, Contract, plan, or understanding exists pursuant to which any Subsidiary has any obligation or any Person has any right relating to the issuance, sale, or transfer of any equity or other securities of such Subsidiary. Except with respect to the Scripps SAH Companies and other Subsidiaries, no Subsidiary owns, or possesses any right under a Contract or otherwise to acquire, any equity or other securities of any Person or any direct or indirect equity or ownership interest in any other business.

 

Section 3.4 Financial Statements; SEC Compliance . Since June 30, 1997, Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “ SEC Documents ”). A complete list of the SEC Documents is set forth on Schedule 3.4 and except to the extent available in full without redaction on the SEC’s web site through EDGAR, Company has delivered to Parent copies of all SEC Documents, including all certifications and statements required in connection with the Sarbanes-Oxley Act of 2002. Company has also delivered to Parent all comment letters received by Company from the SEC since January 1, 2001 and all responses to such comment letters by or on behalf of Company. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act. None of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, Company’s financial statements included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with GAAP (except as may be otherwise indicated in such financial statements or the

 

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notes thereto, or in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of Company as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of Company to Parent that is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Schedule 3.4 lists, and Company has delivered to Parent copies of documentation creating or governing, all securitization transactions and off-balance sheet arrangements (as defined in Item 303(c) of Regulation S-K of the SEC) effected by Company or any Subsidiary since January 1, 2001. Deloitte & Touche, which has expressed its opinion with respect to the financial statements of Company and its Subsidiaries included in the SEC Documents (including the related notes), is and has been throughout the periods covered by such financial statements (a) a registered public accounting firm as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002), (y) “independent” with respect to Company within the meaning of Regulation S-X and, (z) with respect to Company, in compliance with subsections (g) through (l) of Section 10A of the 1934 Act and the related rules of the SEC and the Public Company Accounting Oversight Board. Schedule 3.4 lists all non-audit services performed by Deloitte & Touche for Company and its Subsidiaries since January 1, 2001.

 

Company maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the 1934 Act; such controls and procedures are effective to ensure that all material information concerning Company and its Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of Company’s filings with the SEC and other public disclosure documents. To Company’s knowledge, except as disclosed on Schedule 3.4 , each director and executive officer of Company has filed with the SEC on a timely basis all statements required by Section 16(a) of the 1934 Act and the rules and regulations thereunder since January 1, 2001.

 

Section 3.5 Books and Records . The books of account, minute books, stock record books, and other records of Company and each Subsidiary, all of which have been made available to Parent, are complete and correct and have been maintained in accordance with sound business practices. Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management’s general or specific authorizations, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (c) access to assets is permitted only in accordance with management’s general or specific authorization and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The minute books of Company and each Subsidiary contain accurate and complete records of all meetings held of, and action taken by, the shareholders or members and Board of Directors, managers, and committees thereof, and no meeting of any such shareholders, members, Board of Directors, managers, or committee has been held for which minutes have not been prepared and are not contained in such minute books except for meetings held after December 17, 2003 solely for the purpose of considering the Contemplated Transactions (each of which will be provided to

 

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Parent as soon as they are available and in no event later than the Closing). At the Closing, Company and each Subsidiary will be in possession of all of its books and records.

 

Section 3.6 Facilities .

 

(a) Schedule 3.6(a) contains a complete and accurate list of all Facilities and indicates whether such Facilities are currently or formerly owned, occupied, leased, licensed, used or operated by Company or its Subsidiaries and the dates such use commenced and, if applicable, ceased. Company has made available to Parent originals or authentic copies of all originals of all policies of title insurance, surveys, deeds, leases, Contracts and Encumbrances relating to each of the Facilities now owned, occupied, leased, licensed, used or operated by Company or any Subsidiary.

 

(b) Company or a Subsidiary owns (with good and marketable title in the case of real property, subject only to the matters permitted by the following sentence), or has valid and subsisting rights to occupy, lease, license, use and operate, all the properties and assets comprising the Facilities (whether real, personal, or mixed and whether tangible or intangible) that it purports to now own, lease, license or otherwise possess as reflected in its books and records. Except as set forth on Schedule 3.6(b) , all properties and assets of Company and each Subsidiary comprising the Facilities are free and clear of all Encumbrances and are not subject to any rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature, except for (i) liens for current taxes not yet due, (ii) minor imperfections of title, if any, none of which is substantial in amount, materially detracts from the value or impairs the use of the property or assets subject thereto, or impairs the operations of the Company or any Subsidiary, and (iii) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property or assets subject thereto. All of the Facilities lie wholly within the boundaries of the real property validly owned, leased, licensed, occupied or used by such entity and none encroaches upon the property of, or otherwise conflict with the property rights of, any other Person.

 

(c) The Facilities now owned, leased, licensed or otherwise possessed by Company or a Subsidiary are operable, and are adequate for the uses to which they are being put. The Facilities not owned by Company or a Subsidiary are subject to valid Contracts granting Company or a Subsidiary all rights necessary to occupy, possess, use and operate the Facilities for their intended purposes in the Ordinary Course of Business and such rights are sufficient for the continued conduct of the business of Company and each Subsidiary after the Closing in substantially the same manner as conducted prior to the Closing.

 

Section 3.7 Condition and Sufficiency of Assets . All assets and properties (whether real, personal, or mixed and whether tangible or intangible) now owned, leased, licensed, or otherwise possessed by Company and its Subsidiaries, as reflected in its books and records, constitute all of the assets and properties (real, personal, or mixed and tangible or intangible) necessary to operate the business of Company and the Subsidiaries as previously operated by Company and the Subsidiaries in the Ordinary Course of Business (collectively, the “ Assets ”). Subject to Section 3.6 with respect to the Facilities and Section 3.21 with respect to the Intellectual Property, Company or a Subsidiary owns good and marketable

 

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title or has valid and subsisting rights to lease, license, use and operate all of the Assets, free and clear of all Encumbrances.

 

Section 3.8 Accounts Receivable . All accounts receivable of Company that are reflected on the accounting records of Company as of the Closing Date (collectively, the “ 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 Accounts Receivable are or will be as of the Closing Date current and collectible by Company, net of the respective reserves shown on the accounting records of Company. Subject to such reserves, each of the Accounts Receivable either has been or will be collected in full, without any set-off, within 90 days after the day on which it first becomes due and payable. There is no contest, claim, or right of set-off, under any Contract with any obligor of an Accounts Receivable relating to the amount or validity of such Accounts Receivable. Schedule 3.8 contains a complete and accurate list of all Accounts Receivable as of December 15, 2003, which list sets forth the aging of such Accounts Receivable.

 

Section 3.9 Inventory . Neither Company nor any Subsidiary has any inventory.

 

Section 3.10 No Undisclosed Liabilities . Except as set forth in Schedule 3.10 , neither Company nor any Subsidiary has any liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) except for liabilities or obligations reflected or reserved against on the face of Company’s September 30, 2003 balance sheet and current liabilities incurred in the Ordinary Course of Business since September 30, 2003.

 

Section 3.11 Taxes .

 

(a) Company and the Subsidiaries have timely filed or caused to be timely filed all Tax Returns that are or were required to be filed by or with respect to any of them, either separately or as a member of a group of entities, in compliance with applicable Legal Requirements and all Taxes owed by Company and the Subsidiaries (whether or not shown on any Tax Returns) have been timely paid. All such Tax Returns are true, correct and complete. Company has made available to Parent copies of all such Tax Returns filed since June 30, 1999. Schedule 3.11 contains a complete and accurate list of all income Tax Returns filed since June 30, 1997. Company and the Subsidiaries have paid, or made provision for the payment of, all Taxes that have or may have become due pursuant to all Tax Returns or otherwise, or pursuant to any assessment received by Company or a Subsidiary, except such Taxes, if any, as are listed in Schedule 3.11 and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the applicable accounting records.

 

(b) The United States federal and state income Tax Returns of Company and the Subsidiaries subject to such Taxes have been audited by the IRS or relevant state tax authorities or are closed by the applicable statute of limitations for all taxable years through June 30, 1999. None of such Tax Returns have been audited. Schedule 3.11 contains a complete and accurate list of all audits of all such Tax Returns including a reasonably detailed description of the nature

 

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and outcome of each audit. No adjustments have been made to Tax Returns filed by Company or a Subsidiary or any group of corporations including Company or a Subsidiary for all taxable years since June 30, 1997. Neither Company nor a Subsidiary is under audit (or received a notice indicating an intent to audit) for any Tax Returns or has given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of Company or a Subsidiary or for which Company or a Subsidiary may be liable.

 

(c) The charges, accruals, and reserves with respect to Taxes on the respective books of Company and each Subsidiary are adequate (determined in accordance with GAAP) and are at least equal to Company’s and such Subsidiary’s respective liability for Taxes. There exists no proposed Tax assessment against Company or any Subsidiary. No claim has ever been made by an authority in a jurisdiction where Company or any Subsidiary does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Company or any Subsidiary.

 

(d) (i) None of Company or any Subsidiary has filed with respect to Company or any Subsidiary, or any property held by the Company or any Subsidiary any consent under IRC §341(f), (ii) no property of the Company or any Subsidiary is “tax exempt use property” within the meaning of IRC §168(h), (iii) none of the Company or any Subsidiary is a party to any lease made pursuant to §168(f)(8) of the Internal Revenue Code of 1954, and (iv) none of Company or any of the Subsidiaries has agreed or is required to make any adjustment under IRC §481(a) by reason of a change in method of accounting or otherwise that will affect the liability of Company or the Subsidiary for Taxes.

 

(e) Company and each Subsidiary has withheld and paid all Taxes required by law to have been withheld and paid and have complied in all respects with all rules and regulations relating to the withholding or remittance of Taxes (including, without limitation, employee-related Taxes).

 

(f) None of Company or any Subsidiary is a party to an Contract or arrangement that, individually or collectively, would give rise to any payment (whether in cash or property) that would not be deductible pursuant to IRC §§162(a)(1), 162(m) or 280G.

 

(g) The Company has not been and is not a United States real property holding corporation within the meaning of IRC §897.

 

(h) (i) None of Company or the Subsidiaries is a party to any Tax allocation, indemnity or sharing agreement; (ii) none of Company or the Subsidiaries has any liability for Taxes of any Person (A) under Treasury Regulation §1.1502-6, (B) as transferee or successor, (C) by Contract, or (D) otherwise; and (iii) neither Company nor a Subsidiary has been a member of an affiliated group (as that term is defined in the IRC) filing a consolidated federal income Tax return other than a group the common parent of which was Company.

 

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(i) Neither the Company nor any of its Subsidiaries has distributed stock of another corporation, nor had its stock distributed by another corporation, in a transaction that was purported or intended to be governed in whole or in part by IRC §355 or §361.

 

Section 3.12 Employee Benefits .

 

(a) As used in this Section, the following terms have the following meanings:

 

“ Company Other Benefit Obligation ” means an Other Benefit Obligation owed, adopted, or followed by Company or an ERISA Affiliate.

 

“ Company Plan ” means all Plans of which Company or an ERISA Affiliate is or was a Plan Sponsor, or to which Company or an ERISA Affiliate otherwise contributes or has contributed, or in which Company or an ERISA Affiliate otherwise participates or has participated.

 

“ ERISA Affiliate ” means any other Person that, together with Company, would be treated as a single employer under IRC §414.

 

“ Other Benefit Obligations ” means all obligations, arrangements, or customary practices, whether or not legally enforceable, to provide benefits, other than salary or wages, as compensation for services rendered, to present or former directors, employees, or agents, other than obligations, arrangements, and practices that are Plans. Other Benefit Obligations include consulting agreements under which the compensation paid does not depend upon the amount of service rendered, sabbatical policies, severance payment policies, and fringe benefits within the meaning of IRC §132.

 

“ PBGC ” means the Pension Benefit Guaranty Corporation, or any successor thereto.

 

“ Pension Plan ” is defined in ERISA §3(2)(A).

 

“ Plan ” is defined in ERISA §3(3).

 

“ Plan Sponsor ” is defined in ERISA §3(16)(B).

 

“ Qualified Plan ” means any Company Plan that meets or purports to meet the requirements of IRC §401(a).

 

“ Welfare Plan ” is defined in ERISA §3(1).

 

(b) (i) Schedule 3.12(b)(i) contains a complete and accurate list of (A) all ERISA Affiliates, and (B) all Plans of which Company or any such ERISA Affiliate is or was a Plan Sponsor, in which Company or any such ERISA Affiliate participates or has participated, or to which Company or any such ERISA Affiliate contributes or has contributed. Neither Company nor any ERISA Affiliate has ever established, maintained, or contributed to or otherwise participated in, or had an obligation to maintain, contribute to, or otherwise

 

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participate in, any voluntary employees’ benefit association under IRC §501(c)(9), Pension Plan subject to Title IV of ERISA or multi-employer plan as defined in ERISA §3(37)(A). Neither Company has or has ever had any employees or sponsored any Plan or Other Benefit Obligation.

 

(ii) Schedule 3.12(b)(ii) contains a complete and accurate list of all Company Plans, Company Other Benefit Obligations and identifies as such all Company Plans that are defined benefit Pension Plans or Qualified Plans.

 

(iii) Schedule 3.12(b)(iii) sets forth a calculation of Company’s or any Subsidiary’s liability for post-retirement benefits other than pensions, made in accordance with Financial Accounting Statement 106 of the Financial Accounting Standards Board, regardless of whether Company or a Subsidiary is required by Statement 106 to disclose such information.

 

(iv) Schedule 3.12(b)(iv) sets forth the financial cost of all obligations owed under any Company Plan or Company Other Benefit Obligation that is not subject to the disclosure and reporting requirements of ERISA.

 

(c) Company has delivered to Parent:

 

(i) all documents that set forth the terms of each Company Plan, Company Other Benefit Obligation and of any related trust, including (A) all plan descriptions and summary plan descriptions of Company Plans for which Company is required to prepare, file, and distribute plan descriptions and summary plan descriptions, and (B) all summaries and descriptions furnished to participants and beneficiaries regarding Company Plans and Company Other Benefit Obligations for which a plan description or summary plan description is not required;

 

(ii) all personnel, payroll, and employment manuals and policies;

 

(iii) all collective bargaining agreements pursuant to which contributions have been made or obligations incurred (including both pension and welfare benefits) by Company and the ERISA Affiliates, and all collective bargaining agreements pursuant to which co